Last week I had the privilege of joining Toronto Mayor John Tory and a few other Toronto-based financial technology ("fintech") companies on a business mission to the U.K. If you haven't heard of fintech, the idea is pretty simple: fintech companies use technology to make financial services better.
London is the fintech capital of Europe. Mayor Tory wanted to highlight Toronto as a leading fintech centre as well, so invited my company, Borrowell, to join leaders from Nymi, Kooltra, SecureKey and Incubes.
There's an opportunity for Toronto to be the leader in innovative financial services. But we're not there yet. Here are three things I learned in the U.K. and what it would take for Toronto to be the fintech capital of North America.
1. The U.K. is five years ahead of Canada when it comes to innovation in financial services.
It doesn't take much more than a quick ride on the Tube in London to realize that there are a lot more innovative options for people when it comes to financial services. The ads on the train come from both established and new companies offering services like online real estate agents and different types of bank accounts. My British friend paid for parking with a mobile app that already had his licence plate and credit card number in it. The app notified him when the time was about to expire and he topped it up from his phone.
The ecosystem in the U.K. to support start-ups is impressive.
· There's free workspace early on, tax breaks and support for recruiting talent.
· There are many incubators and accelerators, some focused purely on fintech. In Canada we have amazing incubators like the DMZ, start-up communities like OneEleven and the fintech cluster at MaRS, all of which we've personally benefited from as a company. There's just more of it in the U.K.
· The government invests time in knowing what the emerging trends are by meeting regularly with fintech leaders. This knowledge informs regulation to support more innovation in financial services. An example of this is in small business financing, where banks are required to send applicants they decline to alternative lenders. This legislation is designed to break open the dominance of the big banks and support newer entrants.
As a result, new business models like peer-to-peer lending are flourishing. The U.K. government is empowering everyday citizens to invest in peer-to-peer loans and get higher returns on their savings. In Canada, companies like Borrowell rely on funds from institutional investors because regulation doesn't allow individuals to invest in consumer loans.
2. Our big banks can offer better service by partnering with fintech companies.
In the U.K., the banks are collaborating to incubate financial technology startups through the Fintech Innovation Lab. Their 12-week mentorship program brings together young fintech companies with senior IT executives from 15 of the world's leading banks.
There's lots of great home-grown technology that Canadian banks could adopt to make the consumer experience better. And they are doing it, slowly but surely.
A few of the Canadian banks are working with Sensibill to allow customers to access their receipts directly from their bank accounts. And they're talking with Nymi for biometric authentication that could replace passwords and PINs. But we know the road is slow and rocky, and that getting a meeting often doesn't happen until the company has some sort of validation that comes from outside Canada.
3. If Canadians want options in addition to the big banks, they need to support the alternatives.
As Canadians, we're very proud of how stable our financial services sector is, and rightfully so. At the same time, stability doesn't have to be the opposite of innovation. Better ways of doing things aren't necessarily riskier.
Nobody is talking about getting rid of the banks – we need them. But what we do need to get rid of is the mindset that the banks have to provide ALL our financial services.
Companies are rarely good at many things. And competition is good – it increases innovation, gives incentives to provide good customer service, and drives down prices.
Canadians should check out the new alternatives in the market instead of just defaulting to their local bank. Today Canadians can compare mortgages, credit cards and insurance rates at RateSupermarket.ca and LowestRates.ca. They can invest smartly and simply with Wealthsimple and Nest Wealth.
And the innovation isn't just limited to consumers. Businesses can get working capital loans from FundThrough and make payments easy with Plooto. There are dozens of companies transforming the face of financial services in Canada.
Canadians deserve more choice, better products and lower prices when it comes to financial services. With greater adoption of up-and-coming fintech companies, everyone will benefit from the increased competition.
Eva Wong is chief operating officer and a cofounder of Borrowell, an innovative Canadian lender. Follow Eva @eva_toronto and Borrowell @MyBorrowell.