At a time when most homes didn't even have a computer, David Taylor had a vision of setting up a bank based on personal computers.
He had been an early adopter of PCs, building his first at a kitchen table from plans in Popular Science, and had written budgeting software that brought sneers from mainframe managers. But he remained convinced that PCs would rapidly transform the world of ledgers and tellers' cages.
His idea for a branchless bank was met with furrowed brows by provincial and federal regulators he approached in 1993, after a deep recession had led many small financial institutions to fail.
"They said things like: 'David, it's a terrible time for banks. You've got a new model that's untested and revolutionary, and personal computers are just toys. It's tough for us to consider giving you a licence,'" says Mr. Taylor, now president and chief executive officer of Pacific & Western Bank of Canada. "Even my mother was saying she didn't understand why I'd leave a good job as vice-president of Barclays Bank Canada [now part of HSBC Bank Canada]."
And with no money for promotion, finding customers was going to be a challenge as well, because it was four years before Dutch bank ING Direct arrived in Canada with a big consumer awareness campaign. But he remained undaunted.
Twenty years later, even most long-term skeptics were converted to believers when in late October he and other Pacific & Western officials rang the opening bell at the Toronto Stock Exchange as the bank celebrated a successful initial public offering as Canada's 10th-largest publicly traded bank.
Technology is increasingly creating opportunities to carve niches in industries that have long-established business models, says Michael King, assistant professor of finance at the University of Western Ontario's Ivey Business School in London, Ont.
"We certainly see it in trading and foreign exchange," Prof. King says. "Another area that has great potential but has yet to become widely available in Canada is mobile banking, which is taking off in the United States. Once security issues are overcome, doing transactions on cellphones and personal mobile devices is something that consumers seem to be very willing to adapt to.
"In Canada we have seen companies like President's Choice get into financial services without having to open up branches. That's a big key, because opening up physical operations is very expensive and time consuming."
These were all challenges for Mr. Taylor, and he admits getting the bank to where it is today took longer than he anticipated. But it still developed much faster than anyone he spoke with 20 years ago would have imagined.
He'd approached regulators in each province and federal officials, who said they couldn't grant a licence or federal deposit insurance for the unproved concept.
"I wasn't ready to take no for an answer," he says. So he launched an audacious strategy to persuade an existing financial company to turn over control to him. He got the ear of several investors in London and support and advice from mentors including the late Merv Lahn, the former chairman and CEO of Canada Trust.
His target was Pacific & Western Trust, one of Canada's smallest financial institutions with six branches in Saskatoon that needed an infusion of capital.
Meeting the owner, Bill MacNeill, "I made the pitch in a steakhouse and it was your classic deal sketched out on a restaurant serviette. I said: 'Why don't you let me take over your trust operation and I'll make it grow.'"
His response was: "'So you want to buy my company?' I said: 'Actually, no, Bill, you want to buy me; I'm a banker and you're a miner, and with me running your company it will be worth a lot more.'" He persuaded Mr. MacNeill to give his investor group two-thirds ownership.
The trust company had already decided to shut some of its physical branches, and within a year, the operation was completely online.
Mr. Taylor spent most of 1994 signing up insurance sales people and financial planners who would be the bank's deposit brokers. "I didn't have the money to advertise, so I had to pitch brokers one-on-one on how they could complement their own business and they could get 25-basis-point commissions.
"It took a lot of persuasion, but it was a new business for them and they found it easy to test on customers."
He also got into the trenches at trade shows asking customers what they were looking for. Deposits started coming in immediately and the trust company became a Schedule 1 bank in 2002 – the first approved in 18 years.
Now that the electronic deposit network has matured, the bank has set sights on new niche markets to develop faster growth, Mr. Taylor says. One fast-expanding area the bank got into last year is creating custom banking programs for trustees in bankruptcies. Another new business is financing leasing, filling gaps left when several U.S.-based leasing lenders left Canada in the post-2009 liquidity crunch, including aircraft loans and schools and development projects in rural areas that aren't priorities for the larger banks.
Mr. Taylor says he still has his skeptics, who include regulators. But the bank has always erred on the side of caution and has always lent out deposits prudently with a good spread, he says. "We have $140-million in regulatory capital and about $1.4-billion in assets. Of the listed banks on the exchange, I think we have the best opportunity for growth in the markets we are in.
"I'm happy with the way things worked out. For all the trials and tribulation, it was still a lot of fun."