Toronto-Dominion Bank's chief executive officer identified tech-savvy upstarts as a key challenge for the lender, but asked policy makers to consider new rules to level the playing field with established banks.
"Thousands of fintechs are vying for bank customers," Bharat Masrani said at the bank's annual general meeting in Montreal on Thursday. While competition is a good thing, he argued that new financial technology players – some of which lend money to small businesses through online services – are often not subject to the same regulatory rules as traditional banks, suggesting an unfair advantage and the potential for security lapses. "That's why I believe it would be appropriate for policy makers to consider a regulatory environment that ensures the safety of customer information and the integrity of our financial system," Mr. Masrani said, adding that security breaches and service interruptions have plagued a number of fintechs.
In a conference call with reporters following the annual meeting, Mr. Masrani was reluctant to provide specifics on what policy changes he would like to see or examples of security breaches.
However, some of the most notable breaches in recent years have involved major firms with big budgets to defend themselves against attacks. In 2014, a cyberattack against JPMorgan Chase & Co. compromised accounts for 83 million households and small businesses. Recent attacks have also targeted Home Depot Inc., Sony Pictures Entertainment Inc. and Target Corp.
TD itself was the target of a denial-of-service attack in 2013, when a flood of online traffic knocked out access to the bank's website and mobile banking services.
Despite highlighting fintech as a competitive threat that enjoys unfair advantages over traditional banking, Mr. Masrani made it clear that TD was hardly struggling.
He said the bank would engage with some fintech firms as potential collaborators, and sees the rise of new ideas and technology as a huge benefit to consumers.
"We engage with a wide range of firms who can support our mission to seamlessly fulfill the wants and needs of each and every customer," he said.
Nonetheless, his point about rising competition and a potentially disruptive threat to traditional banking has been supported by many observers.
A report from Citigroup this week highlighted the threat globally. It estimated that banks in the United States and Europe will slash another 1.7 million jobs over the next 10 years – representing about 30 per cent of their current payrolls – as they react to competition in areas such as lending and payments. Investments in the fintech sector surged to $19-billion (U.S.) in 2015, up tenfold over the past five years.
"The banks have clients and scale but the new fintech entrants usually have the innovation edge, especially at the 'client experience' interface," Citigroup analysts said. "To remain competitive, banks need to get innovation before the fintech companies get scale."
Mr. Masrani appeared to agree with this assessment. He noted that TD has partnered with Cisco Systems Inc. to create a lab for building tech-focused banking enhancements and joined an international consortium to explore the benefits of blockchain, the technology that underpins bitcoin.
He also noted recent enhancements to the bank's online brokerage, WebBroker, and announced that TD would soon launch an application called TD MySpend, which will provide customers with a visual representation of their financial health on their smartphones.
"The world is changing around us, and I cannot say with 100-per-cent certainty what the future looks like," he told his audience. "But I do know this: TD will adapt without abandoning what you have come to expect from us."