Carolyn Wilkins, the Senior Deputy Governor at the Bank of Canada, says that inefficient financial institutions have left the door open to competition from FinTech companies.

In a speech to the Canadian Payments Association conference in Calgary earlier this month, Wilkins noted that consumers have become used to having instant access to goods and services, and argued that it should come as no surprise that they now expect to have instant access to their money. She suggested that large, well-funded companies outside of the financial services industry such as Apple and Google are in a position to give it to them.

"The door for competition is open"

"One of the main advantages of traditional financial institutions is the trust they have built with their customers. Tech giants also have wide customer bases and brand loyalty that could help drive adoption," said Wilkins. "These companies are using their customers’ information and their existing platforms to offer attractive and cost-competitive services and to pick away at the most profitable business lines of financial institutions. The range of services they offer could grow over time."

She went on to say that some financial institutions and have become "relatively inefficient", while at the same time technology has made it easier for new players to get into the business. "Supporting systems can date back several decades and are often not interoperable, even within an institution. So the door for competition is open ", she commented.

A net positive effect on Canada's financial system

Wilkins warns that new technologies could even reduce the need for financial advisors. "In theory, new technology could enable a different framework for addressing the same frictions, potentially one that does not require financial intermediaries at all," she said.

Ultimately the Senior Deputy Governor believes that, so long as the risks are well managed, FinTech will have a net positive effect on Canada's financial system. "Fintech will likely entail more of an evolution than a revolution," she concluded. "This is because incumbent financial institutions will adapt, new players will join the financial ecosystem and those with strong business models will survive."