Canada's big banks are beginning to see financial technology (fintech) firms as potential partners rather than rivals as the banks seek innovation to help boost service, enhance efficiency, and cut costs, suggests a new report from PricewaterhouseCoopers LLP (PwC).
"The [banks] don't see fintech firms as unwelcome invaders, but as partners and collaborators — as sources of fresh thinking and creative technologies that can help elevate the customer experience and improve efficiency," the PwC report says. "It's a shift in attitude that's changing how banks tackle many challenges."
The list of challenges facing the banking industry in the year ahead is a long one, ranging from shifts in technology to growing customer expectations and rising costs. In this environment, competition is also increasing, with fintech startups, established technology firms and others edging into the financial services sector whereas the banks are burdened with aging legacy systems that impair innovation.
However, the PwC report says that "Canada's banks are responding to these challenges with urgency, confidence and significant investment." As a result, PwC predicts that in the year ahead, banks will continue to embrace fintechs and innovation, generally, as they seek to upgrade payments systems, improve client experiences, and automate compliance. This approach marks a departure for the big banks, the report indicates.
"Historically, Canada's banks have preferred to keep the development of new products and services in-house," the report says. "Today, banks are increasingly likely to build on their internal efforts, teaming with external organizations to accelerate innovation by capitalizing on their partners' unique capabilities and agility."
In addition to banks' willingness to team up with fintechs, they're also increasingly partnering with academics who are leading sources of research into cutting-edge technologies, such as artificial intelligence (AI), machine learning, and robotics, the report notes: "We're seeing far more collaboration among banks, fintechs and governments to speed progress, mitigate risk and create an environment where banking innovation can flourish."
One of the central obstacles to all of this is developing interoperability and facilitating the future expansion of systems, the report notes: "The answer lies in open standards and open banking APIs. It will be essential for banks, fintechs and other stakeholders to agree to standards for APIs, data and integration patterns — a common ‘language' or ‘lexicon' to keep solutions compatible and mutually understandable."
To that end, various players will have to work together to establish common standards, and to allow for future adoption of emerging technologies, such as robotics, AI and blockchain, the report recommends: "Embracing common standards will ultimately serve as the foundation for further innovation and help banks provide the seamless, friction-free experience customers demand."
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