Canada’s financial services sector is a large, and growing, component of the nation’s economy, but its position is not unassailable. Thus, the sector must continue to innovate if it’s to sustain its success, according to a new report from the Conference Board of Canada.
The report, which explores the impact of the financial services sector on the Canadian economy, notes that as of 2015, financial services represented 4.4% of Canadian employment and 6.8% of gross domestic product (GDP). Moreover, financial services has become one of Canada’s top exports, more than doubling over the past decade to $11.7 billion in 2015, the report notes.
“The sector’s importance to the Canadian economy is increasing, with its share of employment, GDP, international trade, outward [foreign direct investment (FDI)] outpacing the average for all sectors,” the report says. “In fact, financial services have been Canada’s largest and fastest growing source of services exports.”
Beyond these direct impacts, the financial services sector also serves as a catalyst for growth in other areas of the economy, the report points out.
“Financial institutions provide consumers and businesses access to a diverse array of capital sources, which is an important driver of economic growth,” says Michael Burt, director industrial trends at the Conference Board, in a statement. “Canada’s financial institutions are effective in their roles as facilitators and are ranked among the top 10 globally when it comes to access to capital.”
The financial services sector is particularly critical in Toronto, where it employs more than 250,000 people, accounting for 7.9% of employment in the city and 13.1% of GDP, the report also notes. Furthermore, it points out the sector supports another 208,890 indirect jobs across the country in areas such as consulting, accounting, legal and computer services.
Here, too, the sector’s importance is still growing, the report finds. But, it also stresses that the sector “faces a highly competitive environment; thus, its future performance is not assured.”
The report concludes: “Despite the region’s early successes in developing fintech firms, fintech has the potential to cause significant disruptions to the sector’s large incumbent firms. Ongoing innovation is critical if the sector is to continue being a source of growth for both Toronto and Canada.”
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