Balancing tech spending with meeting clients’ evolving expectations and keeping costs under control will be an increasingly critical task for the Canadian banks as the industry becomes increasingly technology-dependent, suggests Moody’s Investors Service in a commentary published Monday.
Toronto-Dominion Bank’s recent announcement that it has signed a deal with a U.S. fintech firm to bring new tech-driven capabilities to its discount brokerage offering is credit positive for the bank, “because it shows the bank is making headway with significant fintech initiatives, which can improve its operating efficiency and fend off new competition,” the commentary states.
TD has signed a licensing deal with New York-based The Hydrogen Technology Corp. that will see the bank to deploy the firm’s technology in its discount brokerage, enabling clients to engage in financial planning and more robust portfolio construction. TD also indicated that the it expects to launch a robo-advisory platform in the future as part of the deal.
“TD’s choice to collaborate with an existing fintech company to gain access to its proprietary technology, rather than to build the desired solution internally is, in our view, indicative of an effective multi-strategy approach that appropriately leverages internal and external resources to develop new capabilities,” states Moody’s.
The ability to balance tech spending with cost control, “is an increasingly critical capability for Canadian banks,” it adds.
Canadian banks’ pursuit multiple strategies, including partnerships, acquisitions, and joint ventures will “diminish the likelihood of significant fintech disruption in the Canadian system,” Moody’s states.