Deputy Minister of Finance says “we need to recalibrate our levers” regarding banking innovation.
At Elevate’s FinTech stage, programmed by BetaKit as part of the broader tech and innovation festival, FinTech leaders came together to challenge traditional banking, air frustrations with its current limitations, and discuss moving into a more customer-centric financial services model.
“Traditional banking just doesn’t meet the expectations of what people have in today’s environment,” said Justin Herlick, Pine’s CEO and co-founder. Herlick, who previously worked at Silicon Valley startup Blend before co-founding the Toronto startup, said customers now want services to be faster, run smoother, and on their terms. He explained how the current banking system has stayed in the traditional sense mainly about the bank and less about the client.
Like Pine, Tim Morris, chief banking officer of Neo Financial, believes that traditional banking hasn’t kept up with clients’ changing demands. It also does not have the ability to evolve, he said. “It doesn’t innovate at the pace at which the average Canadian is looking for benefit, looking to get ahead and trying to understand their options.”
“Traditional banking just doesn’t meet the expectations of what people have in today’s environment.”
Justin Herlick
Pine CEO
The lack of transparency is another source of frustration and should be improved, according to Nesto CEO Malik Yacoubi. “When you go on a bank’s website they will not display the best rate that they can provide, they will just have I think what’s called a displayed rate,” he shared. Transparency, he continued, should be applied to how products and services are explained to customers. “For example, when we provide a mortgage offer to a customer we lay out the pros and cons of every product we’re providing,” he explained.
Yacoubi argued that financial institutions should be more transparent and open in discussing details of their services and offers so customers know what they are getting into.
On a separate panel moderated by BetaKit reporter Josh Scott, Mohamad Sawwaf, founder and CEO of Manzil, explained how much Canada has been lagging behind other countries in terms of banking services and regulatory policies.
“I think we have a long way to go to keep up with a US, or maybe an EU country that has a very competitive landscape when it comes to banking,” he said.
Deemed the Halal Wealthsimple, Sawwaf’s startup is Canada’s only Islamic FinTech startup that offers an investment platform for Muslim Canadians. It’s designed to help the community build wealth with features that align with the Muslim faith and religious values. “Canada’s the last G7 country to adopt any sort of framework when it comes to Halal banking,” he shared.
Sawaff said his travels abroad have shown him what he says is the true essence of digital banking and how far behind the country is in terms of banking innovation. He told of how Manzil’s CFO, a Saudi resident, applied for a bank card online and got the card within minutes from an ATM. Banks there, he said, are connected to the national ID system so his card was printed out on the spot. “That is truly what we should be striving for as a first-world country,” he declared.
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On the same panel, Associate Assistant Deputy Minister of Finance Julien Brazeau said there is a need to convince political leaders to buy into this idea. He noted that all the other jurisdictions that were hit during the 2008 financial crisis are now seeing banking innovation take off in ways that are not happening in Canada. “We need to recalibrate our levers,” he said.
Canada’s claim to fame, Sawaf added, was having the strongest most stable banking environment that was considered number one for many years. “That was 16 years ago. We need to move past that,” he quipped.
To that point, former Open Banking czar Abraham Tachjian speculated onstage that he believes the next piece of legislation will answer many questions FinTech innovators have about the framework. After years of delays, Budget 2024 featured a commitment by the federal government to enact “consumer-driven banking” but gave no timeline for tabling framework legislation. Public consultations on Budget 2024 proposals, including for open banking, ended in September.
While most of the other panellists bemoaned the lack of innovation within most banks, Toronto-based Koho Financial is applying to be one.
The FinTech firm announced a $190-million CAD round of debt and equity financing on the same day it discussed its pursuit to become a Schedule 1 Canadian bank in a fireside chat moderated by BetaKit editor-in-chief Douglas Soltys. CEO Daniel Eberhard said the company is currently in phase two of the process and focusing on internal infrastructure and regulatory compliance. “We are aiming to get to clear phase two at the end of next year,” he said.
That said, the CEO reinforced that he would not bet the company on pursuing a banking licence.
“We are trying to run this in a way where we are really intellectually honest through the process and if it doesn’t fit in six to 12 months or if we learn this is no longer the best for the business, we have to be prepared to pull out,” he added.
Feature image courtesy Manzil via LinkedIn.