If you believe the hype, everything is being Uber-ized. But has financial technology had its Uber moment?
That was the topic of discussion at one of the Economist Summit’s panels earlier this week that brought an incumbent financial institutions and technology veteran together with a startup. The latter was Wealthsimple, co-founded by COO Brett Huneycutt, who hails from south of the border and is focusing on disrupting the wealth management industry.
He believes the Uber moment has come, but it’s important to ask what that means. As a long-time user Huneycutt identified three traits of Uber that he sees as being significant and relevant: it revolutionized the consumer interface to order a car, changed the back office operations of the traditional taxi industry, and showed how quickly a business model could be scaled up after incubating for a year in San Francisco. “Finance has to learn from Uber.”
But Cameron Fowler, group head of Canadian personal and commercial banking at BMO Financial Group Group, doesn’t entirely agree. “I don’t think this is an Uber moment. It’s customer moment,” he said “Disruption is this space is a good thing.”
Equating the banking industry with the taxi industry is not a good comparison, as the latter has historically offered a dreadful customer experience, and while the financial services industry in Canada has issues, it is consistently ranked No. 1 worldwide by Cap Gemini. In addition, across the country, there 80 banks competing. “There’s not going to be one winner in this game.”
Fowler does agree with Huneycutt that Uber has changed the game in terms of offering a beautiful and efficient experience for the user that is digital all of the way through. “The battleground is customer experience,” he said. “There are parallels to be taken from Uber, but this isn’t the moment.” The finance industry requires a great deal of trust and ability to work in a regulated environment, and BMO is its peers have its eyes wide open, unlike the taxi industry. “We feel the disruption now.”
The closing of physical branches and the debut of Apple Pay in Canada are examples of this disruption, said Fowler, and also a sign that traditional hierarchies in Canada’s banks in are crumbling. BMO is now prioritizing mobile over the call center when it comes to its focus on customer engagement and fast release cycles.
IBM Canada president Dino Trevisani agreed with Fowler that there is a great deal of difference between the taxi and banking industries, but also sees fintech companies being able to offer a lot of value within their particular areas, and that the side effects of Uber are putting banks under a lot of pressure. “That pressure is critically important to driving transformation in the banks,” he said. “If the banks don’t transform they will have their Uber moment. They have time to make that transformation.”
Trevisani said IBM is working both ends of the spectrum by helping both large banks and small, innovative fintechs, which need support to scale up, while banks need to understand how they can create an innovation culture so they can adapt and transform themselves more quickly.
Huneycutt said there a pros and cons to being a startup in Canada, fintech or otherise. “We have incredible access to talent here.” It’s easier to recruit, he said, because there’s less competition than in Silicon Valley, home of the Googles and Facebooks. However, in San Francisco, there a culture that tolerates failure as part of the learning process; less so in Toronto.
From a bank perspective, Fowler said the industry has been slow to go digital. “Part of it is there is no real reason to do so.” Innovation in the payments area, for example, has been quite low here, and technology such as blockchain is just getting going.
There is plenty of opportunity for collabopration between new entrants and the traditional banking companies, said Huneycutt. In fact, it’s essential. Wealthsimple’s partnerships with established companies provide it with distribution channels and credibility. Fintechs are able to attract talent and iterate quickly, while the big banks have the data. “I think we’re both afraid of one another.”
Added Fowler: “This is a better together scenario.”