2022 is the year you’ll see every big Canadian financial institution get ready for Open Banking.
Over the last 20 years, Sue Britton has worked in product innovation for the Canadian financial services industry, having previously led international teams and launched multiple products across the world for Symcor, Broadridge and Finastra.
Surinderjit (Jeet) Kaur Bhatti has vast experience in FinTech ranging from the venture capital world to the financial innovation labs. Her areas of expertise include Payments, Digital Banking, Alternative Lending, Crowdfunding, Embedded Finance, Corporate Innovation, and Digital Customer Experience.
Driven by the conviction that established companies have the ability to innovate quickly so they can stay ahead of changing customer needs, Sue and Jeet recently co-founded Fathom4sight - a knowledge-as-a-service platform with advisory support for market foresight in financial services. Their mission is to inform, inspire and facilitate ideas for growth for incumbents. Alongside Fathom4sight, Sue and Jeet host The FinTech Disrupticons, a new podcast series highlighting innovative startups and incumbents. Clayton Weir joined Sue and Jeet on their podcast earlier this year to discuss FISPAN’s growth and next steps, in the episode FISPAN is a Canadian FinTech that believes in banks and helps them build business banking experiences.
Sue and Jeet joined FISPAN’s CEO and Co-Founder, Clayton Weir, on Season Two of the If I Ran The Bank Podcast. In the episode, the three discuss the current state of financial innovation in Canada, how Fathom4sight drives insights for their customers, and the need for banks to evolve with their customer’s expectations.
What is Fathom4sight
Fathom4sight is a FinTech Knowledge-as-a-Service (KaaS) platform offering insights and trends driven by data. As part of their mandate, Co-Founders Sue and Jeet aim to help their customers understand the FinTech and financial product innovation industry, offering value above the database. “We are trying to help the ecosystem understand what’s happening,” noted Jeet, stressing the notion of working with various players in the financial environment, above and beyond traditional bank and FinTech partnerships.
Going a step beyond the data, Fathom4sight’s platform offers foresight and knowledge to help forward financial innovation in Canada. “Part of our new mandate is to build and offer value above that database - offer insights and trends that we can derive from the data,” said Jeet, adding, “so we can really help people understand what all the activity means to them and how they should be getting ready to stay relevant in the market.”
Canadian FinTech and financial product innovation has exploded with activity, including a tremendous increase of organic and global FinTech players. Jeet noted the importance of tracking entrants to the market and new offerings in order to drive insights for their customers. Within its platform, Fathom4sight tracks activity such as who’s launching, the kinds of products they’re using, and who’s getting more traction, thereby providing increased visibility into the Canadian FinTech ecosystem.
Current State of Financial Innovation and FinTech Growth in Canada
Consumer-directed growth in banking and innovation is expected to rise, preceded by the past 24 months. “2022 is the year you’ll see every big Canadian financial institution get ready for Open Banking. It will be an industry-led approach until something meaningful happens with our regulators in Canada… All of the banks are getting ready. They’re getting their technology ready. They’re getting their business strategy ready,” Sue anticipated. Examples of financial innovation can be seen through National Bank’s collaboration with FinTech Flinks. Together, National Bank and Flinks have launched the Open Banking Environment (OBE), enabling access of consumer-authorized data between financial institutions and FinTechs.
Diving into the strategies of Canadian financial institutions further, Sue examined the situations of smaller banks, adding “The smaller financial institutions are somewhere in between ‘I know it’s happening, but I haven’t the foggiest idea what to do’ and [there are] probably some of them quite smart about it and [are] already working on it."
Sue explained that amidst the early stage development, APIs will enable safer and more secure data sharing even before open banking regulations are established in Canada.
Banking on Brands
As more and more brands begin to launch their own banking products, Jeet introduced the idea of banking on brands in Canada. Specifically, banking on brands considers any company - whether it be retail, tech or telco - that integrates banking products into their customer journeys.
Jeet explained that the integration of banking products into customer journeys can be viewed in two dimensions,“One that gives your consumer a way to share and have that banking, financial relationship with you. The other is that you are getting all this amazing data from consumers, that you learn so much more about them. It’s also about owning the consumer experience end-to-end.” The difficulties in obtaining banking licenses in Canada have encouraged players to use wallet and prepaid cards to launch their deposit-taking capabilities in the initial phases. Examples of players navigating this space include PC Financial and The Hudson Bay’s partnership with Neo Financial to offer Hudson’s Bay Mastercard.
While this has occurred mainly in the front-end of banking experiences, increased activity is being seen in the BaaS, banking as a service space. Jeet explained that entering into BaaS enables companies to avoid lengthy and tedious activities (such as legal and compliance work), allowing them to quickly launch their products. An example of this activity includes Stripe’s Shopify Balance, which embeds financial services and enables Shopify customers to open a banking account directly from their Shopify account. While movement into BaaS has largely been occupied by companies and FinTechs, there is an increasing presence by banks.
“Because of the need of brands and everybody trying to get into the FinTech space, at the back end, we are seeing a lot of activity in the BaaS space, banking as a service." -Jeet
Consumers Driving Canadian Innovation
Other payments trends like Buy Now, Pay Later have complemented rapid transformation in the Canadian financial services industry. Companies like Affirm, a FinTech services company offering consumers greater payment option flexibility, have made significant advancements in Canada. In drawing insights from these advancements, Sue noted they are potentially “driven by the need by consumers and businesses to get access to digital capabilities.”
The advancement of digital capabilities have quickly enabled greater brand value, raising considerations for consumer loyalty. Gone are the days of motionless consumer loyalty - now, aspects such as convenience place at the top of the list. Drawn by personal experiences, Jeet noted that “[Some of us] are time-strapped, convenient, hungry people… These behaviors are going to stick; the ones that we adopted during the pandemic, more or less, they will… We are still loyal to certain brands, but think about the new generations - they are not really.”
“It's about where you get the value and the fastest way possible to get it. I think we'll see that in banking. We are already seeing it, I would say, with some of the challenger banks and the way they're offering their services. Hence, banks who are listening need to move fast.” -Jeet
Signalling Change in Retail: Beyond the Business Model
Offering consumers cashback with a list of local and national partners, FISPAN’s CEO Clayton Weir related Neo Finacial’s platform as a “magic circle of life between the small business owner and the retail consumer”. Diving further into the topic, Jeet stressed the FinTech’s interesting dynamic of empowering communities and local small businesses, adding “...when it comes to Canada, having me being an immigrant and having stayed in other big cities in the world, I feel community has a strong value proposition in Canada…They [Neo Financial] are growing those communities… and those small businesses are emerging.”
Offering predictions and next steps for the emerging FinTech, Sue speculated on the increased range of products that could be expected by Neo Financial. This prediction could be met with expectations for the industry, as Sue added “I also feel like this is a bit of a signal about the change that’s happening in the retail space… Neo has this amazing merchant audience. All of these things are becoming multi-sided marketplaces, who’s going to actually really be able to have the customer relationship in the end.”
If Sue and Jeet Ran The Bank
As consumer needs evolve, the onus is on banks to innovate and respond to the consumer: “You should evolve with what your customer’s needs are,” stressed Sue, adding, “I think that by and large, the sentiment amongst incuments has changed.” This being said, evolving to customer needs poses a challenge: with the Canadian financial market largely occupied by big banks, shifts in response to consumer expectations are not easy, noted Sue, adding that even though “they want to do it, there’s no smoking gun out there to help them move fast.” The nature of being a big bank comes with a host of regulatory and cultural obstacles, making it difficult to move and adapt quickly.
Driving the path to innovation as a big bank, National Bank has moved into the FinTech business of Open Banking and banking as a service, assisted by their collaboration with Flinks. Sue spoke upon the foundation of support towards innovation shown by the incumbent bank’s executive team, adding: “I’m pretty impressed with what they’ve done… There’s so many banks that are still undersupporting their innovation people.. They’re keeping them in stealth mode and there’s nothing worse than pouring all your energy into trying to be more like Shopify when you’re inside an incumbent and then have nobody at the top helping you succeed… I think it’s pretty impressive to see how much innovation is happening in open banking.”
As banks take the next steps towards adopting FinTech, we will start to see equal footing amongst players in the ecosystem, as explained by Jeet: “The tables are turning in a way and I think we are moving towards a time where it will be more of equal footing and especially with some of the FinTechs that have the amazing value proposition and banks just can’t afford to miss those or ignore them anymore. This is definitely driven by yes, the regulations, the regulatory staff, but to a certain extent what your customer needs.”
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Dive in further with Sue and Jeet on the full episode of the If I Ran the Bank podcast on Apple Podcasts, Spotify, Google Podcasts, Amazon Music or by visiting the If I Ran the Bank website.
