The Canadian Bar Insurance Association
Corporate

Fintech readiness lacking in Canada and abroad

Technology is set to shake up the relationship between the consumer and their financial institutions, Toronto corporate and commercial lawyer Marlin Horst tells The Lawyers Daily.

The article focuses on a survey by accounting giant KPMG that found many of the 160 financial institutions in the 36 countries it surveyed were falling behind when it comes to dealing with the impact disruptive emerging technology.

According to the report, 57 per cent of respondents identified “emerging financial technologies” such as Bitcoin as the biggest source of disruption in the financial sector. Yet just 46 per cent of those surveyed said they have a fintech strategy in place. A further 42 per cent had one in development, with 10 per cent confessing they have no strategy at all.

Horst, a partner with the Toronto office of Shibley Righton LLP, tells the legal news outlet that Canadian financial service providers are “largely as well prepared as any financial institution” to deal with fintech, but questions whether anyone is really ready for the scale of change that these developments will bring to the sector.   

"It’s going to be at the point where somebody" can use their phone to get a loan for a house, he says. “That looks pretty obvious to me, and we just don’t know what the next thing is going to be.

“Anything that you find frustrating in dealing with a bank or brokerage” will be disrupted, says Horst.

“When you sell shares on a stock exchange there’s three days to clear the trade. Technology is going to make that instantaneous,” he says. “It’s not going to be call up your broker to sell 300 shares of CIBC and wait for the money — it’s going to be sell the shares and 10 minutes later you have the money.”

Horst says he will be interested to see how financial regulators react to such an extensive shift in financial practices.

“No regulator wants to be seen as standing in the way of technology, but at the same time they don’t want to be seen as abrogating their responsibilities to the consumer,” he says.

However, Canadians can take some solace in the fact that our neighbours to the south will face even more drastic disruption thanks to fintech.

“The reason for that is the financial service industry in the U.S. is more fragmented,” Horst says. “In Canada, it’s dominated by five banks that control the vast majority of the financial services industry. They have a power that just doesn’t exist in the U.S.”

Canadian fintech innovators will most likely approach one of the big banks, he explains, rather than going it alone.

“So I think Canada is a little different because the existing big players are most likely still going to be the big players 10 years from now, which most likely isn’t the case elsewhere,” Horst says.

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