RBC, Scotiabank Get Highest Rankings on Canada Fintech EffortsBy
Firms must move from physical to digital banking, IDC says
Canadian banks are ‘placing lipstick on legacy system pigs’
The two banks scored the highest overall ranking -- four checkmarks out of five -- with top ratings in areas such as willingness to tackle fintech issues and establishing digital development hubs, according to the report by research firm International Data Corp. Toronto-based Royal Bank also received the highest ratings for acquiring expertise, funding external fintech research, establishing a research organization and focusing on artificial intelligence and big data.
Bank of Montreal, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank each scored two checkmarks overall on the five-point scale, which IDC said assesses readiness based on the lenders’ public statements or actions. Framingham, Massachusetts-based IDC sells research to banks and other companies.
Canadian banks must transition from brick-and-mortar institutions into digitally driven businesses using global networks, software and servers to survive, IDC said in the report. Currently, the country’s lenders are focused on sticking digital channels on top of existing operations, IDC said, describing it as “a clear indication of a culture that is placing lipstick on legacy system pigs."
“Canadian banks are at a threshold of deciding how to continue to support their legacy systems,” Robert Smythe, who wrote the report along with Jason Bremner, said in a telephone interview. “The banks have no option but to continue to focus on fintech investments, and they have to find a way to reduce the costs to maintain their legacy systems.”
Royal Bank, the country’s largest lender by assets, has increased spending on artificial intelligence and machine learning, technologies that Chief Executive Officer David McKay has called the most transformative for his industry. The firm has been collaborating with the University of Toronto and University of Alberta on machine learning, and named artificial intelligence expert Richard Sutton as head academic adviser for its research initiatives.
Scotiabank has been pursuing what CEO Brian Porter calls a “digital-first mindset” for more than a year, which includes recruiting Silicon Valley talent, opening digital labs in Canada and Latin America, and partnering with fintech firms. Scotiabank will spend about C$2.5 billion ($1.9 billion) to C$2.6 billion this year on technology, up from about C$1.9 billion when he took over three years ago, Porter said at an industry event last month.
Meghan Thomas, a spokeswoman for Toronto-Dominion, said she hasn’t seen the IDC report, but added that the lender has 11 million digital and 5.9 million mobile customers across North America and ranked first among all Canadian financial services firms in mobile engagement according to a separate survey by ComScore Inc. Veni Iozzo, a CIBC spokeswoman, and Bank of Montreal’s Paul Gammal declined to comment on the ranking.
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