Conversations about FinTech often revolve around the same question: can FinTech startups innovate quickly enough to compete with the slower-to-iterate banking institutions?
That question was top of mind at the Canadian FinTech Summit, hosted at MaRS in Toronto. Organized in collaboration with the BDC IT Venture Fund, the Summit brought together both bank executives and FinTech entrepreneurs to brainstorm the possible future for FinTech and why FinTech startups have been integral to shifting how we think about financial services.
Kicking off the full-day event C100 co-chair and Andreessen Horowitz partner, Angela Strange — who was also named among Ottawa’s circle of economic advisors — explained the reasoning behind the Andreessen Horowitz mantra of “software is eating the world.”
“A lot of Canadian entrepreneurs sell too quickly and give up on the Canadian market, and we aim too small.”
Startups are taking many of the bundled core services that banks offer — such as mortgages, insurance, and consumer and business lending — and fragmenting them into a single service done well. Strange said that startups are also taking advantage of the general millennial distrust of banks. “Millennials said that they would rather go to the dentist than listen to a call from a bank,” she said. “And the idea of getting anything in 15 minutes or less is bleeding over into FinTech.”
“Startups are innovating across core banking with new FinTech products, including insurance and investing,” she said. “The battle between incumbents and startups comes down to if the incumbent gets innovation before the startup gets distribution.”
— Nicole LeBlanc (@NpLeBlanc) April 4, 2016
The latter is an issue that startups spoke to during a panel discussion moderated by Globe and Mail writer Sean Silcoff featuring Gabriel Woo, a VP at RBC, Jeff Marshall, VP of the Bank of RBC; Jeff Marshall, a VP at the Bank of Nova Scotia; Kevin Sandhu, CEO of Grow; and Les Whiting, VP of financial services at Wave.
Sandhu and Whiting acknowledged that for all the hype around startup disruption, banks still had an important place in the ecosystem — they have the consumer and employee base, and resources, to quickly push out products and test across a large user base.
“Put plainly, there’s a lot of well-deserved trust with respect to the longevity of banks, and there’s a lot of trust and brand awareness.”
“Put plainly, there’s a lot of well-deserved trust with respect to the longevity of banks, and there’s a lot of trust and brand awareness,” Sandhu said. “Capital is an important determinant, and banks have us beat by a longshot. It’s less about a win or lose value proposition; whether that means that the emerging FinTechs take a prominent position in the world of banking or it’s the other way around, the point is that consumers should end up with a better experience.”
“The technology enables new entrances to marketplaces to build on top of what banks are doing, and you’re seeing acceleration of tech push even faster,” said Whiting.
“A lot of Canadian entrepreneurs sell too quickly and give up on the Canadian market, and we aim too small,” said Sandhu. “I share that sentiment and I think FinTech will perform differently.”
— Douglas Tr0n Soltys (@tron) April 4, 2016
At the same time, banks can’t just expect to keep up by adding new features to sometimes decades-old legacy system — a product of a traditional bank’s common “incrementalist” culture.
“There’s an increasing ‘appification’ of capabilities, where consumers start to select specific apps for specific part of value chain. It creates unbundled experience, so if I get one app for my mortgage and somewhere else for my mortgage and RRSPs, that can create fairly disjointed experience so there’s potential where consumer demands that we rebundle that,” said Kris Hansen, senior principal of financial services to SAP. “People are rewarded for delivering projects and when there’s a problem there’s typically a hardware truck and a software truck and a service truck that need to back up, and we need to bolt some new stuff onto the old stuff. It really creates an end-to-end problem, and the more new stuff we bolt on to old stuff the harder it becomes to fix next time.”
“We have great capabilities across canada and in the FinTech space, we have strongest banks in the world in Canada,” said Hansen. “If we figure out how to create this infrastructure and create strategy, we could potentially create some of the world’s best companies.”
— Wave HQ (@WaveHQ) April 4, 2016
In the closing panel, several venture capitalists — including Dan Kittredge, Partner at Napier Park Global, Chris Wormald, VP of BD Post Media; Gaurav Tewari, Managing Director Global Venture Investing at Citi Ventures; and Doug Steiner Former CEO at E-Trade Canada, discussed the trends and changes they’ve seen in FinTech over the past few years with moderator and BDC IT Venture Fund partner Peter Misek.
“I think a few years ago banks weren’t so keen on entrepreneurs showing up at their door,” said Steiner, adding that the rise of services like Apple Pay forced banks to look at more innovative financial solutions.
“I have three daughters and we as a fund are definitely open to female-led ventures, but they have to be great.”
– Peter Misek, BDC IT Venture Fund
Overall, with pitches from startups, and investors, venture capitalists, and bank executives speaking, the event gave every player affected by FinTech representation. Unfortunately, not all groups at the event enjoyed this representation — the elephant in the room at tech events is often whether or not they will provide a platform for women and people of colour. While the audience seemed to be at least a quarter female, unfortunately, the all-day event was lacking: Strange was, incredibly, the only woman to speak on stage during the day.
When pressed by BetaKit to speak to the women they work with and invest in, the panel offered a smattering of disappointing responses, given that it is now 2016 (and notably no longer 2015).
“Most people, especially the venture capitalist side, we’re the blindest people to gender, especially in terms of focusing on talent and community,” said Steiner.
“I have three daughters and we as a fund are definitely open to female-led ventures, but they have to be great,” said Misek, admitting that the male-centric perspective of these same events are often the result of a venture capitalist’s interactions in daily life — 76 percent of venture capitalists are white and male. Of the IT Venture Fund’s 35-startup portfolio, three have female CEOs.
Tewari said that FinTech was often a male-dominated field, and stays conscious of it during many tech conferences where women aren’t as represented — he noted, though, that at his firm, out of a 31-person team, 17 are women, which adds some perspective. “I can’t explain it but you take notice of it, and it’s an issue we have to fix.”
Taking notice of an issue is the first step towards its resolution. However, unless the organizers of such events are challenged for their lack of women and people of colour, there is no incentive to do better. Taking notice is not enough.