Canada's Financial Institutions: Technology Leaders or Laggards?
Sinclair, Helen, Canadian Speeches
Chief Executive Officer, BankWorks Trading Inc.
Technological leadership is seen as the most important factor that will determine the success or failure of Canadian financial institutions to meet the challenge of global competition. Canada's financial industry is a clear technological leader in some areas, but a laggard in others, squeezed between giant multinational institutions and highly specialized technological firms. Moving up from their present second-tier position to the ranks of world leaders is seen as a doable but formidable challenge. Speech to the Canadian Club of Toronto, November 3.
Let me start with an anecdote from a dozen or so years ago, when I was an employee of Scotiabank. One Friday evening, I headed downstairs to use what was then its only banking machine in the head office building--or for that matter, in the Toronto downtown area. The machine was out of order. As I pondered the alternatives for my weekend grocery money, the bank's chairman emerged from the elevator. "How much do you need?" he asked. "A hundred bucks," I stammered. Out came his wallet and five $20 bills. I still maintain it was the only interest-free loan Ced Ritchie ever made!
Today, I could choose between a number of machines of my own bank, plus dozens belonging to others--all within a five-minute walk of my office. Besides which I wouldn't care whether I had any cash or not, because I would probably be using my debit card--assuming, of course, that I wasn't parked in front of my PC, wheeling an electronic buggy down the aisle of a cyber mall.
Which brings me to my topic for today's address: the role and state of technology in Canadian financial institutions.
In my new incarnation as an entrepreneur, I spend the majority of my days helping technology suppliers identify and market new applications for the financial sector and, in parallel, assisting financial institutions to source new technology. My experiences to date confirm what was my conviction from the outset: that technology leadership is the number one strategic issue facing Canada's financial industry. It is far more crucial to the success of our banks, for example, than being granted the insurance distribution or car leasing powers which have taken up so much time and thought in public debate. That will be my first point today.
My second point will be that our financial institutions have achieved much in some key areas of technology. But their overall position is second tier and they are being squeezed at one end by some of the world's largest financial institutions, with enormous information technology budgets, and, at the other end, by very specialized institutions, which live and breathe technology in every aspect of their operations.
My final point will be that I believe it is possible for our financial institution to work their way to the top of the heap. But it will be a formidable challenge.
Why is technology so important? The answer, in a nutshell, is that it enables financial institutions to deliver higher quality services at lower costs. To take a simple example, it costs $1 to process a cheque, 27 cents for a banking machine transaction, and a penny for an Internet transaction. Lower costs for the bank translate into lower costs for the consumer. A bill paid by telephone, for example, costs 40 cents; a bill paid by mail will cost you more than that for the stamp alone.
And think about discount brokerage. Commission on a thousand shares of TD Bank will cost you $35 if you access Green Line by phone as compared to $29 when you buy over the Web. (Both look good in relation to full service commissions which, at today's share price, will run you well over $600!)
Technology translates into sophisticated mathematical models and tools that enable financial institutions to offer GICs with stock-index-related interest rates, or to guarantee exporters predetermined exchange rates. …