The Canadian financial services and insurance industry is in an interesting and vulnerable position.
Consumer demands are changing and they expect more from their service providers than ever before. Technology is transforming, more rapidly than most companies can keep up with. And corporate giants like Google, Amazon and Facebook, and smaller start up financial companies are well positioned to become disruptive forces in the industry.
Think these changes aren’t likely to affect the Canadian financial services industry?Think again.
Google and Amazon are already in the financial payments processing business. Google launched a mobile app for wireless payments, called Google Wallet, in 2011. Amazon has offered its Checkout and Simple Pay services to merchants for several years now, but seem to be ramping up its capabilities recently. In October 2013 they launched “Login and Pay with Amazon” services, to challenge PayPal (Tech Crunch), and in December, acquired mobile payments start up GoPago (Tech Crunch).
Why the Canadian financial services industry is vulnerable
We are now in an era where products and services (including financial products and services) can be delivered online at a fraction of the cost of traditional retail models. As a result, consumer-direct offerings are growing at a very rapid pace. Witness the growth of Wealthfront, a software-based financial advisor that launched its low cost investment service in December 2011: they began 2013 with less than $100 million in assets under management, and ended the year with over $538 million – a growth rate of over 450%.
How long will it be before providers like Wealthfront or Google take aim at the Canadian financial market, offering more choice and efficient delivery of low-cost financial products direct to consumers – pushing aside and displacing existing product manufacturers and financial advisors? Historically, Canadian financial institutions have been relatively insulated from outside encroachers through protective Canadian regulators. But this will change with the rapidly transforming global retail environment and consumer demand for more choice at lower costs.
The Canadian financial services and insurance industry is fairly ripe for the plucking. New technologically innovative and lower-cost entrants to the market in the last several years have taken advantage of Canadian consumers’ dissatisfaction with current providers, picking the low-hanging fruit and slowing building (and often usurping) client relationships.
These disruptive companies may have a relatively easy time moving into financial services for several reasons:
- They don’t face the same regulatory and compliance challenges that the traditional players do - partly because they will offer products rather than advice.
- Since they operate outside of the traditional regulatory environment, they’re able to innovate more quickly than a financial institution.
- Advanced technology means they can automate for significant cost savings.
- Deep pockets means they have the capital to spend on innovation and marketing, and their extensive existing relationships with consumers (through smartphones, online tools, online retail and other services) means they can reach consumers directly.
All is not lost. There is a way to battle back the storm that is brewing, a way for manufacturers to position themselves as innovators, to keep the advisor in the equation, and stay relevant with consumers.
The solution already exists in a shared online financial services and insurance marketplace for Canada – a flexible technology platform that will allow the industry to compete with these industry disruptors.
Download free white paper
To learn more about the changing financial landscape in Canada and the solutions that already exist, download the free white paper “The Game is About to Change” by Rick Hyde, Ticoon President and CEO.