Banks must find ways to make disruptive technologies work for them: CIBC CEO
This April 3, 2013 file photo shows bitcoin tokens in Sandy, Utah. (AP / Rick Bowmer)
Alexandra Posadzki, The Canadian Press
Published Tuesday, June 23, 2015 6:11PM EDT
TORONTO -- The chief executive of CIBC says the bank isn't afraid of new entrants and technologies that threaten to shake up the financial services sector.
Instead, the lender is closely studying everything from peer-to-peer lending platforms to the technology underlying digital currencies such as Bitcoin, looking for ways it can use these innovations for its own benefit.
"We can play in that space," Victor Dodig said Tuesday when asked whether he feels threatened by financial technology startups that seek to disrupt the traditional banking sector.
Dodig says "doom and gloom" reports about technology companies snatching away market share from the banks are largely overblown.
"Will clients move in droves to these new technology platforms to do their lending? I don't think so," Dodig said following his speech to the Empire Club of Canada after the bank announced it is backing mobile payment app Suretap.
"It won't happen that quickly."
However, it is possible that increased competition from new entrants such as peer-to-peer lenders -- online marketplaces where borrowers can secure loans without going through a bank -- could drive bank fees lower, he said.
"Competition always changes the dynamic on pricing," Dodig said. "Will there be pressure over time? Of course there will be."
Dodig said the bank is closely studying blockchain technology -- computer code that makes up the underlying architecture of virtual currencies such as Bitcoin.
A recent report from Canada's Senate said the technology, which can be used to securely transmit information, has many promising applications. The report urged both private and public sector agencies to explore the technology and consider implementing it to enhance the protection of personal information.
Dodig said it's hard to predict whether blockchain technology will play a central role in how the banks do business, but it's important for the banks to understand how it works and the level of security it offers.
Innovation in the financial services sector has been a common theme among bank CEOs in recent months as a number of new tech-inspired startups encroach.
OnDeck Capital, a U.S. online marketplace where small businesses can secure loans, recently announced it is expanding its services north of the border, and the number of "robo-advisers," or online investment advisers, in Canada has been growing.
Some of the CEOs at Canada's biggest banks have expressed concerns in recent months that nimble new tech entrants are not subject to the same regulations as traditional financial services companies, which gives them a competitive advantage.
"The regulation is still evolving as to whether they're securities companies," said Dodig.
However, Dodig said traditional lenders enjoy some competitive advantages themselves, such as their long-standing relationships with their customers and their reputation as being stable institutions.
"Clients that have money with an institution want to make sure that it's stable and secure, because (deposit) insurance only gives you protection to a certain level," said Dodig.