Royal Bank of Canada (RBC) and Bank of Nova Scotia (Scotiabank) are the most focused on embracing financial technology (fintech) among Canada’s largest lenders, according to a report from research firm International Data Corp (IDC).
The two banks scored the highest overall ranking — four checkmarks out of five — with top ratings in areas such as willingness to tackle financial technology issues and establishing digital development hubs, according to the report by IDC.
Toronto-based RBC also received the highest ratings for acquiring expertise, funding external fintech research, establishing a research organization and focusing on artificial intelligence (AI) 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.
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.
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,” said Robert Smythe, who wrote the report along with Jason Bremner, 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.”
RBC, the country’s largest lender by assets, has increased spending on AI and machine-learning technologies.
The firm has been collaborating with the University of Toronto and University of Alberta on machine learning, and named AI expert Richard Sutton as head academic adviser for its research initiatives.
Scotiabank has been pursuing a so-called “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 is to spend about C$2.5 billion to C$2.6 billion (US$1.91 billion to US$1.99 billion) this year on technology, the bank said at an industry event last month.
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