Rod Hsu wonders every day if large financial institutions are preparing to pounce on his Vancouver-based startup’s business model.
Clients use nTrust’s digital platform to transfer cash directly and instantly to friends or businesses with a few button-pushes on a smartphone. Most of the services are free, but the transaction fees that do exist are kept low compared with rates charged by banks or PayPal.
Hsu, nTrust’s chief experience officer, said innovative payment systems like his and Bitcoin’s show an appetite “for breaking the mould” and bypassing traditional institutions in the financial sector.
Although he said it’s a “race against time” to get established in the market before banks poach this business model, results from a global survey show the Canadian financial services sector lags significantly behind other countries in terms of fostering innovation.
In Canada, 28% of companies in this sector find it challenging to cultivate an innovative culture within their walls, according to data from PricewaterhouseCoopers (PwC) released in December 2013.
An average of just 13% of firms reported the same problem across the globe. And in the U.K., not a single company surveyed said it had a problem establishing an innovative culture.
Karen Forward, director of management and technology consulting at PwC, said innovation comes down to improving productivity, creating new business models to adapt to a changing landscape and developing breakthrough products and services that change the marketplace.
She said one of the big challenges for Canadian banks is that they’re held back by complex and long-established processes.
Although this kept the country stable during the 2008 financial crisis, these processes make it more difficult to implement change quickly to keep pace with the rest of the world.
But Canadian financial institutions still have the advantage over startups when it comes to understanding customers, according to Forward. She said the key to making these institutions more competitive rests on rethinking the client experience.
“When you look at those successful organizations, they have a tolerance for risk and a willingness to fail,” she said. “And it’s interesting when you look at the speed of technology, it’s like that pace of innovation [has] to increase as well.”
Wavefront president James Maynard, whose Vancouver firm advises companies how to get wireless apps and services to market, said mobile technology is transforming commerce at a much faster rate than the Internet did two decades ago.
“Companies really ignore the impact of mobility on their business at their peril,” Maynard said.
Although his own experience shows Canada lags behind when it comes to innovation, he said it’s still very possible for the country to catch up quickly.
“We tend to be an earlier adopter of technology. We moved way faster on smartphones than the U.S. did. We moved much more aggressively on electronic banking,” he said.
Although nTrust is focused on the global market, Hsu said the company’s Canadian success relies on remaining patient, investing capital and constantly adapting its technologies and services to market needs.
“To … shake up that [financial services market], you certainly need those types of attributes in order to play,” he said. •
