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With Open Banking coming to Canada, there has been an increasing shift towards openness; where consumers and not traditional institutions, are in control of their data. Challenger Banks, which are designed to compete for consumers with traditional financial institutions, have benefited significantly from consumers having greater choice when it comes to their financial products and services. A Challenger Bank is any company that offers banking services in a digital only mode, do not have any physical branches, and users interact with them through the web or an app. Although the barriers to the success of Challenger Banks can be difficult to overcome, the opportunity for growth and success is considerable. Internationally, there have been a number of successful cases of Challenger Banks. Revolut, a challenger bank based in the UK, offers customers banking products such as prepaid debit cards, currency exchange, cryptocurrency exchange, and peer-to-peer payments. As financial systems around the world begin to adopt Open Banking, Challenger Banks have begun to consider expanding across the pond. In recent years, a number of successful Challenger Banks have considered expanding into Canada specifically. So why Canada? 

The 3 Reasons Why Challenger Banks are Choosing Canada

Opposites Attract 

As Canadian consumer’s needs and expectations continue to evolve, the ability to deliver products and services that enhance the customer’s experience, whether it be through convenience or speed, has created an opportunity for stakeholders. Within the Canadian landscape, the FinTech ecosystem consists of 1,200+ FinTech start-ups. The growing strength of the FinTech market within Canada presents a unique opportunity for any company interested in innovation. Through FinTech’s ability to provide agile technology and disruptive business models, partnering with FinTechs has enabled the transformation that incumbents need to survive. As tech giants such as Amazon, Alibaba, and Google have begun to offer financial products, these companies can leverage their existing customer bases for faster adoption of their new offerings. Amazon for instance, has made serious investments in payment and lending products, that will stand as a serious challenger to conventional banks. 

With the emerging threat of new entrants, Canadian incumbents are increasingly partnering with FinTechs to remain competitive. Payment Source recently announced a partnership with FinTech STACK to enable Canadians to access their Load Hub product via any Canada Post location. In comparison to their local bank branch, the partnership will allow customers to have greater access to traditional financial products and services. STACK members can now instantly load cash into their prepaid Mastercard at the 6,000 Canada Post locations across the country. As Canadian incumbent’s and FinTech’s continue to partner with other FinTechs, Challenger Banks and alternatives will increasingly become an attractive opportunity. Offering agile solutions, disruptive business models, and a deep understanding of the global consumer, Incumbents will benefit from Challenger Banks growing success. For Challenger Banks looking to expand, Canada and its incumbents represent an obvious opportunity into a new market that is familiar with FinTech and one that is always open to partner. FGS reached out to a unicorn (startup with a valuation of over $1 billion), and a successful Challenger Bank, Revolut for a comment. Revolut mentioned that “the ideal partner is one that shares a like-minded attitude, looking to make advancements in the customer experience by solving real problems in creative ways.”

The Canadian Opportunity 

For Challenger Banks, the Canadian market is a unique opportunity. Most notably, Challenger Banks such as Revolut, have recognized a market opportunity for their products and services within the Canadian market. “Canada has always been a very attractive market for Revolut. As a country constantly at the forefront of innovation, the clunky and unresponsive products from the big banks showed a clear opportunity in an otherwise technology-forward market. Simply, it’s not so much what the Canadian landscape offers Revolut, but what our product can offer a marketplace yearning for innovation in the personal finance space” stated Revolut. Presently, the Canadian consumer is diverse; made up of a large number of baby boomers, as well as a significant amount of millenials that are increasingly becoming empowered about their financial health. Within the next few years, Canada will see one of the most significant shifts within its workforce as baby boomers begin to retire and millennials and Generation Z will become the majority of the Canadian work force: a new workforce that has been empowered by technology. 

Traditional Canadian financial institutions will fail to meet the needs of millenials as the modernization of their legacy systems will fall short of the digital experience expected by this generation. Consequently, this has created an opportunity for Challenger Banks such as Revolut. By recognizing this gap within the Canadian market, Challenger Banks are set to succeed significantly if they were to expand and partner with an incumbent. Although Canada is a smaller market, Challenger Banks are also attracted to the idea of being one of the few to operate within Canada. When compared to the US, the American market is highly saturated with competitors. This can potentially lead to high costs associated with brand awareness, as well as increased barriers to success when partnering with incumbents. For international Challenger Banks therefore, the Canadian poses the best opportunity to enter the North American market. 

Home away from Home 

Although a foreign market may have a need for a Challenger Bank’s solutions, the norms and culture of a country can be a significant deciding factor as to whether or not they should expand. Canada is a unique opportunity for any Challenger Bank who is considering an expansion into a new market. Adopting a policy of multiculturalism, Canada recognizes the culture, race, and religion of all its constituents as being equal. For Challenger Banks based around the world, the ability to expand into a new market where they are judged for their product and not for their background, is a significant pull factor. Cost of living and immigration policies for instance, are two significant factors that would need to be considered as a Challenger Bank expands. Countries that are too expensive or have a negative stigma towards immigrants for instance, would create too many barriers for an expanding Challenger Bank. Alternatively, Canada should be a natural option!

Wrapping Up 

Increasingly, incumbents are seeing the value of partnering with FinTechs – whether they are domestic or international. As societies shift towards a more open financial system, Challenger Banks will continue to expand their reach into new markets around the world. Canada stands as a country that will benefit the most from this shift; as the culture and norms of the country emphasize collaboration and acceptance. Moving forward, it will be interesting to see how Challenger Bank’s products and services will impact the lives of Canadians specifically. 

To learn more about how we help innovators succeed, check out our podcast The Disrupticons where we share stories with innovators and why it matters. 

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This list was compiled by Jay Palter Social Advisory. It is based on an analysis of Twitter audience and engagement globally on the topic of payments. For more information on methodology, see below.

From digital disruption and technological innovation, to regulatory requirements and consumer demands, the payments space is one of the most exciting and rapidly changing business environments in financial services. However, the sheer volume and speed of these changes, as well as the increasingly globalized market in which payments innovation is occurring, make it challenging to stay abreast of relevant news and developments.

Industry-wide conferences, such as The Payment Canada SUMMIT (May 9-11, 2018 in Toronto), offer excellent opportunities to get caught up on key developments and network with innovators, experts and business leaders. (Register NOW and save 10% by using this code: 10FGS18SUMM)

In between these events and gatherings, social networks are playing an increasingly important role connecting the payments industry to news and information about innovation around the world and the people driving these changes.

Below, we’ve compiled a list of top social influencers who are leading online discussions and sharing of payments information, innovation and resources. 

Top Payments Influencers Globally

You can also subscribe to this list on Twitter.

 

Methodology

It is common to want to know why some people are on the list and others are not, so let me explain the methodology used to compile this list.

First, I relied on a commercially available social media analytics tool (Little Bird) which offers powerful algorithms for analyzing large volumes of social media data. The software scores social media accounts that frequently communicate on topics related to “payments” and then looks at the inter-relationships among these people.

Second, I separated the results into individuals and organizational accounts because I want to focus on individual influencers, not brands. In most cases, the software does this, but there are some edge cases that require manual intervention and mistakes are sometimes made.

The important point is that this is not the only credible list of payments influencers online, but it is an excellent place to start.

For more information on influencer lists and how to use them effectively, see How to Use an Influencer List or contact me.

 

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A little while ago, we had to renew our business insurance policy and were given a new rate from our existing provider that was 3 times the previous year. But there is more. And it requires going back a little to how we chose this provider.

We started the company and as first-time entrepreneurs, didn’t know much about some of the key elements of starting a company. Getting business insurance was one of them. With one of our 1st clients – a large Canadian financial institution – came the realization that we needed to have a lot of things in place if we wanted to do business with the big girls (notice I didn’t say boys).

We started our search for a business insurance partner back in early 2016. It was not easy at all. We went to our current insurance relationships and none of them provided business insurance. We looked online, and then thought – like our lawyer and accountant – maybe it would be nice to have someone local.

I wont name names, but we found a local business insurance company and proceeded to get information. It took many phone calls, emails, and eventually an in-person meeting and at least a few days in total (spread out over a few weeks). We eventually got our insurance and hoped we had the right coverage. Not a good experience overall.

Over the year as the business grew and we needed things for clients, it was a pretty big pain to get what we needed. Not enough to change providers, but annoying nonetheless.

But when we received the renewal amount, that was it. 3 times the amount from the previous year. Crazy. It was 7am on a weekday, and we had less than 2 weeks before our policy had to be renewed.

We went online, and searched for other options. And then I remembered Zensurance. As a regular visitor and supporter of the DMZ, I remembered they had won the BMO Next Big Idea In FinTech Challenge, and also remembered meeting a few of the key team and founders. So there was some trust there already. We found them in 1 second online, and started to fill out an application online.

It was EASY. PAINLESS. FAST. An amazing client experience to say the least. In less than a few minutes, we were done. We received an email right away saying we would hear from them within 24 hours. That same day in my inbox was the proposed policies that based on the application process, I was confident were the right ones. The price was only slightly higher than we were paying, and that was that. We provided authorization, signed the documents online, and now we are a Zensurance client. Definitely feeling Zen – that’s for sure.

What’s the lesson? Friction is what drives customers away. If you think a customer won’t leave you because you are a trusted large incumbent, and new companies are perceived as risky, I believe you are wrong.

We represent one customer segment, and other customers with a different persona may have left earlier, or stayed with the provider for different reasons. But in general – all of that friction in the customer experience is table-stakes now for all companies – no matter how big or small – to remove in order to have the good fortune to keep their business. Hope you find your ZEN too.

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