Pascal at FiniCulture raises an interesting question: financial technology has always been around (enabling cross-border transactions and fast credit card payments), but economically speaking, does it really improve productivity? The purpose of financial services is to help people spend, send, receive, invest and save money in the best way possible. If any of these activities are “rigged” to only profit the institutions at the expense of their customers, then activity suffers. That said, firms have been innovating and, as their rising profits (strong even in 2008 and peaking at $1 trillion in 2014) show, they are becoming more productive without charging more or spending less.

However, according to PwC’s report last year, the productivity and efficiency of Canadian banks has remained flat, challenged by a slowing revenue growth, and increased regulatory and compliance costs. International banking productivity decreased by 0.5% due to heavy investments in technology, operations and regulatory reform.

UK financial services also show poor productivity, and a case is being made to introduce flexible working to give workers a sense of autonomy. In research by Vodafone, which surveyed 8,000 global employers and employees, 83 per cent said they had seen an improvement in productivity after introducing flexible working arrangements.

Also check out

  • The challenges faced by bank back offices. Automating back offices, where the non-client-facing administration and support personnel work, can reduce banks’ overall costs by up to 30%.
  • The State of Canada’s Tech Sector (2016): The labour productivity in ICT (Information and Communications Technology), defined as the ratio between real value added and hours worked, is outpaced by real estate, utilities, mining and oil/gas extraction, which shows there is an opportunity for improvement. The low productivity is likely due to firm size, where a bigger firm means that workers are more specialized and can do their work more efficiently. This suggests that sustaining large domestic firms is the key to improving ICT productivity.

As CFM students, we can

  • Educate ourselves on overcharged fees in the financial services industry and think of how firms can immediately profit from serving their customers’ best interest instead of purely their own. Here is a documentary that shows how banks have a high incentive to drive their customers further into debt, and in some cases, toward suicide as their bills become unmanageable.
  • Find out how to simplify regulations on financial firms, or how firms can follow them more easily.
  • Join banks’ back offices and work on simplifying their legacy systems.
  • Or, build a Canadian tech firm that survives for a long time. Dream big and find out what your firm would look like! Who would be your major partners? Do you want to do fintech, where your market size is potentially in the billions, or something different?