TORONTO – Royal Bank chief executive Dave McKay says RBC will need to work with early-stage companies – even those looking to snatch market share from the traditional banks – in order to thrive in an increasingly digital world.
“We need large organizations in the public sector and business, RBC included, to work closely with early-stage companies, even the ones trying to disrupt us, to support, mentor and motivate their progress,” McKay told shareholders Friday at RBC’s annual meeting in Toronto.
The bank will need to be part of a “thriving ecosystem” of entrepreneurs in order to innovate and “build the bank of the future,” he said.
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In particular, McKay said the bank is interested in working with new payments technologies, as well as in automating some of its back office processes in order to trim costs.
McKay also said many of the bank’s competitors are technology firms that have entered the financial services space but aren’t subject to the same regulations as banks, said McKay. These new rivals can operate at a lower cost but risk reducing the stability of the country’s financial system, he added.
“Many of these entrants are excellent competitors – innovative, driven and responsive to their clients – but they may also distort the financial system with unintended risks that regulators cannot clearly see,” said McKay.
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His comments were similar to remarks last month by the CEO of TD Bank.
TD chief executive Bharat Masrani called on financial regulators to introduce rules governing new entrants such as digital payment providers and alternative lenders. Masrani said non-traditional players who don’t have to abide by the same regulations that banks are subject to have a competitive advantage.
Tech companies Apple and Google have been wading into the financial services space by creating digital wallets that allow customers to make payments using their smartphones. By facilitating money transfers, technologies such as Apple Pay and Google Wallet insert themselves in between banks and their customers, weakening the relationship.
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