“I think the channel needs to evolve, and I think technology will play a big part of it – finding faster and more efficient ways to process the business and make it more cost-effective for lenders as well as for brokers,” Dong Lee, president of Mortgage Architects
, recently told CMP. “I think these FinTech companies, whatever or however they look like, will start to define how this channel evolves. I think it’ll be for the better because we’ll have to find more effective ways to do our business.
In short, if the broker channel doesn’t embrace changes in technology, it could be left behind.
A recently released study, FinTech in Canada, looks at how financial technology is revolutionizing certain industries. This is what brokers need to know.
FinTech is growing
“In 2014, investment from private capital in FinTech companies was US$12.21 billion, an increase of 201%, compared to 2013,” Christine Duhaime, executive director of the Digital Finance Institute, said in the report. “In 2015, FinTech investment grew 75% to US$22.3 billion, and over 1,100 FinTech deals were announced.”
Banks are the largest players in FinTech
Big banks (read: the broker channel’s main competition) are investing billions in technology in a bid to gain easier access to consumers.
“In 2015, banks in North America spent US$62.2 billion on external IT and that number is expected to increase in 2016 to US$64.8 billion, surpassing half a trillion US$ globally in 2017,” the report said. “For core processing alone, banks will spend an estimated US$35 billion in 2017.”
Canadian banks targeting customer service through FinTech
"As just one example, Royal Bank
of Canada both creates FinTech in-house with developers in Orlando and Silicon Valley and also externally as part of the US-based R3CEV, a blockchain technology consortium investigating tech solutions for future uses of the Blockchain, which recently filed for its first patent for its distributed ledger platform," the report said.
Fintech aiming to replace people, including brokers
“Robo-advising services are shaking up traditional wealth management. They offer machine-generated investment advice at a lower cost than traditional financial advisory services and promise objective, data-driven advice where and when customers want it,” the report said. “Robo-advisors such as Betterment LLC, Wealthfront and Personal Capital have attracted hundreds of millions of dollars in venture capital.”
FinTech is expected to revolutionize business and, indeed, the broker channel. A recent report delves into some of those developments, including some trends brokers need to know about.