Robo-advisors are having a big impact on Canada’s financial industry–so much so that even the Bank of Canada is pushing financial institutions to compete.

The rise of fintech solutions and digital wealth firms could lead to evolution across a broad range of financial services, says Carolyn Wilkins, Bank of Canada’s senior deputy governor.

Read: Op-Ed: Robos offer more support than you think

Wilkins gave a speech about fintech this morning, and noted a combination of factors point to the potential for industry change: customers are more demanding, large non-financial players are entering the space and the inefficiency of some financial services is becoming apparent.

“Some existing financial institutions and infrastructures have become relatively inefficient, while new technology has reduced barriers to entry,” she explains. “[Many] systems date back several decades and are often not interoperable, even within an institution. So the door for competition is open.”

Read: Robos becoming more ambitious, says expert panel

But, despite the hype about digital wealth managers and fintech, she expects legacy financial institutions will adapt by working with and learning from new entrants.

Read: Industry reacts to robos aligning with advisors

“Financial institutions and infrastructure operators are making important decisions about which parts of their businesses they want to defend and grow, and which ones they want to scale back,” says Wilkins. “This urgency is not only coming from fintech contenders; banks are also dealing with a more demanding regulatory environment and exceptionally low interest rates that are squeezing profit margins.”

She adds: “banks already spend close to $200 billion a year on IT globally, so replacing legacy systems will mean difficult and critical investment decisions.”

Read: 4 ways robo-advisors humanize automated tools

The Bank of Canada’s priority in this environment, she says, is to see upgrades made to the core payment systems that the financial system relies on. “Now is the time to make our core systems more efficient and competitive.”


Comparison of Canadian robo-advisors

Machine intelligence could be your next smart investment