TORONTO – There is no “plague” of data breaches and solvency issues affecting financial technology upstarts, contrary to what TD Bank’s CEO says, the heads of several companies in the so-called fintech sector said Monday.
The industry insiders were responding to comments made by TD Bank (TSX:TD) chief executive Bharat Masrani who, during the bank’s annual meeting in Montreal last week, called for more regulatory oversight of the fintech industry.
Masrani said numerous issues around solvency and security breaches have “plagued” fintechs, leaving customers at risk of losing their money or having their personal information compromised.
But a number of fintech CEOs at a conference in Toronto questioned the veracity of Masrani’s comments.
“To the best of our knowledge there is no plague within the space,” said Jeff Mitelman, the CEO and co-founder of online small business lender Thinking Capital.
Kevin Sandhu, founder of online lender Grow, called it an “unfair accusation.”
“I haven’t seen a lot of liquidity crunches or data breaches coming from responsible, well-managed fintechs,” Sandhu said.
Mitelman said it’s inevitable that regulators will eventually step in and boost their oversight of fintech players. However, he said the industry will have to become much more mainstream by snatching more customers away from the banks before it gets onto the radar of regulators.
Canadians have been slow to adopt offerings from fintechs, according to a report published by business consultancy firm EY earlier this year.
The report found that only 8.2 per cent of Canadians who are active online have used at least two fintech products within the past six months — versus 16.5 per cent in the United States.
Sandhu said he welcomes regulation, but he doesn’t think it would be appropriate to apply the same rules that govern the banks to significantly smaller, tech-savvy fintech startups.
“It’s putting a round peg into a square hole,” Sandhu said. “There has to be a broader discussion about what risks do we actually present. Are they around data breaches? I’d argue no, because I think our data security is well in excess of what a bank’s is.”
Andrew Graham, CEO and co-founder of online lender Borrowell, said there are already a number of regulations that govern fintech companies, depending on which realm of financial services they operate in.
For example, online lenders have to abide by a variety of rules on customer disclosure and interest rates, which vary from one province to another, said Graham.
“For our company to launch, we spent about three times as much on legal and regulatory compliance as we did on tech,” he said.
Graham said he doesn’t see the need for stricter regulations, although he added that there are some areas where the rules could be clearer.
“I think everyone would benefit from an environment that provided clear direction for new entrants in terms of what rules and what regulations should be followed in various spaces,” said Graham.
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