MONTREAL — From free stock trading to buy now, pay later, the explosion in new fintech offerings poses a challenge to Canada’s big financial institutions. But if its recent moves are any indication, the country’s largest bank isn’t planning to remain above the fray.

In the last six months, RBC has rolled out products in buy now, pay later and online enterprise payments, part of its strategy to hold on to its customers in the face of new competition.

“I have to say, we are anticipating a more open market,” RBC chief executive Dave McKay told analysts on the company’s earnings call in late August. “We’re anticipating disruptive tech platforms that we’ve talked about for the last five years.”

RBC’s most recent new offering is Interac e-Transfer for Business, a payment product that gives businesses instant access to electronic payments, at a time when companies like Lightspeed, Shopify and Square are all looking to grow their payments businesses.

In BNPL, a market dominated by global fintech players like Klarna and Afterpay, RBC has partnered with Bread, a division of U.S.-based Alliance Data, to roll out an installment-payment product called PayPlan. Those efforts built on the bank’s previous initiatives to provide more tech-native solutions for clients, such as Ampli, a cash-back app, PayEdge, a service for paying suppliers, and Ownr, a platform that helps people launch businesses.

“We need to make sure we’re providing value across [multiple services] because otherwise, our customer engagement fails, and the customer needs to see us as a provider of a bundle of solutions,” Ramesh Siromani, RBC’s senior vice-president for enterprise payments, said in an interview with The Logic. “We think of it as, ‘Hey, does the customer have access to everything that we can provide? And do we provide the right value proposition, and provide them the full value across the gamut of services we offer?’”

Despite the rise of new competitors, these are still good times for Canada’s Big Six banks. All six beat analysts’ expectations in their earnings reports last month as they benefited from more economic activity tied to the reopening. RBC, for its part, reported net income of $4.3 billion in its most recent quarter, up 34 per cent year over year, with record profits from its capital-markets division.

Still, challenges loom. Major moves by tech companies, from Square’s US$29-billion acquisition of Afterpay to Apple’s BNPL partnership with Goldman Sachs, suggest that competition with fintechs is only ramping up. Meanwhile, on the election campaign trail, the Liberal Party has said it plans to implement an open banking system by early 2023, requiring financial institutions to share valuable customer data with fintechs who are building alternative products and services. The Conservative Party, opening up a lead over the governing Liberals in many polls, has said that, if elected, it also plans to introduce legislation on open banking.

For investors, questions around how banks plan to compete with fintechs have been top of mind. On earnings calls last month, analysts peppered banking executives with questions about buy now, pay later and no-fee stock trading—two services that have propelled fintechs to new heights recently, at the expense of incumbents. Some companies, including TD Bank, have even started disclosing increased competition with fintechs as a risk factor in their investor materials

“What we’re seeing overall is that you can’t ignore this innovation,” said Patrick Lor, managing partner at Montreal-based Panache Ventures and a fintech investor who also sits on the board of ATB Financial, a bank owned by the province of Alberta. “It’s coming, whether you want it to or not. And there’s a good chance that it could restack the deck.”

Besides launching new products, RBC has been backing startups through its RBC Ventures arm, though the unit has only announced one investment so far this year, in HR tech company HelloDarwin. Venture investments allow the bank to get a sense of whether a company’s product would be valuable for its customers before buying the business outright, said John Mackerey, senior vice-president of North American financial institutions at credit-rating agency DBRS Morningstar.

Around the time of Square’s acquisition of Afterpay, analysts speculated that the purchase could trigger a wave of consolidation across the industry. For now, though, banks’ competitive edge lies in the fact that they have huge customer bases to whom they can sell products and services, while fintechs have to fight for each new user, Mackerey said. 

“The issue fintechs have is getting customers,” Mackerey said. “The banks have the customers, so I don’t see them as providing or causing much erosion in banks’ customer base—provided the banks can keep up with what digital solutions customers are requesting.”

Correction: Square acquired Afterpay. An earlier version of this story included incorrect information appeared in one reference to the deal.