Canadian Banking Giant’s CEO, ‘It’s Important For Banks To Understand How Blockchains Work’

New players in the financial services space, like Apple Pay, are causing a top to bottom reinvention of the banking business model. This is causing incumbents to rethink their strategies. The Canadian Imperial Bank of Commerce (CIBC) is not waiting to be overtaken however. The bank is open to adopting the new technologies being developed, both internally and externally.

As reported by the Financial Post, during a talk at the Empire Club the CIBC President and Chief Executive Officer, Victor Dodig said that the bank was “embracing and deepening collaboration and strategic partnerships with outside innovators [and] working with new tech partners and networks.”

The CEO also stressed that many of the threats to banks are overblown:

“If you believed all of the doom and gloom being written about banking these days, you would think it’s just about all over for us — that the Apples, Googles and others … are about to put us out of business, and that our clients are set to desert us in droves for new financial services providers.”
— – Victor Dodig, Canadian Imperial Bank of Commerce CEO

CIBC, the fifth largest Canadian bank by deposits, has had a history of keeping up with the times. The bank opened the country’s first ATM in 1969, and drive-thru banking branches in the 1950 and 1960. It was also the first to offer online and telephone banking.

On Tuesday, CIBC became the first bank to participate in Suretap, a digital mobile wallet that allows you store, and pay with, all your credit and debit cards on android and blackberry devices. During his talk Dodig commented that even though Apple Pay has yet to enter the Canadian market, it’s arrival is inevitable, and others like it would will follow.

Dodig also commented that the bank was closely studying the technology behind the digital currency bitcoin, and that it was hard to predict how the technology would impact financial services. He was clear in stating the importance of understand the technology and the extra security it could offer, especially for banks.

The Canadian Senate released a report last Friday that urged regulators to use a light touch when restricting digital currencies, and the technology behind it. The report outlined that it could have several benefits, such as security and transparency, for the country’s financial industry. It also encouraged banks to serve bitcoin startups and companies, which have had a notoriously difficult time maintaining banking relationships.

The global bank, who has operations in the Caribbean, Asia and the United Kingdom, also operates in United States, where they run a securities service through a join venture with the The Bank of New York Mellon. Mellon has also been experimenting with bitcoin’s open source code, and even piloted a rewards program using the Bitcoin blockchain.

CIBC also faces other problems, which are arguably more pressing issues than blockchain technology. The rise of peer-to-peer lending presents a significant risk to the bank, whose core business is lending. As a result, the bank is actively looking into how to implement new lending programs.

Fintech lending startups, which typically allow people seeking loans to entirely avoid using a bank, will likely cause banks to lower their fees.

"will clients move in droves to these new technology platforms to do their lending? I don’t think so."
— – Dodig

CIBC is the first Canadian bank to publically say they are actively exploring blockchain technology, but the announcement is not surprising and is quickly becoming the new norm. Just earlier this week, the multinational British bank Barclays announced they were working with two bitcoin/blockchain startups — Saffelo and Everledger — to explore potential partnerships. Both of the startups graduated from an accelerator that was was created by TechStars and Barclays.

Three of Australia’s Big Four banks are also exploring blockchain technology. WestPac, the Commonwealth Bank of Australia, and the Australia and New Zealand Banking Group, have all said they are currently experimenting with Ripple for the purpose of settling payments between the banks’ various subsidiaries.