When John Flint, chief executive of retail banking and wealth management at HSBC, looks at financial innovation, he can't see much of it.
"What most people say is innovation is developing mobile apps – connecting incumbent businesses, legacy services and products to customers via their mobile devices," Mr. Flint said.
These are worthy developments, the British-based executive said on a recent stop in Toronto. But they are not imposing any significant changes to the way the financial system currently works, making disruption more of a threat than a reality.
Mr. Flint's comments land amid a lively discussion in financial circles about what incumbent banks will look like over the next decade, as nimble new competitors promise services that undermine bank profitability and customer loyalty.
One recent paper by the consultancy McKinsey & Co. suggested that traditional banks could lose up to 60 per cent of their retail profits to financial technology, or fintech, firms within the next decade.
Canada's biggest banks have responded to the threat by beefing up their in-house technology talent, closely monitoring the fintech universe and, in some cases, striking partnerships with outside firms.
Mr. Flint is not ruling out that change is coming, but he offers a far less alarming picture – and an important view, given that HSBC is one of the world's largest banks, with $2.4-trillion (U.S.) in assets.
"Revenue growth in banking is really hard right now. But that's not because of the disruptors. It's because of bigger issues, like very low interest rates," he said.
A lot of the discussion surrounding financial disruption revolves around small startups that are looking at specific areas, such as wealth management and payments, to take market share away from traditional players.
Mr. Flint applauds these moves because they are good for consumers: They are forcing the incumbent banks to respond with better offerings of their own.
"But few of these little disruptors has grown up into anything meaningful," he said. "And for those that have – PayPal is a nice example – the innovation wasn't building new technology. It was applying technology that existed to a really simple customer problem, designing a new customer journey and making it available."
Among Western developed countries, regulators still have not finished fixing the system after the financial crisis. What fixes have been made involve increasing barriers to entry, with higher capital burdens for example.
This is why many of the current attempts at disruption have been focused on payments, since new entrants in this area of finance have not had to bear the regulatory burden when looking after other people's money.
"It's when you become a deposit-taking institution that your life becomes very complicated," Mr. Flint said.
China, though, may offer a different story. There, the role for fintech is potentially much greater, given the state of existing financial infrastructure and a belief that financial technology can offer meaningful improvements.
"The domestic banking system exists on a very old and disaggregated infrastructure," he said. "So there is probably a lot that meets their policy objectives, where new technology brings transparency and audit trails to everything."
One area to watch in China: WeChat. Initially released five years ago, the messaging app now has more than 700 million monthly active users, many of them living their lives on the platform.
Potentially, Mr. Flint said, consumers could essentially outsource their financial relationships to the platform, eroding relationships with actual banks. This is known as disintermediation, and serves as a cornerstone of disruption.
But in Canada and much of the rest of the developed world, he argues, small startups do not amount to the same threat.
"A fintech startup with 12 staff and a really good idea and wages for the next three months, let's face it, is not going to disintermediate a Toronto-Dominion Bank or a Royal Bank of Canada or an HSBC from their customers," Mr. Flint said.