What’s Next in Canadian Banking?

People with anxiety and bankers have an awful lot in common. What they both crave beyond all else is certainty and unfortunately for both, they are doomed to never have it. The worried person wants the certainty that their worst fears will never come to materialize, but the future cannot be predicted, and uncertainty must instead be tolerated.

The banker, the financial analyst, the investor and those giving financial advice all want the certainty from the market, but the future cannot be predicted and uncertainty must instead be tolerated.

The key difference however is that anxiety can be overcome with interventions such as cognitive behavioral therapy, exposure therapy and somatic experiencing. At the time of writing, there are no treatments for the inherent risk of financial markets, but that doesn’t stop people trying.

In this article we take a look at the short-term future of Canadian banking which includes a brief exploration of a trend that many are hoping will be as transformative to the uncertainty of the industry as psychological treatments are to the uncertainty of anxiety sufferers.

Artificial Intelligence Implementation

The somewhat labored metaphor in the introduction of this piece was inspired by not only some of the key themes in The Psychology of Money by Morgan Housel, but by the much heralded uncertainty busting introduction of AI into the financial sector.

Up until recently, analysis of the stock market and predictions have been limited to the cerebral capability of humanity. Yes, complex computers have run simulations but all of the data and parameters of those simulations have been designed by humans.

Now, with the growth of AI, financial analysts are hoping to enlist the help of an intelligence far superior to theirs. One that is capable of operating at a much greater level of accuracy and certainty than anything that has gone before.

If the bold claims about increased certainty are to be believed, then the implementation of AI could see many people and institutions solidify their wealth. Why solidify? Because AI systems are expensive and only those with existing wealth will be able to avail of them.

However accurate AI predictions are though, nothing can come close to a 100% success rate. The world is too chaotic for that, no machine, no matter how clever it is can predict the decisions of every human that has an impact on the global economy.

Increased Digitization

Canadian banking has been adapted to an increasingly online environment for a number of years. It appears however, that in recent times we have reached somewhat of a tipping point where real-life transactions have become significantly dwarfed by online ones.

Every year more and more banks are closing down, in March this year, The Royal Bank of Canada (RBC) announced the upcoming closure of 25 HSBC Bank branches in the country as people prefer to keep track of their finances online. Less cash is being spent in stores, digital wallets are on the rise and the high street is steadily giving way to Amazon and other online retailers. It’s a trend that is being seen everywhere around the world. In Canada, many are opting to play with the best casino online, rather than visiting one of the country’s many world famous land-based casinos such as the Niagara Fallsview Casino or Casino de Montreal. And when Canadians do visit these venues, they are increasingly dependent on digital payments; they made up 86% of total payment volume in 2023 across the country.

Picky Investment

There is a robust argument that capitalism is killing the planet. The world’s largest greenhouse gas producers also just so happen to be the biggest sceptics of climate change which is either an incredible coincidence or has something to do with the trillions of dollars they make from selling their products every year.

Well finally it looks as though capitalism could be making a last gasp effort to save the planet and leave off from killing it. Not for altruistic reasons but for financial ones. The planet is starting to reach a tipping point where the effects of climate change are starting to have a detrimental impact on shareholders dividends.

This means that going forward major financial institutions are going to have to think very hard about what type of industries and sectors they are investing in. Oil might well produce big dividends at the moment, but floods, hurricanes and major heat events are beginning to hit other investments in a major way.

In order to maximize profits and reduce risk in other areas, banks not just here in Canada but all across the world are tentatively beginning to move away from traditionally rewarding commodities that are killing the planet.

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