Canada’s banking industry is facing increased competition from growth in the fintech sector as mortgage demand weakens according to a new report.

The Conference Board of Canada says that despite these challenges, banks will manage to increase their pre-tax profits to more than $95 billion in 2018 and will see output grow by an average of 2.6% annually through 2022.

"The impact of financial technology firms on the industry is growing, and to date this has been primarily beneficial to the industry. Productivity continues to increase considerably and has been a key driver behind its successful financial performance," said Michael Burt, Director, Industrial Economic Trends, The Conference Board of Canada.

The banking sector has responded to fintech disruption by expanding their own digital offerings, but the other challenge they face will be hard to mitigate.

The report says that demand for mortgages will drop “considerably” as interest rates rise and more stringent mortgage regulations weigh. This, along with lower demand for other consumer loans will weigh on banks’ profitability.

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