The Banker and the Snowboarder
A Tale of Two Giants: Royal Bank and Shopify
Royal Bank of Canada has been around since 1864 and still tops the TSX at roughly $246 billion in market value. Shopify, founded just 19 years ago in 2006, is now Canada’s second-largest public company, valued at $188 billion.
What Shopify’s Stable-Coin Move Means
Last week, Shopify showed why. The Ottawa e-commerce giant switched on USDC stable-coin checkout through partnerships with Coinbase and Stripe, promising near-instant settlement for merchants and “borderless” payments for shoppers. In plain English: your favourite Shopify store can now accept a digital dollar that moves 24/7 for a few pennies—bypassing the card networks that for decades have funneled lucrative fees to Visa, Mastercard and the Canadian banks that issue those cards. Reports that Walmart and Amazon were also considering the move precipitated a 5% drop in Visa and Mastercard.
Regulatory Green Light: The GENIUS Act
Late Tuesday, the U.S. Senate passed the GENIUS Act, the first federal law that gives stable coins an official regulatory home. Treasury Secretary Scott Bessent called the opportunity “a potential US $3.7 trillion market by 2030.” With Washington planting the flag, every global payments player (from Amazon to RBC) has to decide whether to ride the new rail or risk watching volumes leak away.
Three Pressures on Canadian Bank Profits
- Swipe-fee compression: Canadian merchants pay roughly $2 billion a year in credit-card fees. Stable-coin rails could shave fees by a third, starting with big retailers that have negotiating muscle. If just 15% of card volume migrates, the Big Six could lose $1 billion in high-margin revenue within five years—about 6% of 2024 net profit for the group.
- Deposit drift: A regulated, interest-bearing digital dollar may tempt households to park cash in a wallet rather than a chequing account. A 3% deposit outflow would slice roughly $9 billion from RBC’s ultra-cheap funding base, denting earnings by an estimated $180 million a year.
- Rewards spiral: Rich credit-card perks are funded by those swipe fees. As fees fall, expect banks to trim points and cashback. That, in turn, erodes the very loyalty that keeps Canadians reaching for plastic.
- Tech-spend catch-up: JPMorgan* already clears billions a day on its private blockchain. PayPal launched PYUSD last year. Canadian banks will need to invest heavily to issue (or at least integrate) CAD-backed stable coins. That’s a new line-item many investors haven’t modelled.
Why Bank Stocks Still Matter
Canada’s banks aren’t about to disappear. They boast fortress capital ratios, diversified businesses and regulatory protection. But the ground is shifting. A reasonable scenario is “same banks, lower profits.”
Our Take as Top Ottawa Investment Advisors
Potential beneficiaries (stocks to watch):
- Shopify (SHOP)* its merchants gain bargaining power as payment costs fall.
- Coinbase (COIN, US)* co-issuer of USDC and likely custodian for many Canadian merchants experimenting with stable coins.
- Visa (V)* & Mastercard (MA, US) paradoxically, these networks could rebound if they succeed in absorbing stable-coins into their rails, though near-term headlines may stay volatile.
- Circle (CRCL, US) USDC (the stable-coin) is minted by newly IPO’s Circle. As adoption grows, it may become a financial powerhouse.
- Ethereum and Solana are the dominant blockchain ledgers used by Circle for USDC transactions.
Names facing headwinds:
- Royal Bank (RY)*, TD (TD), CIBC (CM), BMO (BMO)*, Scotiabank (BNS)*, National Bank (NA)* not a crisis, but expect fee compression and a longer pay-back on tech spend.
- American Express (AXP, US) depends heavily on premium interchange; watch for travel merchants to dangle stable-coin discounts.
How to Think About Portfolio Positioning
- If you hold Canadian bank stocks for dividends, no need to panic. But consider trimming oversized positions and redeploying a slice into fintech or card-network names that are leaning in, not holding back.
For income investors, dividend yields at the banks still justify a core holding, but growth may lag once fee erosion sets in.
From Snowboards to Stablecoins
In 2006, a snowboarder-turned-coder named Tobi Lütke couldn’t find good software to sell snowboards online, so he wrote his own. Less than two decades later, his company is using digital dollars to challenge a banking model that predates Confederation.
Nobody is saying that Royal or TD will vanish. Yet the GENIUS Act highlights a truth that long-time bank investors can’t ignore: payments are becoming software, and software is eating fees. Just as streaming upended cable bundles, stable-coins may unbundle the quiet toll booths that have long powered Canadian bank profits.
What This Means for Your Retirement Strategy
For investors nearing retirement, the lesson is simple: respect the banks’ legacy but recognize that even granite pillars can erode when the tide changes. As Portfolio Managers, we’re not selling our Canadian Banks—especially in income generating portfolios. We are happy to keep collecting those dividends Canada’s blue-chip banks are famous for. That said, in our growth portfolios we own the disrupters as well as the incumbents. We want you to benefit from both.
Your Portfolio, Positioned for Change
Shopify’s rise is proof that disruptive technology can reorder Canada’s market hierarchy in the blink of an eye. At Evans Family Wealth, tracking—and acting on—those disruptions is part of our daily work. We research, write about, and invest in innovations like stable-coins so our clients don’t have to chase headlines after the opportunity has passed.
If you’d like your portfolio positioned to benefit from the next generation of winners, explore our North American Focused Equity and Canadian Focused Equity strategies. Both mandates are built to capture long-term growth from companies at the forefront of change while maintaining the disciplined risk management we’re known for. If you already own those models—sit back and know that we have it covered!
Staying ahead of the curve isn’t optional in today’s market, it’s the foundation of lasting wealth. We’re on it!
Watch the Video: Stable-Coins vs. the Big Six
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Glen
