Toronto-Dominion Bank said Tuesday it has acquired Toronto-based startup Layer 6 Inc., a move aimed at bolstering the Canadian bank's artificial intelligence expertise amid a broader push by financial services firms in adopting the technology.
Terms of the deal were not disclosed. TD said in a statement that the acquisition is not expected to have a meaningful impact on the bank's common equity Tier 1 capital ratio.
Continue Reading Below
The acquisition will help TD "jump start" its ability to launch services such as product recommendations for retail banking customers rather than build an AI team themselves, said Michael Rhodes, the bank's group head of innovation, technology and shared services. The startup will retain its name and its office in midtown Toronto but will focus its work solely for TD, he added.
"We've made enormous investments in data and data infrastructure over the past several years, " Mr. Rhodes said. "We didn't have substantive intellectual capital around AI, so this actually filled in a gap for us."
The Layer 6 deal is the first major acquisition by a Canadian bank of an AI company as financial service institutions develop technology aimed at taking their massive stockpiles of data and use complex algorithms that could, for example, improve customer satisfaction or automate various services to help manage costs.
Royal Bank of Canada opened an AI research lab based in Montreal in November aimed at taking advantage of the city's well-established AI presence. RBC hired Richard Sutton, a professor of computing science at the University of Alberta and top AI researcher, as an adviser last year.
Layer 6's software uses artificial intelligence to handle large amounts of data and provide real-time prediction tools that would help provide customers with recommendations for products and services, said the company's co-Chief Executive Jordan Jacobs. Layer 6's co-founders Mr. Jacobs and Tomi Poutanen also helped launch Canada's Vector Institute in March to encourage a national presence that would support research collaborations with local companies and academics in AI technology.
The company put itself on the map after winning last year's ACM RecSys Challenge, an annual research competition that was previously awarded to teams from Alibaba Group Holding Ltd. and Russian software giant Yandex. Layer 6 hasn't secured any venture financing and was built on a relative shoestring budget by the company's founders as well as some angel investment from friends, Mr. Jacobs said.
"Banks have enormous amounts of data and AI needs a lot of data to be effective and accurate," Mr. Jacobs said. "Banks can show a return on investment in what they're doing, whether that's measured in terms of customer satisfaction or revenue improvements. Even small improvements can be worth a lot of money."
Canada has seen U.S. tech giants such as Facebook Inc., Alphabet Inc.'s Google, Uber Technologies Inc. and Microsoft Corp. establish well-funded AI research labs across the country in recent years.
Canada's AI boom also comes amid a surge in Canadian startup venture capital financing from U.S. investors with nearly 400 million Canadian dollars ($321 million) invested in the country's AI and machine learning startups over the past three years, according to recent Thomson Reuters data.
Write to David George-Cosh at email@example.com
(END) Dow Jones Newswires
January 09, 2018 07:04 ET (12:04 GMT)