Spending the full day at VanFunding event, it was clear that Fintech is absolutely exploding right now. New apps and back-office tools are being developed in finance, mobile payments, peer-to-peer lending and robo-advice at startups across the country.
The level of activity
According to EY’s Fintech Adoption Index, only 8.2 per cent of digitally active Canadians have used two or more fintech products in the past six months but the survey says Canadians’ adoption of fintech may triple within 12 months, making this sector a truly disruptive technology. That’s both a threat to old-style bricks-and-mortar financial institutions and an opportunity for nimble ones.
Here are few examples that talk about the level of activity underway:
- Borrowell has seen $450 million in loan applications from 35,000 people in 2015
- Vancouver-based Mogo Finance Technologies Ltd., raised $50 million in its initial public offering in 2014.
Similarly, additional success stories from last few years in terms of capital raise include:
- Ottawa-based e-commerce platform Shopify ($100 million)
- Verafin ($60 million) a fraud detection tech firm from St. John’s
- Stock-trading platform Lightspeed from Montreal ($35 million)
- Blockstream from Montreal ($21 million), a digital or “crypto”-currency platform
- Vancouver’s financial services platform Zafin (U.S. $15 million)
- Toronto’s online lender Financeit ($12 million).
(Craig Asano: chair of NCFA introducing the CRE panel)
However, at the same time Canada needs a lot more. According to KPMG, $13.8-billion (U.S.) was invested into North American venture-capital-backed fintech companies in 2015, double that from 2014. With record levels of funding, the hype has never been higher, but the hype has not translated into dollars in Canada. The disparity between U.S. and Canadian funding goes unreasonably beyond the typical 10:1 ratio of our respective economies. In fact, the gap has risen so dramatically that it raises the concern that Canada and its citizens risk losing out on one of the most important innovation cycles in the history of finance.
However, some progress is being made for e.g., Power Financial has invested in robo-adviser Wealthsimple, online lender Borrowell Inc. and most recently is pouring more dollars into a mobile money application developed by Koho Financial Inc.
Members of Team R2 with NCFA chair Craig Asano: Jessica Mizuik, Amar Nijjar & Chad Gemmell
Fintech has the potential to transform the financial system across a broad range of services. And that is a good thing, because there is a lot of inefficiency that can be shed. Although some of the technology may be revolutionary, its overall effect on the financial system is likely to be evolutionary. Financial institutions that adapt will survive, and new service providers will become part of the financial ecosystem. In some areas, this evolution is happening fast, while in others, the most transformative technologies still have developmental hurdles to clear.