Fintechs state of play: Q&A with Rob Khazzam

 
Brigitte Goulard: The opening of Payments Canada to new payment service providers, including Float, is an important development for players within the space. What does this mean for Float?

Rob Khazzam: This is something we’ve worked toward for years. And the implications are significant.

Two themes in particular jump out for me. Primarily, it is about access. We will soon be a conduit for tens of thousands of businesses across Canada. Being a part of Payments Canada means that we can have better access to payment rails, payment tools and payment technology and, ultimately, things that help us move money for our customers in the market.

The second one is engagement and influence. There is an opportunity to bring perspectives that reflect the mission and customers we serve, including small businesses whose needs may not be covered by the industry, and proactively champion them in that forum. This can contribute to changes in regulation and to the technology roadmap the federal government and private sector are moving forward.

Brigitte Goulard: Do you think it will introduce more competition in the marketplace?

Rob Khazzam: I hope so. I think we all want competition. Competition is how Canada wins. Right now, we're leaving that on the table. So, we want an even playing field. We want businesses to be able to innovate without unnecessary restrictions. I believe if multiple participants can compete, it's going to produce innovation and economic prosperity for Canada.

Brigitte Goulard: The financial services marketplace is rapidly changing, with an explosion of new offerings and service providers. Do you think regulatory frameworks for new companies may temper enthusiasm or will this growth continue?

Rob Khazzam: I'm optimistic that it will continue. There are two components: one, removing regulatory obstacles that artificially limit the volume and pace of innovation from market participants; and two, the volume of market participants.

I think the second one, the volume of market participants, is cultural. Canada, including the businesses that operate in this field, need to hold themselves to a higher bar. I am very unapologetic about it. I think the participants that are in the market today are operating with standards that are far too low. They are not competitive in Canada, and they are certainly not competitive globally.

I think that’s an important cultural element. We need people to wake up every day asking whether the experience they’re delivering belongs in this century or the last one. “Am I improving customer service standards? Am I meeting customers where they are right now?” 

 
If we want to create economic prosperity, we must eliminate friction for businesses and their ability to access, and invest, capital and to send and receive money instantly. It seems trivial, but it's a huge source of GDP growth. For example, greater than 50% of the money movements that Canadian companies engage in take three to five business days to clear. In a 20-business-day month, that's just completely unacceptable.

If we want our money to work harder, and we want our economy to grow, we must get out of our own way. Consumers are dealing with the highest cost of living in a generation. But they have access to tools that are genuinely modern and make it easy to invest, move money and know where every dollar goes. Businesses in Canada don't have that same baseline. The infrastructure just hasn't caught up. That's the gap we're closing.

Marissa Daniels: Under the draft open banking legislation, it is unclear if there will be regulations requiring fintechs to become participating entities in order to receive and share data. The legislative framework also proposes to ban screen scraping. How do you think open banking will impact fintechs and consumers?

Rob Khazzam: Fundamentally, open banking is the concept that if you bank with a Canadian institution or provider, you can easily connect with third parties that provide similar or adjacent services. Those third parties can securely understand what level of balance you have and have access to basic information about your finances—provided you have explicitly authorized them to do so. This would all be in a low-friction manner, so it would mean no PDF forms or paper statements.

Removing sources of friction is the most important thing. It enables the market to better compete and offer better services to customers without necessarily having the ability to move their money without authorization. For example, if I have a bank account at five different institutions and I want to apply for a loan or mortgage at another institution, it should be instant. Authentication should be as simple as filling out a form and doing a single sign-in. The institutions accessing my information can read it, but they can't edit it or move my money without my authorization. That dynamic is the key opportunity.

Marissa Daniels: In the recently published Float Year-in-Review, you spoke about building a strong regulatory foundation. What are your thoughts on how the Canadian government is supporting financial services innovation? Are there any playbooks from other countries that would benefit the Canadian ecosystem?

Rob Khazzam: I think there is a lot of talking, but not enough action. There's still a challenge of duplication between multiple regulatory frameworks and regulators. There are still gaps regarding who falls under which regulations.

 
I think industry engagement is a good thing. However, ultimately a single person needs to make a decision based on what will have the largest net economic benefit to Canada. This is one of the few areas where someone in the government needs to explicitly decide for the whole of Canada and not for any one participant.

Marissa Daniels: As co-founder of Float and an advisor to Framework Ventures, you have experience on both sides of the deal table. What are your thoughts on the current fundraising environment in Canada?

Rob Khazzam: I think it's really hard. John Ruffalo recently wrote a post about access to capital in Canada, and I think it's a great articulation of the dynamic within the current fundraising environment. There are market forces at play and Canadian forces at play. We have that dynamic where we proudly focus on building in Canada but nine-and-a-half out of ten global investors are not interested. We are, in some respects, at a disadvantage because most global investors want to invest in global markets or American markets. So Canada takes a back seat. If you are building a U.S. business from Canada, you're probably getting a discount. If you are building a business focused on Canada, 95% of global investors are not interested in investing in you.

When you add on AI and what's happening now, I think all companies are finding this huge sea change where software development is becoming less durable and less differentiated. If you're a founder based anywhere in the world and you are trying to access capital, but are not already far into AI then it is probably very, very hard. If you are in Canada, it's probably even more challenging.

There's also very little policy direction set by the government to invest in Canadian startups. There is a huge swath of capital that's missing from the market that could otherwise be focused on Canada in a more proactive way. From a public policy perspective, we could be more intentional about setting aside capital for the explicit purpose of investing in Canada. There is a national benefit to that, like we've seen in Dubai and the Nordics. If we don't do that, people will leave because they feel they can't raise capital here, which is already happening in extraordinarily large numbers. Founders will either build a business that's funded by non-Canadian investors, for which Float is a prime example, or they will have to take their business elsewhere.