The Canadian fintech review: The Canadian market

Canada has a diverse fintech ecosystem that presents startups and those who do business with them with many opportunities and challenges.

Learn more about this rising industry as Konata Lake and Brigitte Goulard discuss:

  • how Canada compares to other markets
  • what startups entering the space can expect
  • the current state of play for raising capital
  • the ins and outs of the tech talent market

Click here to see other videos and webinars in this series.

Brigitte Goulard (00:06): The topic of our video today is about the Canadian landscape. So our first video was about the trends in 2022, now we're all about Canada and what's happening here in Canada because as I mentioned in the first video, sometimes Canada's a little bit of a laggard when it comes to fintech. And so I just wanted perhaps to start off asking you, what is the fintech space in Canada? Can you describe what that would be?

Konata Lake (00:31): What we're really seeing is areas or products and services that are financial related, where people come up with technological solutions to deliver those faster, to deliver those cheaper, or even to integrate with product and services of larger financial institutions. We're seeing those get labelled as fintech. And given the kind of established financial services sector in Canada, we're seeing technology companies participate in all aspects of the fintech ecosystem. And particularly within Canada, there's a high concentration within Ontario in terms of fintech-related companies, and then it spreads out to other regions.

Brigitte Goulard (01:16): So if you're looking at, you know, how Canada compares to other international markets where they have been perhaps a couple years in advance from what we are, how does it look? How does Canada do? Are we doing well or we need to catch up a lot?

Konata Lake (01:28): Certainly we're doing quite well. I’d say Canada certainly hits above its weight, so to speak. If you think of relative population size or maybe even economic size. The ecosystem that provides for that kind of ranking is incubators, that kind of take early stage fintech companies, work with them in terms of, you know, refining their product, helping them figure out where to market it.

Konata Lake (01:52): Also find the established financial institutional players that we have, you know, the banks, the insurance companies all now have divisions that are focused on innovation and on technology. And there's really a symbiotic relationship between both the tech companies and themselves. So because Canada and particularly Toronto has this established financial regulatory system. It's a natural place to have a strong fintech sector because you marry the technology startups with that established financial institution network, and you get a really great breeding ground for, you know, developing fintech companies.

Brigitte Goulard (02:31): What I find really interesting, having worked in the financial services sector for quite a while, is the help that fintechs are getting through incubators or even, you know, sandboxes put in place by regulators and in trying to give them a leg up to encourage innovation in Canada. So, you know, you and I have been involved in all kinds of different initiatives and so from your perspective, what would be some of the big challenges that we find in Canada for the fintechs? Is that finding resources, finding talent, finding money and what could a fintech do to resolve some of these challenges that they're having?

Konata Lake (03:09): One of the challenges we see is certainly the regulatory framework, which is in place to be helpful obviously, to provide security and certainty to participants within the fintech space. But, you know, I’ll give you a quick anecdote. I had a call with a potential client from the US, and when I described our regulatory scheme, he was quite excited because he thought that what that means is that there's not a lot of people who try to break into that, and being a very aggressive US kind of startup, he thought that's the perfect place for me to play.

Brigitte Goulard (03:41): That’s until they talk to me and then they'll go, “Oh no that's not so good!”

Konata Lake (03:44): I give them the positive news.

Brigitte Goulard (03:46): I'll give them the tough news.

Konata Lake (03:48): And so the regulation, whether it's the fact that we have multiple regulators for a particular sector across different provinces or simply the perceived conservative nature of some kind of regulatory bodies, that can present a challenge because what that means is a lot of the time fintechs need more resources to try to deal with the those regulators. So that can be one of the challenges. But as mentioned before, the ecosystem really supports development of fintech in Canada.

Brigitte Goulard (04:23): What about talent? Like, where do you get those people to help you?

Konata Lake (04:26): You know, Canada is quite competitive. Certainly when I speak with some of my colleagues or participants in the system in the US, Canada is seen as a place to get really great talent at a fraction of the cost compared to Silicon Valley kind of companies, for example. But if you're a local Canadian fintech startup, it can still be prohibitive to some of the cost of hiring. And so one of the things that we see fintechs doing is they actually will partner overseas, you know, to development capabilities in institutions overseas that can provide that relatively cost-effective matter. So fintechs are coming up with creative ways to get around the cost factor due to labour.

Brigitte Goulard (05:06): Good. So basically, Canada's a good place for fintechs.

Konata Lake (05:08): Canada's a great place for fintech.

Brigitte Goulard (05:09): I know that you work closely with venture capital and there you find the word “capital”. So fintechs are always looking for capital. So what's the space looking like? What should they be thinking in terms of capital?

Konata Lake (05:21): It’s a great question, and certainly in today’s environment, when we see what’s happening in the markets and what’s seeming to happen with large global venture capital players, there’s a lot of concern as to the appetite for spending and investing. And what we’re seeing is that appetite remains strong for good companies with very clear ideas, clear vision of what they’re trying to do, and who are very cost conscious in how they’re spending. Gone are the days when you can simply hire a team once you did a raise and spend spend spend. So to the extent you’re kind of well-structured, great idea, great team, we’re still seeing a lot of capital available for fintech companies and we’re seeing that both within Canada from Canadian VCs but also still seeing a great deal of interest from US VCs who have seen examples of great Canadian success stories. And so those success stories have created an avenue for others looking to Canada for great companies to invest in.

Brigitte Goulard (06:14): Great. So Canada, a good place.

Konata Lake (06:16): Great place.

Brigitte Goulard (06:18): Thank you for joining us today on our second fintech video. And stay tuned because we'll have a third one coming soon.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

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