Nesto is officially launching an expanded product for financial institutions. As it does, it’s also completing a pivot that has been years in the making: a transition from a solely direct-to-consumer online mortgage lender to a “mortgage ecosystem” builder partnered with Canada’s biggest banks.
“One of our values is to be uncomfortably ambitious.”
Malik Yacoubi,
Nesto
The Montréal-based startup was founded in 2018 as a digital broker that aimed to make the complex mortgage process more transparent. Last year, the 350-person startup acquired CMLS Group, a company significantly larger than itself. Nesto suddenly surged to 1,100 employees and $73 billion in mortgage assets under administration, according to CEO Malik Yacoubi.
“One of our values is to be uncomfortably ambitious,” Yacoubi told BetaKit at Canada Fintech Forum in Montréal.
Yacoubi said Nesto has spent the past year gelling the two entities together by integrating CMLS executives and technology. Now, it has fully rolled out Nesto Cloud, a technology suite that helps financial institutions integrate the company’s mortgage lending platform into their consumer products.
The company first debuted a B2B product in 2022 with IG Wealth Management when it raised a Series C round. Since its founding, Nesto has raised more than $165 million in venture funding from backers such as IGM Financial, Portage, Diagram, and National Bank of Canada’s corporate venture capital arm, NAventures. It has nabbed some of its investors as enterprise clients, as well as TD Bank and Canada Life.
Nesto Group (under which Nesto, CMLS, and its subsidiary brand Intellifi are housed) is profitable and doesn’t need more funding, Yacoubi claimed. The CEO did not share the company’s revenue.
The startup’s position in the market—providing white-labelled tech to financial institutions— feeds into a trend of FinTech companies collaborating with the very banks they compete against. This comes as FinTech companies have spent years pushing the government to implement an open banking framework that would help disrupt a consumer finance market where large banks dominate.
At Canada Fintech Forum, Yacoubi said he has felt a “mindset shift” over the past few years as banks have become more open to collaboration with startups.
“Ten years ago, it was: how can I build and own everything in the future?” Yacoubi said during a panel discussion. “There has been an evolution where banks see way more partnerships.”
Synctera chief product and technology officer Ellen Linardi argued that this collaboration, once seen as an “unnatural union,” is becoming a necessity to effectively serve customers.
“Consumers…are going to expect a certain kind of compliance and regulatory trust that many of these FinTechs can’t guarantee or have failed [at] before,” Linardi said.
Collaboration helps in part by sharing data between banks and FinTechs, panellists said. But having proprietary consumer data can also act as a unique differentiator, particularly as artificial intelligence (AI) tools automate processes.
“Having unique data not inside ChatGPT is valuable,” Patrick Surry, chief data scientist at Hopper, said. “It becomes part of our moat.”
Yacoubi claimed customer data obtained throughout the mortgage lifecycle is Nesto’s “unfair advantage.” The CEO said Nesto is investing “big dollars” into a data feedback loop with its partner underwriters to use that information for improving its platform. As for AI tools, the company is deploying them within its product and encouraging developers to use AI copilots (35 percent of Nesto’s code is now AI-generated, Yacoubi said).
However, there’s always more useful data to be had. Yacoubi has been waiting for the Canada Revenue Agency to open an application programming interface (API) for years to help Nesto validate customers’ incomes. “That’s the open data that will really help with mortgages,” Yacoubi said.
Feature image courtesy Nesto.