The federal government’s long-awaited legislation to formalize open banking will be a “massive milestone” for Canada’s FinTech startups like API developer Flinks. But even without it, the Montréal-based FinTech platform has spent the last few years quietly setting itself up to become the primary infrastructure for tech companies looking to offer financial services in the country.
Following a rapid-fire series of partnership announcements with Xero, Central 1, and ATB Ventures over the past three months, as well as its first foray into the payments space, Flinks is looking to cement what co-founder and CEO Yves-Gabriel Leboeuf told BetaKit is a unique position in Canadian FinTech.
“We think we sit at the very middle of the entire ecosystem, the same way Visa or Mastercard is at the middle of their very own ecosystem,” Leboeuf said. “Having that special position … enabled us to come up with a very bold strategy and vision to have the ability to deliver that infrastructure.”
“We think we sit at the very middle of the entire ecosystem, the same way Visa or Mastercard is at the middle of their very own ecosystem.”
Founded in 2017 and majority-owned by the National Bank of Canada following a 2021 majority stake investment, Flinks is one of a small cohort of companies acting as the picks and shovels of an open banking equivalent. The company provides APIs for FinTechs to access their customers’ financial data securely and without the need for screen-scraping, a method of financial data collection that’s been heavily criticized as risky, glitchy, and insecure.
In late 2021, Flinks launched Outbound (formerly called Open Banking Environment), the country’s first open banking platform to share data between Canadian banks and FinTech platforms, with National Bank as the initial banking partner and EQ Bank joining half a year later. In January, it announced an agreement with Central 1, a financial services provider for the British Columbia and Ontario credit union systems, to give Central 1’s 300 member institutions access to Outbound.
Flinks’ partnership agreements are more accurately described as private open banking. But the long-awaited introduction of open banking framework legislation—expected in Budget 2024 with implementation pegged for 2025–could be a game-changer for Flinks, which has been a vocal advocate for a formal system. If and when the legislation gets enacted, it will give Canadians the right to control their financial data and share it with third-party FinTech platforms, ending screen-scraping for good and making APIs—software intermediaries that help two applications talk to each other—king.
“That will be a massive milestone,” Leboeuf said. “Having potential regulations implemented eventually is a massive win for us, for our customers, but more importantly for Canadians who are trying to access their data regularly or being told by their bank not to access their data.”
The Canadian FinTech landscape has evolved significantly in the last few years, Leboeuf said. In 2021, the company was largely working with “early adopters” like National Bank and EQ Bank. Today, more incumbent financial institutions are starting to see the opportunities in secure data sharing.
“Not only the potential regulations in Canada have influenced the mid- and large-sized financial institutions to get ready from an infrastructure standpoint and open up their data in a more secure and faster way, but it opened up their eyes as well,” he said. “They were trying to understand, ‘Is there something valuable here that we can benefit from?’ And in most cases, the answer is yes.”
Faye Pang, country manager for Canada at Xero, a global accounting, payroll and workforce management solution for small businesses, said screen-scraping is still prevalent in Canada. Xero’s customers in the country face a very different reality than the other advanced open banking markets it operates in, like Australia and New Zealand, where the company is headquartered.
Canadian small business owners often struggle to establish, and re-establish, the connection between their bank account and their Xero account, Pang said, because screen-scraping is unreliable, breaks often, and requires many multi-factor authentication attempts.
“We really see high-quality bank feeds—i.e. transactional data coming into Xero—as table stakes,” she said, adding that such data allows small business owners to reconcile their books, surface cash flow insights and make forward-looking projections, collaborate with their accountant or advisor to access capital, and more.
“If you think about how that comes to life in an established market, they’re not worried about… ‘I need to reconcile my books today, is my bank feed going to be working?’ But that’s a legitimate concern for Canadian small businesses across the board.”
In mid-December, Xero partnered with Flinks to give its customers in Canada and the United States secure access to more than 20 direct bank connections, starting with National Bank. “Once we build that connection, it becomes a high-quality data feed,” she said, calling API connections “the promised land.”
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As of this year, Flinks now roughly doubled its API coverage since 2021 to more than 20,000 financial institutions on both sides of the border, including the Big Six banks, Meridian Credit Union and Desjardins in Canada, and Bank of America, SunTrust, Capital One, and Wells Fargo Bank Online in the US. In contrast, Plaid, a major US-based API provider, connects to more than 12,000 financial institutions in the US, Canada, and Europe.
That growth is partly thanks to Flinks’ owner: National Bank. The Montréal-headquartered bank, which has invested in Flinks through its venture capital arm NAVentures since the company’s 2018 seed round, spent $73 million to acquire an 80 percent equity stake in the company in 2021 and tacked on an extra $30 million to accelerate Flinks’ expansion across North America.
“We liked the team, we liked the product, we invested more and realized it was a key game-changer for us,” Julie Lévesque, executive vice president of technology and operations and chief information officer at National Bank, told BetaKit in an interview.
Lévesque said the bank, which has invested in a host of FinTech startups through NAVentures—including Synctera, Borrowell, and Nest Wealth—has a “very different strategy” than other financial institutions, integrating the capabilities of many of its investee companies into its own operations.
“We’ve become a positive advocate on open banking alongside Flinks,” Lévesque said. “We feel there’s only upside to that.”
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Leboeuf said National’s ownership stake has pushed Flinks up the maturity curve. Operating as a bank subsidiary has introduced new governance and compliance frameworks around security, fraud, and money laundering. It’s something he said has attracted new bank partners.
“It’s enabled us to build products that are enterprise-ready,” he said. “One of the questions we had before [the acquisition] was whether other banks would be interested in working with Flinks … if we’re that close with National Bank. And interestingly, the answer is no. They’re more excited than ever before.”
The bank’s ownership stake has also been an “important part” of Flinks’ foray into payments—another component of its broader infrastructure strategy, according to Leboeuf. “It does help us access some rails we need to deliver the vision we have,” he said.
In early February, the company’s first inroads into the payment space went live: the Flinks Pay fund transfer API. The pay-by-bank product, which uses the Interac payment rails, is meant to help businesses embed instant payments directly into their products and services—a common challenge for Canadian startups.
The current iteration of Flinks Pay can be used to speed up the account funding process—crucial for FinTech startups that face hurdles in acquiring new customers and activating accounts—and help digital lenders recover loan payments. Lévesque also noted an opportunity in the retail sector, since the service allows customers to pay by bank instead of credit card. That would also give companies the ability to avoid high credit card transaction fees and get paid immediately, rather than waiting on funds.
Lévesque told BetaKit that National Bank has also used Flinks Pay to open accounts and transfer money between business units, and said it’s likely something other banks could benefit from. “I can’t speak for other banks, but using Flinks Pay is definitely an accelerator [for us],” she said.
The next iteration of Flinks Pay will include electronic fund transfer (EFT) functionality, one of the most common payment types in Canada. According to Payments Canada, the non-profit organization in charge of Canada’s payment clearing and settlement systems, EFTs have seen a 49 percent increase in usage over the last five years. In 2021 alone, there were 19.7 billion EFT transactions worth a cumulative $10.8 trillion.
Canada’s automated clearing settlement system, which facilitates Payments Canada’s batch-based EFT system, can currently only be accessed by direct clearers—a small list of financial institutions that includes National Bank.
Leboeuf said Flinks’ ultimate goal is to offer a suite of payment solutions that leverage other current and future rails, such as the real-time rails being developed by Payments Canada. Like open banking, payments modernization has taken many years to implement, much to the frustration of Canada’s FinTech community.
“The destination for us is, in the same way we have most of the financial data being ultimately distributed through the Flinks platform, most of the payments ultimately get handled by Flinks.”
Feature image courtesy Flinks. Photo by Joelle Simard-Lapointe.
