Despite being an 18-month-old company, Wealthsimple has emerged as one of the top FinTech startups that are making the big banks nervous. The company secured a major $30 million Series A investment back in April, and since then, has bought an “undervalued” super bowl ad, acquired a brokerage, and partnered with fellow FinTech startup Borrowell.
In a sit-down with The Disruptors co-host Bruce Croxon, Wealthsimple’s CEO Mike Katchen talked about the appeal of FinTech startups to the general public, and the inevitable increase of FinTech partnerships.
“If you look at our numbers, about 85 percent of our clients are under 40, which is the inverse of the industry. So it’s tackling an entirely new market and folks that haven’t been investing before because they didn’t really have any other option,” said Katchen.
While Katchen argues that their robo-advising platform can be even better than traditional services, he said that as a FinTech startup, there’s still a struggle of getting Canadian consumers to trust them; in Canada, there are five big banks that dominate, whereas US consumers have more options. It’s part of the reason why Katchen thinks FinTech partnerships will become more commonplace.
“A bank does everything, but may not be the best at everything,” Katchen said. “We think we can be the best at investment management, Borrowell thinks that they can be the best at lending, and if we can unbundle the bank and put these pieces together, we can bring down the cost of acquisition by sharing those customers and package the full suite of services outside of the bank.”
Even with this hurdle, there are signs that FinTech is doing something right as he admitted that BMO tried to build its own Wealthsimple, called SmartFolio.
“Apparently how they did it is that they hired a dev shop in Toronto and said, verbatim,’Go copy Wealthsimple,” said Katchen. “For us, nothing could be more validating about the business that we’ve built. But even BMO, with all their scale, launched at a much higher price point.”
Watch the whole interview below:
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