Synctera launches embedded banking platform in Canada

Canadian launch comes nine months after Synctera landed $15 million from National Bank.

After getting its start in the United States, banking as a service (BaaS) platform Synctera has launched in Canada.

The platform allows organizations of various sizes, from small FinTech startups to major brands, to develop FinTech apps and embedded banking products — including bank accounts, card programs and lending — that are compliant with Canadian payments and banking regulations. 

According to Synctera’s Drew Olanoff, the startup is now closing deals with an average annual contract value of $500,000 USD.

The Canadian platform will launch with bank account, card, and electronic fund transfer functionalities, with more features like bill payment planned for the future. 

“We’ve had this aspiration for a really long time, effectively since we started the company,” Kris Hansen, Synctera’s co-founder and chief technology officer, told BetaKit in an interview.

Synctera was founded in 2020 by Peter Hazlehurst, former lead of Google Wallet and Uber Money, Hansen, former chief technology officer of Koho and Portag3 Ventures, and Dominik Weisserth.

Despite its Canadian-majority engineering team, the company initially launched its two-way marketplace in the US in 2021. Hansen said it was partly due to the country’s size and ultra-competitive banking industry, which has thousands of regional and community banks in addition to major financial institutions, and partly due to the regulatory complexity for Canadian FinTechs.

Fifty companies use Synctera in the U.S., including TipHaus, Float, Firstcard, Exo Freight, Waya and BTG, Latin America’s largest investment bank, and the company said it is launching between two to four more into production every month. Drew Olanoff, Synctera’s head of communications, said the company is now closing deals with an average annual contract value of $500,000 USD, and its biggest deals between $2 million and $3 million USD.

The company first revealed plans to expand to Canada in March, when it announced National Bank as its banking partner in Canada and a $15-million funding round from the bank’s corporate venture arm, NAventures, with participation from The Banc Funds, Veritex Community Bank, Midland States Bank and Emigrant Bank.

RELATED: Vistara Growth secures $200-million CAD initial close for fifth private credit fund

Hansen said Synctera began plotting its expansion after its Canadian employees saw the unique offerings being launched through the platform and weren’t able to try them out themselves.

“Friends in the engineering team and I would talk about solutions launching in the U.S. and a lot were really cool — ‘oh, I’d use that, that would be fun, boy I’d like to test that,’” he said. “We just started wondering what it would take to do this, and we had people imploring us to come to Canada.”

Hansen admitted the move was “daunting” to contemplate given the regulatory landscape Canadian FinTech startups need to navigate to launch compliant products.

Lisa Durnford, Synctera’s head of compliance in Canada, said the company sees itself as a “compliance starter pack” for FinTech customers, with embedded compliance solutions for navigating know-your-client, know-your-business, fraud and anti-money laundering requirements. It was the result of “collaborative conversations” with National Bank’s compliance teams to find ways to address common regulatory hurdles. 

“It’s a known challenge in Canada that once you’re regulated as a money service business, or soon a payment service provider, it’s almost seen as a downside or a challenge, or often it’s so prohibitive that companies start to build in Canada and launch in the U.S. first,” said Durnford, who joined Synctera from Wealthsimple, where she was the company’s director of compliance and product risk. 

“For a long time I found that to be so frustrating,” she said. “Businesses have great ideas and launch awesome products here and have a vision for what they want to build, but face challenges accessing banking, and the regulatory requirements are an upfront hurdle.”

Money service businesses (MSBs) are regulated by FINTRAC. She said it’s a broad category under anti-money laundering legislation that covers a wide variety of businesses. Because some types of money movement are considered high risk, there’s a perception that all such regulated businesses are risky. Synctera itself is regulated as an MSB.

“The most frustrating response, when you’re looking to build something and need a partner, is that it feels too risky and they’re not able to support it,” she said. “There’s something exciting about being able to embrace the money service business category and dig into what the risks are, how to manage them effectively and build a seamless path forward.”

Elena Litani, Synctera’s product lead for Canada, said that without a platform like Synctera’s, FinTechs often have to “piecemeal” a solution when building a new product for customers — finding a banking partner, establishing a relationship with a credit card provider, and figuring out the compliance process on their own. Litani said she struggled with that very problem when she co-founded FinTech startup Pillar, which shut down in April. 

RELATED: $86-million Series D extension has Koho targeting growth and profitability

“It’s chilling for small businesses,” she said. “It’s very difficult to find partners — some have parts of [what you need] but none of them have everything.”

The platform is the same in both the U.S. and Canada, Hansen said, just with different back-end banking partners — creating a “relatively straightforward path” for U.S. companies to expand to Canada.

Synctera’s first Canadian customer, Toronto-based card program provider Yariex, is set to launch in the coming weeks. Yariex focuses on specialized cards for niche markets, including white-label cards and cards for non-governmental organizations. It is also working on a card program specifically for parents to give their children allowances. The company’s card programs allow the purchaser to put restrictions on the use of the card, as well as access to analytics on how money is being spent.

FinTech startups need to have a bank sponsor in order to issue cards. Vahid Abolhassani, co-founder and chief operating officer of Yariex, told BetaKit in an interview that with the National Bank partnership through Synctera, Yariex may be the first FinTech to be sponsored by one of the big six banks.

Yariex’s first offering — prepaid cards for Food Banks Canada that the charitable organization can distribute to its members to take the pressure off their grocery bills — is rolling out in January. 

Abolhassani said Synctera did “a lot of the heavy lifting” to help the company navigate the bank’s compliance requirements and tailor them to the specialized nature of the card program, as well as with product testing to ensure the cards work once they’re out in the world.

Hansen said as Synctera has grown in the U.S., it’s been “pleasantly surprised” by the solutions that customers have created with its API “building blocks.” While he said the company’s target use case when it launched was supporting retail-focused FinTechs and challenger banks, he said customers have started to build commercial applications — including commercial banking solutions for purchasing buildings, supply chain finance and manufacturing companies creating account structures to help customers buy, move and distribute their products.

More open infrastructure in the U.S., and in particular the launch of the FedNow real-time rails over the summer, has allowed Synctera to build its offerings to those specifications, and for its customers to rethink their business dynamics, Hansen said. 

In its fall economic statement, the federal government announced plans to introduce long-awaited legislation to implement consumer-directed finance — also known as open banking — in Budget 2024, and committed to amend the Canadian Payments Act to expand membership eligibility for Payments Canada, which is charged with delivering the real-time rail. 

But Hansen said he believes the lack of open infrastructure to date “in general hampers innovation. … In Canada, in general, the mood around the real-time rail is we’ll see, but no one is building to it yet. It seems a bit more precarious. For FinTech V2, there’s not as much visioning around the art of the possible.”

Durnford said the company is aiming to enable more competition and innovation in the country. “Every company building in the space will benefit from continued conversation.”

Kelsey Rolfe

Kelsey Rolfe

Kelsey Rolfe is an award-winning freelance journalist who covers tech, mining, work, and finance.

0 replies on “Synctera launches embedded banking platform in Canada”