Earlier this month in Toronto, leaders from across Canada’s financial sector convened at the Plug and Play Toronto FinTech Innovation Showcase to highlight the tech set to transform Canada’s financial services ecosystem.
The showcase, which took place on February 1 at Visa Canada’s Toronto headquarters, was jointly held by Visa Canada and Plug and Play. The pair recently announced a collaboration to support FinTech startups across Canada.
“It takes a lot of successful partnerships to build a business here in Canada. It does everywhere, but especially here in Canada.”Chris Ferron, head of digital partnerships and FinTech at Visa Canada
The event looked to explore opportunities for collaboration among members of the Canadian financial services community, to spotlight leading companies, and to discuss how Canada can accelerate the momentum of its FinTech sector.
“If we can create a platform that brings together all of the startups, the corporations, the VCs, everyone in the ecosystem, we can create a ton of opportunities for startups to elevate the financial services industry as a whole,” Nadine Mühl, head of FinTech at Plug and Play, said as part of her opening remarks.
The showcase featured pitch sessions from seven Canadian FinTech startups, including Cyder, Kodif, Railz, QuadFi, Symend, Walnut, and Yariex. The event also hosted two panel discussions with financial and tech sector leaders on Canadian tech unicorns and Canada’s FinTech ecosystem.
Leaders discuss Canada’s evolving innovation ecosystem
To kick off the event, BetaKit editor-in-chief Douglas Soltys moderated a panel discussion focused on how Canada’s FinTech sector has evolved, and the role partnerships play in enabling innovation.
Chris Ferron, Visa Canada head of digital partnerships and FinTech, spoke to the Canadian financial system’s changing sentiment toward technology and innovation partners over the last decade.
Recalling the ecosystem ten years ago, he said, “I think many of us looked at the Canadian financial space and thought, ‘This is established, the players are set, it’s going to be really hard for other players to come in.’”
Fast forward to 2024, and new players have arrived and risen. The Canadian FinTech industry has experienced significant growth in the last decade, with a projected compound annual growth rate of 25 percent through 2029. This has seen the total Canadian payments market record increases of four percent in volume and seven percent in value year-over-year.
A recent report from Inovia Capital found that FinTech companies such as Wealthsimple and Neo Financial are now the most dominant in terms of VC funding in Canada, with $5.7 billion invested into the sector since 2019.
“We’ve got Wealthsimple, we’ve got Neo, we’ve got success stories that are homegrown in Canada,” Ferron said, adding this proves that Canadian customers are not only willing to try differentiated experiences, they’re actively seeking them out.
But that doesn’t mean it’s been smooth sailing. Partnerships were a key area identified by the panel as a sticking point that incumbents and emergent players are still figuring out. “It takes a lot of successful partnerships to build a business here in Canada,” Ferron said. “It does everywhere, but especially here in Canada.”
A banking partner can certainly fuel a startup’s trajectory, but it’s also a symbiotic relationship, as Jennifer Rodrigues, head of investment and partnership at TD Banks, noted.
Today’s banking customers expect more from their financial institutions (FIs), Rodrigues said, but banks “cannot get to market fast enough by ourselves. We need to collaborate [and] find FinTechs who actually have that mindset of more innovative experiences, so that between our scale and that innovation, we can actually go and deliver the experiences customers want.”
But even when FinTech startups do find an ally in an FI, there are often still synergistic challenges, according to Hanna Zaidi, VP of payments strategy and CCO at Wealthsimple.
“You’ll have these arms [of the bank] that are really well intentioned, and the business is really bought in, and then FinTechs are handed off to other departments in the bank, and you’re having to navigate really large organizations that don’t think the same way that you do,” Zaidi said.
Ferron said the key challenge for both FinTech startups and FIs is getting them “at the table together so that a FinTech can start to build,” which is why he said Visa launched its Fast Track program.
“Whether that’s card issuance, money, movement, payment, acceptance, we can find a way to collaborate partner with all of them,” Ferron said, adding that Visa Canada’s value proposition lies in the consulting, mentorship, and preferred economics it offers, which includes discounted access to platforms and services offered by Visa.
Lack of open banking is not stopping innovation
Another obstacle confronting FinTech companies in Canada is the constrained nature of the country’s financial ecosystem, primarily due to the absence of open banking and real-time rails. Canada is currently the only G7 country without either, which puts it at a disadvantage relative to many of its international counterparts.
Despite the federal government’s repeated commitments to initiate open banking, including a recent pledge to introduce legislation this year, the FinTech sector has expressed mounting frustration over the persistent delays and the protracted timeline for implementing such a framework.
Zaidi said this is challenging enough for homegrown companies, but it also makes it more difficult for international FinTech companies looking to enter Canada, because the strategies that have proven successful in other markets may not be effective in Canada.
“If you’re in the US, you’re probably coming in with an unbanked or underbanked playbook, or if you’re from the UK, you’re coming in and you’re trying to scale the type of licensing and regulatory benefits that you have in those markets,” Zaidi said.
While Ferron and Rodrigues both agreed on the necessity of implementing open banking in Canada, they shared a slightly different perspective. Rodrigues said that the absence of open banking is “not stopping the innovation, because our customers still want it and we need to build for it.”
Ferron quoted Float co-founder and CEO Rob Khazzam who recently said, “We can sit on our hands and keep complaining that open banking isn’t here, or we can keep innovating.”
“FinTechs are addressing real gaps in the Canadian market that large FIs either don’t have the interest in, don’t have the capacity for, or are just not part of their strategy,” Zaidi added. “That creates a whole host of opportunities.”
For all three panelists, enabling FinTech innovation was seen as a broader opportunity to problem solve. “We’re looking and ready to work with companies at any stage, we want to help create more homegrown success stories and the opportunity is strong in Canada,” Ferron said.