Wealthsimple sells UK book of business as FinTech giant focuses solely on Canada (for now?)

Is Wealthsimple trying to build Canada's first FinTech super app?

As Wealthsimple exits another international market, the Canadian FinTech giant has completed the transition begun earlier this year to focus solely on Canada.

Wealthsimple announced today that the company has sold its UK book of business to European digital wealth manager Moneyfarm (terms of the deal were not disclosed). Wealthsimple UK will transfer its existing 16,000 customers to Moneyfarm by end of January next year, and no longer provide advisory services.

“Our ambitions remain beyond Canada, and certainly we’re excited about other markets in time.”
– Mike Katchen

“As we shift our focus to our Canadian business for the time being, finding a partner for our UK clients that shared our belief in making investing affordable and accessible was our top priority,” Caroline Murphree, Wealthsimple’s CEO of Europe, said in a statement.

The sale is the last step in a transition out of international markets begun earlier this year. Wealthsimple sold its US book of business to Betterment in March, citing a desire to focus more directly on the Canadian market.

RELATED: Non-committal on a banking license, Wealthsimple CEO Michael Katchen says company’s ambitions extend “beyond Canada”

In an exclusive interview with BetaKit in June, Wealthsimple CEO Mike Katchen indicated that the motivation to focus on a single market was to ensure a proper product offering.

“I think what you’ve seen from us, as we’ve divested from the advisors business a year ago, as we left the US market to focus on Canada, it’s about focus,” Katchen said, referencing Wealthsimple’s sale of its advisory service in 2020.

In contrast to its market scale-back, Wealthsimple has been aggressive in expanding its product offerings, adding savings and spending, cryptocurrency asset purchasing and spending, as well as peer-to-peer payments. In June, Katchen also told BetaKit that the company is exploring credit and insurance offerings.

Still, at that time, the CEO noted “our ambitions remain beyond Canada, and certainly we’re excited about other markets in time.” The phrasing closely mirrors that of Murphree, which indicates Wealthsimple might not remain Canada-only forever.

Before new markets might come an IPO. In 2019, Katchen told BetaKit that Wealthsimple had set a target of $20 billion in assets under administration (AUA) before considering an initial public offering. According to the company, Wealthsimple currently sits at $15 billion in AUA, with over 2.5 million clients and tax filers across its Invest, Trade, Crypto, Tax, and Cash services; that’s three-quarters of the way to the finish line and a significant number of customers.

Mike Katchen Wealthsimple
We dont think Canadians need another bank we think they need something better than a bank Mike Katchen told BetaKit How about a super app then

Of course, there’s a chance that Wealthsimple’s words on the matter don’t match its actions, and the company’s comments about an eventual return to other markets are due to either Canadian politeness or poor comms discipline. Regardless, the Canada-only move marks not only a major strategic shift for the company, but one that mirrors global FinTech trends.

So is Wealthsimple trying to become Canada’s FinTech super app?

At the start of the decade, the standard FinTech approach to growth was to own one segment of the local financial value chain and scale to own it globally. Such global ambitions have mostly been dashed by a highly-regulated space where regulations differ per market, limiting the traditional scaling benefits of technology businesses (see Revolut’s on and off and perhaps on again-relationship with Canada).

Following this year’s Money 20/20 conference in Las Vegas, the aspiration for FinTechs now seems to be becoming financial services ‘super apps’, adopting the model of Chinese giants like Alipay and WeChat. Both Revolut and PayPal have warmed up to the branding, and with some analysts skeptical that local wedge-product incumbents have what it take to compete globally with the likes of Apple and Amazon, the proposition of using regulatory hurdles as a walled garden to becoming a national FinTech super app seems quite appealing.

So is Wealthsimple trying to become Canada’s FinTech super app? The company certainly put significant efforts into building challenger bank moat around the country; in June, Katchen noted Wealthsimple has built its own financial infrastructure, which “is highly technical, requires high performance, high regulatory compliance, [and] high integrations with legacy platforms,” something the CEO called “extremely difficult to do well and scale.” The company was also the first to receive conditional approval from the Canadian Securities Administrators to operate its cryptocurrency platform – a year before any other company was approved.

The company also has the capital and brand recognition to dominate the local market. Wealthsimple has the second-largest brokerage in the country by clients, and its trade app reach number one overall on the Canadian Apple App Store in January following the meme stocks craze. That was a few months before the company secured a $5 billion valuation through a $250 million capital injection from Meritech and Greylock (which featured an additional $500 million in secondary capital) to build out its team and product portfolio.

Answering a question from BetaKit in June as to whether or not Wealthsimple was pursuing a charter banking license in its home country, Katchen responded, “I think that the question of whether we actually need to go and get a charter banking license ourselves is one to be determined. I think you can actually deliver most of what you want through partnership without having to get that license.” To date, that has proven true.

Whether or not the company commits to its new strategy or keeps its options open, the sale of its UK book of business is likely Wealthsimple’s final move of 2021 – after all, the window for new Canadian IPOs is currently closed.

Douglas Soltys

Douglas Soltys

Douglas Soltys is the Editor-in-Chief of BetaKit and founder of BetaKit Incorporated. He has worked for a few failed companies and written about many more. He spends too much time on the Internet.

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