Fintech is changing the conversation in Canada’s financial services sector
Andrew Popliger, National Technology Leader
Fintech and disruption are two sides of the same coin. By injecting new, innovative technologies into the traditional financial services sector, fintech is changing the way that financial institutions engage and interact with their customers.
Canada presents an interesting opportunity for the fintech sector. Unlike in some other markets around the world, the big banks—and their decades of experience—are highly trusted by Canadian customers. Understanding this dynamic, fintechs are exploring the opportunity to collaborate with these institutions (gaining access to an established customer relationships) while also competing against them.
To showcase how the sector is developing, PwC and CB Insights have published our latest Fintech Market Map. In it, we’ve seen significant growth in Canada’s fintech funding—with total investments nearly doubling since 2018—and local companies are working hard to keep up with global rates of adoption and innovation.
While there are numerous opportunities for growth, Canadian fintech companies still face challenges when it comes to developing and selling new products. We need to critically examine what’s currently working, and what needs to change, to help our ecosystem go from “good enough” to a global leader. To do just that, we’d like to explore some of the key trends in Canada’s fintech landscape.
Fintech offers a unique lens for improving customer experiences
Today, the focus for financial services organizations is on user experience. Customers have high expectations, and innovative fintech businesses are often better equipped than their traditional counterparts to meet and exceed these expectations. To start, fintech businesses are agile—they constantly innovate and iterate based on the demands of their consumers and aren’t constrained by legacy infrastructure like the banks are. They are also keenly focused on customer experience and prioritize the design of user interfaces that are easy to use. Lastly, fintechs operate within an expansive digital ecosystem, leveraging available technology and data to simplify their path to deployment.
On the other side of the equation, fintech companies stand to benefit greatly from their collaborations with Canada’s established financial institutions. By gaining access to generations-worth of customer trust, they can deploy their digital products without having to do the extra legwork of building a strong consumer base.
In Canada, our regulators are still assessing the viability of open banking, making it a challenge for fintech players to access critical user data. Canadian banks hold the keys to this data, once again making them appealing partners for fintech companies looking to launch their products. We’re already seeing this in play: just look at Borrowell’s collaborations with CIBC or TouchBistro working alongside JP Morgan.
Real estate and wealth management are making strides
There are a number of fintech segments that have been especially productive in the last year, including insurance, borrowing and investment technologies. One area we’re watching closely is proptech, where the collaboration between the real estate industry and new financial technologies is revolutionizing how people buy and sell properties. Companies like Zoocasa, Properly, Casalova and Rentmoola are leveraging fintech to transform the marketplace.
Another space where fintech is building momentum is wealth management. Our own Global Fintech report indicated that wealthtech is a significant area of investment and opportunity. Now dollars are beginning to flow, with the likes of Cacheflow, d1g1t and Nest Wealth presenting fundraising success stories.
Finally, lending and payment solutions are a natural fit for fintech. This was one of the biggest areas of investment in the last year, exemplified in companies like TouchBistro, FundThrough and Lendified.
It’s not all a smooth sprint
Canada is becoming very much aligned with the pace of adoption and deployment of fintech solutions we’re seeing across the world. Despite this, there are still a number of challenges that local companies face as they try to find room for their products in the marketplace.
To start, fintech companies have to deal with the slower sales cycle that larger financial institutions are known for. As a result, the starting position for tech businesses has to be much stronger compared to other sectors when selling into these markets. Larger projects demand bigger developer teams and therefore a more significant investment. But financial institutions have both the means and the motivation to make these projects work, and once a collaborative partnership with a fintech company is formed, it tends to be sticky and likely to last for the long term.
Entrepreneurs can better position themselves with potential partners and investors by building inroads early, engaging them in forward-looking conversations even before they have a finished product. That way, eventual investors can be brought on in an advisory capacity, helping to co-create the technology into something they’ll want to buy.
The Fintech Market Map lets us understand what’s going on in this thriving, cross-sector fintech ecosystem and ushers opportunities to advance it even further. It’s an exciting, constantly-evolving business landscape, and we look forward to seeing even more changes in the year ahead.
Curious to know more about which Canadian fintech companies are leading the pack? Check out our Fintech Market Map.
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