canada fintech

Financial technology, or fintech, is an industry sector that is growing by leaps and bounds. Global fintech investment has seen exponential growth from $1 billion in 2008, tripling to $3 billion in 2013, and more than doubling again to $6.8 billion in 2014. That number is only expected to continue to move upward at an astronomical pace.

As fintech continues to expand, countries all over the world are scrambling to take advantage of the opportunity to modernize their financial sector and grow their economies. Not surprisingly, Canada is stepping up to the challenge.

The Rebirth of the Canadian Startup Scene

During the late 1990s, Canada had gained a reputation as a hotbed for numerous technology startups. At that time, most of the companies primarily concentrated on areas such as telecommunications and data networks. When the dot-com bubble finally burst in the early 2000s, many of the Canadian startups were deeply affected and closed their doors permanently as the flow of funding and business interest came to a halt.

Some hard lessons were learned as a result of stock market meltdown that ensued from the failure of so many technology firms. Investors became more cautious, and many entrepreneurs gained valuable insights from the experience that they carried forward into new ventures.

By the mid- to late 2000s, new startup companies were making a comeback, but this time, things were different. Rather than trying to solve a problem that didn’t exist, which caused numerous dot-com firms to fail, some startups sought to solve a very real and existing issue: financial services that were ineffective, inefficient, and expensive. Thus began Canada’s fintech startup community.

Canada: Home to Innovation

Hardly a stranger to technological innovation, Canada designed and built the Canadarm2, the robotic arm that was used to build the International Space Station and continues to be used there today. With its highly educated and highly skilled workforce, it’s no wonder that Canada has won acclaim for its accomplishments from the global community and continues to attract talented people to study and work from around the world.

The innovation and expertise that made Canada famous has also heavily influenced the country’s fintech sector. Payments disruptors like Hyperwallet, Payso, Payfirma, and RentMoola carry on the proud tradition of combining creativity and out-of-the-box thinking with technical skill and know-how.

In order to support an ideal climate for a sustainable fintech industry, there also needs to be a clear legal framework in place. Without an established regulatory system, both potential investors and clients will lack the sufficient confidence necessary to support fintech companies due to perceived uncertainty and instability.

“Canada has a strong reputation and position on privacy, security and regulatory compliance, which are critical elements when dealing with financial technologies,” said Jon Jones, President of Trulioo. “This trusted view positions us as a leading country for fintech.”

You Say, “Toronto,” and I Say, “Vancouver”

There are many fintech hubs around the world, including London, New York, Singapore, Sydney, and of course, Silicon Valley. Most of these cities are also major financial centers, making them ideal choices for startups to set up shop and immerse in fintech culture, technology, innovation and growth.

But what about Canada? Where are its fintech hubs?

Many people would instinctively focus on Toronto, given that the city is home to Canada’s primary financial district. It makes sense to keep fintech companies close to the bankers and financiers that they are supposed to help, right? That may not necessarily be the case.

Vancouver is already home to many tech firms, like Hootsuite, Amazon, and Electronic Arts. However, a surprising number fail to make the connection of Vancouver as a strong Canadian fintech hub. Does a fintech company really need to be close to the headquarters of financial institutions to be successful?

In a recent Techvibes article, several Vancouver fintech entrepreneurs chimed in and pointed out that the West Coast city has many advantages as a fintech hub. Being further removed from the established banking corporate culture along with traditional, old-school thinking is actually a benefit for local startups. With its renowned livability and high quality of life, Vancouver continues to attract some of the best talent that tends to stay because of the great lifestyle that the city has to offer.

“There’s huge value in accessing our more ‘West Coast’ approach to thinking outside the box and taking risks,” said Kathryn Loewen, founder and CEO of Vancouver-based fintech startup Control. “Maybe it’s the mountains, or the ocean, or something in the air here in Vancouver, but I think that we tend to bend the rules a bit more and think through problems creatively without fear of constraints.”

Building a Strong Fintech Ecosystem

What will it take to build a solid fintech ecosystem in Canada? As in other international fintech hubs, there needs to be centers of excellence established in order to support, nurture, and develop the country’s fintech community.

One strong supporter of this idea is Christine Duhaime, founder and executive director of the Digital Finance Institute, based in Vancouver. She already sees that the city has made great strides with regards to building up the local fintech scene.

“The interesting thing about Vancouver’s fintech ecosystem compared with Singapore and London is that we don’t have any government or global bank subsidized fintech centres or fintech innovation labs,” said Duhaime. “The growth of our fintech ecosystem is real, organic, and much more viable and sustaining as a result, at least for the short term.”

In Toronto, the MaRS Discovery District is a specialized space created specifically help entrepreneurs launch and grow innovative companies that can improve lives. It focuses on three key sectors – cleantech, health, and information and communications technology, with fintech falling under the last category.

However, Duhaime has a different vision for Vancouver. She wants to see a dedicated space for fintech in the city that can truly focus on developing startups in the sector.

“I set up the Digital Finance Institute in Vancouver in part to support fintech in this city,” she added. “My next step is to create a working fintech space in Vancouver where fintech companies – little ones – can come hang out and innovate, like what Paris has. That is a perfect innovation model.”

As fintech forges forward, so will Canada. However, there will need to be stronger partnerships built between the private sector and government, according to Jon Jones, President of Trulioo.

“In order to remain competitive with other countries that provide government subsidies, like the UK and Singapore,” he said. “Canada can further establish itself as a world leader in fintech by forging deeper partnerships with all levels of government to ensure that the industry in this country remains at the forefront.”

The future looks very bright for fintech, as it disrupts banking and finance by enabling faster, cheaper, and easier-to-use financial services for everyone. With the right structures in place, Canada can stake its claim as one of the world’s leading fintech centers.

What countries do you see as emerging fintech players?

This is not a comprehensive list of Vancouver fintech startups.