For decades—actually, about a century—little transformation occurred throughout the makeup of Canada’s financial sector. The same familiar faces became “The Big Five,” a title crowned with an air of Mount Rushmore-like permanence.
But eventually technology stubbornly edged its way into the realm traditional finance—and since then, innovation has spurred a rapid rate of change.
Things happen fast, eh?
As a publication dedicated to covering the intersection of finance and technology in Canada, below we offer our observations on today’s most relevant trends.
Becoming Better Than a Big Bank
Since the dawn of Canadian fintech a couple of decades ago, the grand goal has been to compete with the Big Five. But perhaps that is not the correct aim—rather, there has arisen an opportunity to be something different, something better, as Wealthsimple chief executive officer Michael Katchen put it earlier this year.
Toronto’s Wealthsimple is among a new generation of digital-based financial institutions that offer services and products increasingly similar to those from traditional banks, but often with lower barriers to entry. One thing that allows these fintechs to compete on cost is that most don’t have a single physical branch; the entire banking process is conducted online.
Since its founding in 2014, Wealthsimple has been constantly adding new features—over the last couple of years, for example, the fintech has released venture capital, private credit, and private equity offerings—as the growing firm continues to look more and more like a regular bank, but a lot leaner.
And Wealthsimple is hardly alone. Across the country, Vancouver’s Mogo, founded in 2003, today helps Canadians invest like Warren Buffet in the simplest way possible.
There is also KOHO Financial, which recently raised $86 million in a series D extension at an $800 million valuation as it surpassed one million users. Freshly funded, the fintech firm is ardently marching toward official bank status.
The Big Five might not be sweating yet—the Royal Bank of Canada remains Canada’s largest company by market cap—but sustained fintech innovation is likely to continue fragmenting an increasingly saturated market.
Ottawa’s Shopify, while not aspiring to bank status, is nonetheless an example of a fintech startup that can climb to the highest ranks in a relatively condensed timeframe.
Given the modern pace of change, others may not be so far behind.
The Importance of Prioritizing Powerful Payments
Online commerce continues to grow and chip slowly away at brick-and-mortar retail (which, these days, is also integrating financial technology as much as the digital realm).
But online commerce can easily annoy consumers, because on the internet, customers tend to have little patience and demand lots of options. Their expectations are simply higher. That’s why Canadian retailers such as RONA and Hudson’s Bay tap companies like Affirm for an e-commerce boost.
To further the flow of commerce online, some firms are working to bring physical aspects—such as one’s face—into the picture (pun intended). A Winnipeg-based innovator of e-commerce this year unveiled the launch of a biometric checkout powered by Wink, a Texas-born payments platform that enables institutions to leverage facial and voice recognition-based multi-factor authentication.
Using Bold Checkout with Wink, retailers can authenticate customers with voice and face recognition using the camera on their personal device or an in-store terminal. Once a shopper is verified, they’re automatically signed into their customer account and details such as delivery preferences, loyalty points, coupon offers, and preferred payment method are pre-filled to complete the purchase.
Biometrics are already popular in retail (consider Face ID on an iPhone to access Apple Wallet, for example), but Bold laments that “existing capabilities are limited to certain devices and to the payment portion of checkout only.”
“There is a massive untapped potential for retailers to tap the benefits of biometrics for delivering a frictionless omnichannel and secure checkout experience for shoppers,” believes Deepak Jain, CEO of Wink. Bold Commerce is introducing biometrics “into every part of the checkout process, completely eliminating passwords and PINs, so shoppers can go from cart to purchase using only their face.”
The biometric authentication also adds an extra layer of security for retailers and shoppers to prevent purchases from fraudulent bots or unauthorized accounts, Jain added.
For more insight into other aspects of the present and future of payment technology, check out our exclusive interview with Mark Frey, Group President at Corpay Cross-Border, a Toronto-based firm that specializes in cross-border payments and foreign exchange risk management.
Is A.I. Adoption to Aggressive for Canadians?
Try finding a fintech that isn’t using AI in some capacity in 2024.
We’ll wait.
But seriously, if a new fintech isn’t entirely based around AI, then it’s at a minimum still leveraging the technology behind the scenes.
Products, services, and employees are all utilizing AI tech in an effort to gain an edge it a competitive and shifting market.
One problem fintechs may run in to with such an aggressive adoption of AI is that many Canadians still prefer the human touch, even when it comes to strictly business.
Data shows Canadians remain unconvinced AI offers pros outweighing cons. Even as AI gains steam throughout the nation, the number of consumers expressing discomfort with skilled service providers (like doctors, lawyers, and financial advisors) using AI has actually increased.
It’s not that Canadians are necessarily opposed to new technology. But a line is crossed when the entire process appears outsourced to machinery.
“The average Canadian still wants to know that a human is involved in the process,” says Scott Bleasdell, who serves as Chief Product Officer of Dye & Durham, “even if AI is doing a lot of the heavy lifting.”
One key aspect for fintechs and other businesses leveraging AI to consider is transparency. Bleasedell implies a correlation between vagueness around the implementation of AI and a user’s discomfort with the tech.
“Transparency about how AI is and isn’t being used, and the benefits it provides to the client, will be critical in helping legal professionals and other skilled service providers foster widespread acceptance of AI use in their offerings,” the executive stated.
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