Fintech and Paytech in Canada- a Match Made in Heaven
It’s official: Fintech is surging in Canada- the fastest growing area being the Toronto-Kitchener-Waterloo corridor in Ontario- which is home to nearly 200 startups and over 20 accelerators/incubators!
Deloitte AI leader and strategist Mukul Ahuja states that “Fintech is a broad space. There are at least 10 areas where significant development is taking place—from insurtech to personal financial management. And Canada is quite interesting in that it has followed the lead of what is happening globally, and it’s really picked up steam in the last while. There are at least 1,000 fintech companies here, and every day there’s a new one popping up.”
Paytech is undoubtedly the fastest growing segment within the Fintech industry, comprising about 25 per cent of all the fintechs in Canada. (To clarify - The term “paytech” is used solely for entities who are mainly focused on deposits, savings and payments. These groups are often affiliated with larger financial institutions and are not involved in mortgages, lending, insurance or wealth advisory services.) Fintechs and Paytechs both act to serve clients and connect them in the ways they need with the payments system.
Why have fintechs and paytechs in Canada been able to grow and find common synergies? There are a few factors:
Blockchain growth is a major driving force. The financial services industry is making major investments in blockchain- with the Toronto region leading the pack. Half of Canadian blockchain startups are headquartered in Toronto, which is also home to the Blockchain Research Institute.
Other hubs are starting to rise across Canada, such as the Chamber of Digital Commerce Canada and ColliderX, which calls itself “the world’s first open-source, crowdsourced, and crowdfunded blockchain research and development hub.”
Canada also has the distinct honour of serving as a test market for many firms that may get their feet wet here- then move on to launch globally, often starting in the USA. This allows Canadian consumers to test out a diverse plethora of services and provide feedback which could be incredibly beneficial to the service providers themselves.
Government policy and regulation are also at the heart of this industry- as initiatives are currently being floated which include modernizing regulatory frameworks to reflect changing consumer demand and business modules; plus lobbying various levels of local government to ensure fintechs in the Toronto region have access to seed funding. Fintech and Paytech companies are also collaborating with their counterparts in other countries to develop government policy. This is why experts such as Ahuja believe that as international fintechs continue to expand, Canada will be right beside them- and possibly playing a major role in policy framework development.
We live in very exciting times. Canada- once America’s sleepy neighbour to the north- is emerging in 2020 and beyond as a global testing ground for fintech and paytech companies- and we could play an even larger role in steering global fintech/paytech development and government policy in the years to come.