Canada is currently home to 80 FinTech companies, most of which are based in Toronto, Waterloo, Ont., and Vancouver. An Ernst and Young survey found 8.2 percent of digitally active Canadian consumers have used at least two FinTech products within the last six months, in the form of money transfers and payments, and savings and investments.

Compared to the 15.5 percent of global consumers using those same products, it would seem Canada lags behind, but the country’s FinTech companies seem poised to spur faster adoption within the next 12 months.

Solving a friction

FinTech start-ups and established firms have sprouted up, aiming to add value-added services and access to capital for those who need it, like providing loans to small businesses that have cash flow challenges and may not have access to traditional bank financing, for example. Mobile peer-to-peer payments and sending money internationally to family or business vendors around the world have been growing in popularity.

“It’s about not always focusing on disrupting or challenging traditional business financial systems, but rather focusing on solving a friction in a current process,” says Alexander Peh, Head of Mobile and Market Development at PayPal Canada. “If you can find an area where people are frustrated with a gap in the financial system that isn’t servicing them, then FinTech companies can come in and fill those.”

Thinking globally, beyond just Canada, is a crucial component to achieving that, he adds. Another focal point is collaboration, not only with partners, but also incubators and other established players in the FinTech ecosystem.

“To be successful in this industry, it’s important for FinTech start-ups to truly understand which regulations apply to them, and which regulations apply at the various stages of growth,” he says. “Being a start-up, it’s hard enough to be discovered, so it’s important to have a robust marketing strategy. Knowing the cost of acquiring a new customer, market using cost-effective channels, customer engagement — and then once it’s almost at that stage, how to retain those customers.”

Businesses build, consumers win

Founders and entrepreneurs tend to have a few different avenues with which to steer their companies. Some may want to build long-term sustainable companies. Others may prefer to partner with incumbents, including major banks, to build their customer base. Or the ultimate goal may be to be acquired by a larger firm.

The launch of development labs in Canada has been a first step in establish ing the kind of support seen in other international FinTech hubs. Banks and other financial institutions have increased their involvement to foster innovation as well. Peh believes regulatory bodies could gain from the enhanced transparency, opening of data, and economic gains if they are able to leverage the technology and balance risks with developing the FinTech ecosystem.

“The major winners will be financial service companies that embrace technology and look for opportunities to leverage it to enhance or expand their private offering,” he says. “The losers will be those who fail to draw on new technologies to better serve their customers, or don’t innovate in a way that puts their customers and their needs first.”