More high-potential fintech startups are emerging thanks to venture capital investments. Dinaro Ly, head of the fintech cluster at MaRS, discusses the figures and how fintech is evolving.

Mediaplanet: How has fintech grown in the last five years?

Dinaro Ly: The number of fintech companies across Canada has grown from approximately 40 in 2015 to over 250 high-potential startups in 2017. This growth has been fed by venture capital (VC) — $1 billion USD invested into Canadian fintech companies between 2012 and 2016.

Additionally, fintech working groups have evolved to help galvanize a strategy from all key stakeholders — government, policy-makers, regulators, investors, industry professionals, and academics (eg. the Fintech Advisory Committee). Discussions around policy and regulation have also accelerated with the introduction of a regulatory sandbox called Launchpad, setup by the OSC.

MP: What are the most innovative areas in fintech?

DL: I believe some of the most popular sectors are lending, with leading companies such as Borrowell, Financeit, Fundthrough, and Thinking Capital; digital wealth management, including companies like Wealthsimple and NestWealth; and digital banking, with companies like Koho and Mogo.

I’d love to see more Canadian-based insuretech companies emerge. There are many aspects of the insurance industry that could be modernized and potentially disrupted with exponential technologies.

MP: Has collaboration between startups and incumbent financial institutions improved?

DL: The question of “build, buy, or partner” is still very much top of mind. Together, they are working to improve the reception of new technologies and products to better serve their customers and create more efficient core banking systems. In 2016, MaRS tracked over 20 partnerships developed between fintech companies and incumbent banks across Canada.

MP: What role does MaRS play in advancing fintech and financial innovation?

DL: MaRS’ role is to continue to catalyze collaboration, investment, and commercial opportunities for Canadian fintech companies. Specifically, in the areas of capital, talent, customer opportunities, and partnerships.

In addition to our advisory role, we are committed to amplifying the voice of the fintech community to the necessary stakeholders in government, policy, and regulation. MaRS aims to help ensure Canada has a strong global presence in financial services, which will continue to attract investors, talent, and financial institutions to Canada.

MP: Where would you say Canada ranks in terms of global fintech? Are there any statistics or reasons why?

DL: Canada remains one of the world’s strongest and most stable financial services centres. The country ranks high in a few categories:

  • VC investments — Fintech in Canada continues to demonstrate strong year-over-year (YoY) growth when compared with fintech in other countries.
  • Talent — Canada continues to produce world-class software engineers, developers, and STEM graduates.
  • Industry support — There is a strong desire and motivation from the industry to drive more change in policy, regulation, and open banking initiatives.

MP: Where do you see fintech in 2018?

DL: More open banking initiatives. The PSD2 (Second Payment Services Directive) initiative will go live in Europe, which will allow for more Canadian-specific open banking initiatives. As these initiatives grow, cybersecurity, compliance, consumer privacy, and regulation will become more prevalent themes in fintech too.
More industry sandboxes. They will play a larger role in fintech, in addition to regulatory sandboxes.

Companies considering initial public offering (IPO). We expect at least one fintech company to consider going IPO in 2018. This will fuel the fintech community and set the foundation for other founders in terms of investment opportunities, and Canada’s overall fintech profile.