Financial technology (fintech) companies are set to take over the banking industry and transform our lives within the next 10 years, according to a recent report by McKinsey & Co. But what will that transformation look like for Canadian consumers?
Like most disruptive technologies, the majority of the companies spearheading the revolution are based out of Silicon Valley. But that doesn’t mean Canadian customers are being left behind. In fact, many Canadian companies are at the forefront of the fintech revolution and have the potential of becoming runaway success stories in the next decade. Here are five fintech companies that you’ll likely be hearing about a lot very soon.
WealthSimple
WealthSimple is one of Canada’s premier robo-advisors. Robo-advisors are online investment management companies that use software and algorithms to help you invest your money.
Started by Michael Katchen, a 28-year-old who previously worked for McKinsey and 1000memories (a website that was bought by Ancestry.com), the company is aiming its low cost offerings at millennials and other technophiles. Clients can invest a lump sum and add to it monthly.
WealthSimple makes investing easy for those who don’t have the time or desire to learn all about the stock market and make their own investment choices. The service helps you choose a few funds to invest your money in and handles things like rebalancing your portfolio, reinvesting dividends and optimizing your taxes automatically.
They also provide financial advisors who you can contact if you have any questions. Their website is extremely mobile friendly which makes it easy to check in on how your investments are performing while you’re on the go. The best part? They only charge between 0.35% and 0.5% for assets under their management.
Borrowell
Getting a loan or line of credit from a bank isn’t just time consuming but it also involves a lot of paperwork. Even then, many people just don’t qualify. That’s why online marketplace lending is one of the more successful parts of the fintech revolution. People can go online and complete a loan application in minutes. They can then get approved in a much shorter time period and have their loan transferred to them electronically without having to meet anyone in person.
Borrowell is just one of a small number of emerging Canadian marketplace lenders, which include the Vancouver firm Grouplend, but they’re already seeing a great deal of success. Borrowell offer rates that start at 5.6% APR which is much lower than an average credit card and are a great option for people who are looking to refinance credit card debt or borrow for a home renovation.
Payfirma
Payfirma is one of Canada's oldest fintech companies; they’ve been around since 2011 and offer point-of-sale software that have helped businesses accept credit and debit payments online, in store, and on mobile devices.
They also offer payment analytics to help businesses make decisions. They’re a company that most Canadians have interacted with without knowing it since they process payments for thousands of businesses in North America. Now, they're looking to grow and have zeroed in on expanding into the U.S. and potentially issuing an IPO, which means that you’ll probably be hearing a lot more about them in the future.
They’re also planning on expanding the types of payments their platform can process to include PayPal and Bitcoin. While Victoria, BC-based Beanstream is a bigger company than Payfirma, it was recently acquired by a Swedish Fintech innovator Bambora making Payfirma the best Canadian competitor in the mobile payment sphere.
InvestX
Have you ever wished that you could invest in the next Facebook before it becomes a runaway success? InvestX is the Canadian fintech company that is helping to make that possible.
They’ve created the first platform that allows the general public to participate in private equity funding. The goal of InvestX is to make equity investing democratic. They provide access to vetted companies that you can invest in at much lower minimums. With InvestX equity investing won’t just be for the billionaires of the world. While equity investing can be more risky, there is also greater potential for reward.
Equity investments have averaged a 16% return over the last 10 years according to Cambridge Research.
FundThrough
FundThrough won’t revolutionize everyone’s lives, but if you own a small business it might just be exactly what you need.
With the rise of online marketplace lenders comes those that are focused on small businesses. Small businesses have long had a difficult time getting money from banks. Because they’re smaller, the loans that they need are often smaller as well. So small that it rarely makes sense for a bank to get into the business of making small business loans because of the small return on investment of the time it takes to approve and issue the loans.
Online lenders like FundThrough are able to fill that gap and make all small business lending easier and more straightforward. FundThrough is particularly revolutionary because it focuses not just on the companies who are borrowing the money but on their customers. They work with businesses that sell to established companies. Payment terms in some industries can be one to three months.
FundThrough shortens that payment window to 24 hours. They provide the business with working capital that allows them to keep the lights on while waiting for their credit worthy customers to cut them checks.
An exciting industry
These are just five of the fintech companies that are sprouting up across the country. Many others great companies are focused on the behind-the-scenes work of the financial technology revolution like Shopify, a company that helps anyone build their own online store with easy to use e-commerce software, or Verafin, a company that specializes in fraud prevention and anti-money laundering.
As financial technology becomes more engrained in how we spend, save and invest our money expect many more companies to crop up, as well as some exciting IPOs and acquisitions.
