Financial Technology Crucial Component as Canadian Economy Transitions to New Reality

Falling oil prices combined with the currency drop have created real challenges for business across Canada and the overall economy.

In fact the most recent CFIB business barometer shows that the country’s small business confidence has fallen. Yet, just as the resource sector is encountering real challenges, the exchange rate is opening doors for tourism, retail and manufacturing. What effect does any of this have on the emerging Fintech sector? In my opinion, a great deal.

Ernst & Young released their FinTech Adoption Index last month sharing their analysis on the landscape and the changing ecosystem of traditional banking, and to summarize the findings: disruption beckons.

The biggest driver for change are increased customer expectations – with Fintech companies delivering lower fees and a seamless online user experience, traditional sector players will need to get aggressive and quickly adapt or partner to hold on to their market share. 

The report also surveyed how “digitally active” Canadians are. The results showed that Canada has been lagging behind both the UK and the US so far; only 8.2% of active consumers in Canada have used two Fintech products within the last six months. The report cited a current lack of awareness of new innovative products as the barrier for not integrating more products into their daily life

. Our comfort and confidence (with good reason) in the traditional banking system has also somewhat stifled consumer interest and innovation within the industry. However, according to a CIBC survey, 67% of Canadians are open to trying new technology – consumers and businesses alike are eager for new solutions to suit their financial needs.

It’s no surprise that Fintech companies are disrupting and increasingly starting to partner with the traditional banking sector. In many ways these new companies and models are complementary to the existing financial ecosystem.

Of note however was Postmedia’s recent announcement to collaborate with online lender, Mogo. This announcement was unique in the manner in which advertising services and equity were combined in the agreement. This partnership may be the first of many showing how both the finance and the advertising industries are evolving and how Fintech companies are taking market share and investment from other Canadian industries.

As the Fintech movement continues to grow across Canada it is encouraging to see Canadian based organizations like the MaRS FinTech cluster growing rapidly. It is also great to see steps towards organizing our best and brightest in the space. In September 2015, the Digital Finance Institute, in partnership with Canadian Payments Association, came together to discuss how to create an organized Fintech community.

Since then a variety of companies from across Canada including OnDeck have engaged. Recently the DFI spearheaded a new initiative to create the Fintech Association of Canada. The FAC will make its official debut with a launch party on April 13, followed by its third fintech conference on April 14 – both events will take place in Vancouver.

Canadian consumers and small businesses are ready for solutions that Fintech disruptors like OnDeck are bringing to market. With the economic headwinds we face in Canada, the time has never been better to allow more alternatives for financing, lending and moving money and ensure it is put to work where it’s needed most.  Here’s to the Fintech sector helping to grow Canada’s economy in 2016.