Canadian Fintech: KOHO does it again 🤑
Refinancing CEBA loans. Brex comes to Canada. FINTRAC crack down.
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💰 Funding
KOHO, a digital bank for low income Canadians raised $86m at an $800m valuation, which is flat from their $210m round last year. For context, a flat round from 2022-23 is pretty sweet! Some stats:
1m users
$100m run rate
100% rev growth in the last year
100k users of their credit builder, a financial product that mimics the repayment of a loan to establish positive credit history with bureaus
FinChat, an LLM for public market analysis raised $2m. The company originally launched as Stratosphere two years ago, and recently merged the two products.
Merchant Growth, a small business lender, raised a $300m facility, to help CEBA loan holders pay their obligations back to the government on time.
The CEBA program provided interest-free loans to small businesses up to $60k during Covid.
⅓ is eligible for forgiveness if paid back by the deadline, which was recently extended to Jan 18th. If the deadline is missed then the loan is fully repayable and starts accruing interest at 5%.
Merchant Growth is helping borrowers take advantage of the forgiveness component plus an extended payback period.
🤝 M&A
Canada Life, a diversified financial services company with a large wealth management business has acquired Value Partners and IPC, bringing them to $89b AUM across 6k advisors.
IPC used to belong to IGM Financial, who has the same owners at Canada Life - Power Corp.
Contract Capital Corporation, a lender to the IT industry, was acquired by Stearns, a US bank. CCC is an interesting niche lender somewhere in between invoice factoring and equipment lending. Here’s an example:
A managed service provider to the telco industry needs to build and manage data centres in order to deliver their software. The problem is that the telco client just wants to pay a software fee and have the data centre costs built into it, paid over time.
This obviously creates a big financing gap for the IT vendor.
CCC solves this by financing the data centres and gets repaid out the vendor’s software margins over time.
IN PARTNERSHIP WITH THE BANK OF CANADA
Calling all payment service providers!
Policy wonks already know that payment service providers (PSPs) will be regulated by the Bank of Canada under the new Retail Payment Activities Act (RPAA).
This means that if your company offers payments (digital wallets, money transfers, payment processing, and lots more) then you need to register with the Bank of Canada.
But who actually needs to register? How is it done? And by when?
All of these questions and more will be answered on Dec 13th in a free webinar hosted by the Bank of Canada.
🚀 Product
Nesto, an online mortgage company will start servicing Canada Life’s residential mortgage portfolio.
Nesto announced their b2b strategy at the 2022 Lenders Summit. This partnership brings their total loans under management to $10b.
Brex, the og corporate card and spend management platform is now available for Canadian employees of American firms, with local subsidiaries. Should Float be worried?
Not right now. Brex is focused on Canada only insofar as it helps them win large US-based multinationals.
Brim, a platform for banks and brands to launch credit card programs, announced a partnership with Mastercard to expand into the US.
Brim is already one of the only non-bank Mastercard issuers in Canada.
The partnership also includes an integration into Mastercard’s open-banking platform Finicity, which will allow Brim to offer enhanced KYC, quicker linking of bill-pay, and reconciliation between bank accounts and accounting / tax platforms.
⚖️ Policy
CIBC & RBC have been put on the FINTRAC naughty list (sorry ‘tis the season) for poor AML governance and process. Both banks failed to submit suspicious transaction reports (STR) in cases where there were reasonable grounds to suspect money laundering or terrorist financing.
The banks were fined a combined $8.8m. Ouch!
📈 Stat of the week
95.7% - the amount of mobile payments that are done through a QR code in China.
QR or “quick response” codes allow merchants to accept payments with as little as a mobile phone and a piece of paper.
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