Canadian Fintech: Koho is officially becoming a bank 🏦

Jan 29, 2024

Good morning! Welcome back to Canadian Fintech, a newsletter for founders, operators & investors.

Are you an existing subscriber? Please consider supporting this newsletter by upgrading to a paid subscription 🥰

Was this forwarded to you? Become one of our 8,489 subscribers by clicking below.

Clip Money, a cash deposit service, raised $500k in debt from BDC.
- Rather than going to a bank branch, merchants can deposit their cash in a ClipDrop box (found mostly in malls) and be credited the following day.
- The fintech went public in 2022.

Nest Wealth, a suite of tools for financial advisors, was acquired by Objectway, an Italian fintech entering Canada. This is a case-study in how to pivot successfully:
- Nest Wealth launched in 2014 as a direct to consumer robo-advisor the same year as Wealthsimple
- Feeling the heat by 2017 Nest Wealth pivoted to b2b, deciding to licence their platform to other financial advisors. National Bank invested at this point.
- In 2019 they doubled down on the b2b angle by acquiring RazorPlan, an Alberta based financial planning software.
- Today they service 3/6 big banks and large independents like Raymond James.
Innovation Credit Union acquired the loan portfolio of Symple Loans, a consumer fintech lender.
- Symple expanded into Canada from Australia in 2021.

Koho has moved into the second of three phases to secure a Schedule 1 banking licence.
- There are only 35 domestic Schedule 1 banks in Canada. 10 of which have been approved by OSFI since 2014, including Street Capital Bank (now owned by RFA) and Haventree Bank.
- A bank licence would give Koho the ability to hold deposits (which they currently do through Peoples Trust) and get direct access to payment rails overseen by the Bank of Canada.
- Koho Bank could be operating in the next 2 years.
Central 1, a service provider to Ontario & BC credit unions partnered with Flinks to offer open banking APIs.
- Historically each province had its own credit union central, which provided infrastructure like cheque clearing and ATM management for multiple local institutions that were too small to build / buy these systems themselves.
Wealthsimple can now be used to sign into government services like the CRA. This is thanks to their partnership with Interac who started working with fintechs last year.

Nesto, an online mortgage lender, will start originating loans through the broker channel via a partnership with M3, the largest broker in the country.
- About 40% of mortgages in Canada go through brokers.
- Nesto originally launched as a broker in 2017, before becoming a direct lender.

A new cyber security bill which will give the federal cabinet new regulatory powers over national systems that are “vital to national security or public safety” is being criticised by banks, who prefer to have dedicated financial services regulators like OSFI.
Balance, a crypto custodian relocated from Ontario to Alberta, in order to take advantage of the province’s more amenable stance on crypto.
- Alberta allows for special-purpose trust registration, which means you can be incorporated as a trust without having to also be regulated as a deposit-taking business, which is typically overseen by the CDIC.
The federal gov has introduced a two-year cap on international student permits to relieve pressure on housing. This will decrease the number by 35%.
- Fintechs that finance international students like MPOWER & Passage will likely be unaffected as they service larger universities, who will muscle out the smaller ones for visas.
FINTRAC hit TD with a $10m fine for not meeting AML requirements. This is the agency's largest fine to date.
- CIBC & RBC also received slaps on the wrist recently.