Canadian Fintech: A Rocket is headed for Canada ๐
From scandal to acquisition. Rent payment credit reporting. Flight insurers in a tailspin.
Morning!ย
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๐ฐ Funding
Milk Moovement, a supply chain startup for the dairy industry raised $26m to help private farm and co-ops manage payments, deliveries and even manage equity ownerships. And to whoever picked that nameโฆ well done ๐
WonderFi became the first Canadian-regulated crypto exchange to go public on the TSX. The company is a rollup of Bitbuy and Coinberry, financed in part by Kevin OโLeary from Shark Tank.ย
Autozen, a marketplace to sell your car to dealers, closed $5m. I previously wrote about auto marketplaces like Mintlist, HeyAuto, and TradeRev here.ย
Edmonton based Truffle, a restaurant POS system, picked up $2m to compete with Lightspeed, Snappy, and Touchbistro.ย
๐ค Acquisitions
Canadian PE firm Novacap, acquired a majority stake in RateHub, a marketplace for mortgages, credit cards, and insurance products. RateHub is a registered mortgage broker (meaning they can pick up fees from lenders on originated loans) and also owns CanWise, a mortgage lender.ย
Alterna Savings, Ontarioโs 3rd largest credit union is acquiring troubled competitor PACE. This is not your typical consolidation story:
Alterna first tried to buy PACE in 2014 but the deal fell through
Shortly after it was revealed that PACE had a significant amount of fraud in its loan portfolio
In 2018 the FSRA (Ontarioโs financial regulator) took control of PACE and removed its executives
8 years later Alterna is finally completing the transaction, just technically itโs buying PACE from the provinceโฆ
๐ Productย
Borrowell, a credit score monitoring platform now allows Canadians to report their on-time rent payments to Equifax (one of Canadaโs two credit bureaus). This complements Borrowellโs acquisition of Refresh Financial, a credit building loan provider in 2019. I go deep on rent reporting here.
Shoplazza, a Canadian Shopify competitor with significant market share in Asia Pacific partnered with Clearco to provide their merchants with financing. Shopify provides this sort of financing in-house through its Shopify Capital arm.
Jeeves, a corporate card for Canadian SMBs, is getting into lending. โJeeves Growthโ is a revenue based line of credit that adjusts automatically.
Level, a bookkeeping platform for contractors, has partnered with construction industry payments company MazumaGo, to reconcile purchases in real time.
Digital travel agency, Hopper is expanding its suite of financial products including โcancel for any reasonโ insurance. This comes as Canadian travel insurers are paying out customers $1.30 in claims for every $1 theyโve made in premiums due to
Pearson Hellflight cancellations.
๐ณ In partnership with Float
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๐ A rocket is headed for Canada
Edison Financial, a Canadian mortgage brokerage, is rebranding as Rocket Mortgage. Why is this important? First letโs get some context:
Rocket is Americaโs largest mortgage lender and was one of the first to offer an end-to-end online customer experience.
In 2019 Rocket made its first Canadian acquisition: Lendesk, a platform for mortgage brokers to submit deals to lenders.
After the acquisition, one of Lendeskโs founders launched (technically relaunched but letโs not get too in the weeds here) Edison Financial, a brokerage that became a client of the Lendesk platform he helped build.
The following year, Edison was also bought by Rocket. Two years later, the companies are unifying their branding.
Okay coolโฆ but why are you writing an article about a fintech changing its name?
Because the REAL story here is that Rocket is planning to become a lender in Canada by the end of this year, and the rebrand is part of that strategy.
This means that Rocket will lend out their own funds to customers, instead of just brokering deals with other lenders. In other words, they will be competing against lenders on their own platform. And who are the largest mortgage lenders in Canada? Banks, by a long shot.
Rocket grew its US market share from 1.3% in 2009 to 9.2% inย 2020. It now does more than Wells Fargo and JP Morgan Chase combined.ย
So can they do it again in another market?
Rocket has a lot going for it:
Tech - By leveraging its US tech, the company will bring down their operating costs and speed to closing. Traditional lenders struggle on both of these fronts.
First mover advantage - Other than fintechs Pine, Nesto, QuestMortgage, & Neo, Rocket will be one of the only fully digital mortgage lenders in the country.
Branding - Rocket sponsors the NFL, PGA Tour, and Clevelandโs NBA arena.
Broker roots - Being an established Canadian broker, Rocket already has a proven growth channel.
But it wonโt be easy:
Market cycles - Rates are rising and mortgage originations are slowing.
Competition - Bank brand loyalty is far stronger in Canada than the US. This is no problem in the broker channel (if youโre buying through a broker youโve already exhibited less loyalty to your bank) but it will be harder for Rocket to win in other channels.
There are over $1.7 trillion in outstanding Canadian mortgages. Itโs a large pie and there is room for many winners. Game on!
๐ Number time!
30% the amount mortgage payments are predicted by the Bank of Canada to increase over the next 5 years.ย
3/5 the amount of Canadians who support the regulation of crypto.
1/2 trillion the amount wiped off of fintech valuations this year from their peak.
๐ Whoโs hiring?
Float, Product Designer - Growth (Remote in Canada)
Milk Moovement, Product Manager - Finance & Equity (Toronto)
Clearco, Head of Capital Markets (Toronto)
Properly, Product Lead (Remote)
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