Canadian Fintech: Cash & Covid 💸
Fintech multiples don’t multiply like they used to. The fintech story no one asked for. Canada's latest unicorn.
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Canadian lending is on 🔥:
QuadFi picked up a $127m credit facility to provide affordable loans to immigrants, who struggle to get credit elsewhere. Their underwriting model looks at alternative data sources like education and career trajectory.
Newly formed fintech Savvii Group announced a $10m seed round and plans to launch a consumer card.
Responsive, closed $3.5m to help wealth advisors use artificial intelligence to make better product recommendations to their clients. The funding came mostly from Co-operators, a major Canadian financial advisor and client.
Neo Financial has become a 🦄 (a private company valued at over 1$b) after securing $185m in their Series C, led by Peter Thiel’s VC firm.
PEI based PayTic raised nearly $3m to help banks automate payments compliance for things like KYC, AML, reconciliation, chargebacks and fraud.
Dapper Labs, the brand behind CryptoKitties and NBA Top Shot has launched a $725m VC fund to invest in fintechs building on their blockchain. For context, Dapper Labs has itself only raised $600m.
TIMIA, a lender best known for venture debt, is venturing into new territory. They have expanded into residential mortgage lending with their acquisition of Brightpath and into small business lending with the acquisition of Pivot. This puts the lender at over $200m in assets.
Canadian e-commerce giant Shopify announced its largest acquisition ever, a $2b deal for shipping logistics platform Deliverr. This gives Shopify the fulfillment capabilities it needs to go head-to-head with Amazon.
In the fintech crossover that no one asked for, BMO is launching a Twitch channel. Soon you’ll be able to watch Sean Frame, a personal banker from Windsor (and the world’s luckiest employee) chat about financial literacy while pwning n00bs…
Synctera, a Canadian infrastructure company that helps fintechs quickly launch new products inked a partnership with Mastercard. Clients will now get access to Mastercard’s open banking platform, Finicity. Why does Mastercard own an open banking platform? In the wake of the Visa - Plaid acquisition debacle, Mastercard quietly acquired Finicity. Don’t worry, Visa later acquired Tink, a European open banking company to even the playing field.
Canada has become one of the first countries in the world to require online crowdfunding platforms to report AML (anti-money laundering and terrorist financing) activity. This will bring about 1,000 new crowdfunding & payment platforms under the remit of FINTRAC, Canada’s AML watchdog. This decision was triggered by crossborder crypto donations to the trucker convoy earlier this year, which I wrote about here.
Finance Canada is considering appointing a director to oversee cybersecurity initiatives that protect the financial sector.
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Fintech multiples don’t multiply like they used to
Over the last 6 months Canada largest public fintechs have been hammered:
Shopify is down 75%
Nuvei is down 55%
Lightspeed is down 60%
This tailspin has even impacted the private markets:
Wealthsimple has been devalued by 20% by their largest shareholder, Power Corp. Power Corp is also invested in fintech household names like Borrowell, Nesto, and Koho.
What’s going on?
Inflation: prolonged low rates have triggered big time inflation, which means… rates are going back up.
Covid ending: as Canadians return to in-person commerce, e-com enabled fintech will grow slower.
Cost of capital: fintechs that lend (Clearco, Loop, Caary, etc.) will now need to pay more for their portfolio capital. The flip side here, is that banks (who many many of these fintechs compete with) can now increase rates, while retaining their super low cost capital, which comes from customer deposits.
These macro conditions are working against fintech valuations. But don’t get valuation confused with value.
When asked if Power Corp was worried, executive James O’Sullivan said, “this is not a reflection of the business model, its prospects or the management at Wealthsimple”.
In other words, current multiple compressions are not an indictment of the fintech value prop.
In partnership with Calgary Fintech
Are you a Western Canadian fintech startup? Apply & compete for the chance to win up to $250k here.
Cash & Covid
Cold hard cash is making a comeback in Canada, but not for the reason you may think.
In a recent Bank of Canada study tracking ATM withdrawals, the BoC said that cash demand is at a 60 year high.
Why? Because cash loves a crisis:
2000: Canadians pulled out cash in anticipation of Y2K knocking out ATM systems
2008: A similar trend popped up when the financial crisis brought bank stability into question
2020: Uncertainty around a global pandemic led to a surge in withdrawals
But wasn’t Covid was supposed to kill cash?
We all saw Merchants trade in their storefronts for Shopify accounts. Plus, cash is super dirty and a great way to transfer germs. So why are we taking it out?
Well, there are two things you can do with cash. Spend it or save it.
📉 Spending in down: The BoC says that spending cash dropped from 54% in 2009 to only 22% in 2020, and accelerated through the pandemic.
📈 Saving is up: Canadians are sitting on an unusually high levels of cash. We also are increasing our demand for high dollar value bills - particularly $100's.
According to the BoC, these intersecting trends suggest that Canadians are taking out cash to hold as a store of value, not to transact with.
In other words, we’re still using cash, we’re just not using it to buy stuff.
👀 Who’s hiring?
FrontFundr, Head of Marketing (Toronto)
Equifax, Director Consumer Data (Toronto)
Nuula, Financial Analyst (Toronto)
Float, Product Manager Accounting (Toronto)
Goeasy, VP Marketing (Mississauga)
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