Canadian Fintech: Fall Economic Statement ⚖️

Payfare acquired. Wealthsimple's 2025 product roadmap.

Good morning! Welcome back to the Canadian Fintech Newsletter, an industry roundup for founders, operators and investors.

Every Monday we break down the hottest topics in the industry in under 3 minutes.

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💰 Funding

• Hostaway, a short term property rental management software (marketing, backoffice, etc.), raised over $500m from General Atlantic and PSG.

  • The company’s CEO has operated out of Toronto for the last 9 years, until recently.

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🤝 M&A

• Payfare, a Toronto based earned-wage-access (EWA) service focused on gig-workers has been acquired by Fiserv, a large payments and banking infrastructure company for $201m.

  • This past September Payfare’s largest client, DoorDash, announced that it would not renew its contract. This triggered a 75% drop in their share price and “strategic review” of the company’s direction.

• National Bank’s takeover of Canadian Western Bank was approved by the Finance Minister.

• Canada Pension Plan acquired a $690m minority stake in Regnology, a Germany based regulatory reporting software for financial institutions.

• Tulip, a Toronto based POS & clienteling platform acquired Humankind, a US clienteling tool.

  • Clienteling is basically a fancy way of saying relationship driven sales ie where a sales agent helps you shop in the store or online.

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🚀 Product

• APX Lending, a Toronto based crypto backed lending marketplace is expanding into the APAC region via a joint venture with Butn, an Australian small business lender.

• Wealthsimple announced their product roadmaps for 2025:

  • Margin trading

  • USD chequing accounts

  • Bank drafts - similar to a cheque but one that’s guaranteed by the FI. Typically used for down payments on homes.

  • Credit card

• Koho has stood up a core banking system in preparation for their banking license.

• Mantle, a cap table management software, now allows clients to run corporate-sponsored liquidity programs (i.e. tender offers) so that employees can sell their shares without having to wait for an acquisition or an IPO.

  • Carta, a large US based competitor, very publicly killed a similar product that was not corporate-sponsored after client complaints that they were using private information to sell shares to outside buyers without the blessing of the client.

  • Hiive is another Canadian company that brokers secondary transactions for private shares.

• Three Ontario based credit unions have partnered to build “alternative banking models” designed for the underbanked.

• Healthcare of Ontario Pension Plan will allow self-employed doctors to join the retirement plan after years of being barred because they were considered both an employee and employer of their practice.

  • Issues like this have led to the emergence of multi employer pensions in Canada like BluePier and Link Plan.

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⚖️ Policy

Last week Canada’s Fall Economic Statement was published by Finance Canada. This document provides a brief economic update on the country and usually introduces minor adjustments. You can think of it like a mini federal budget.

This year’s budget was completely overshadowed by Canada’s Finance Minister resigning, moments before she was supposed to deliver the document, throwing the Liberal leadership into panic mode and calls from the Opposition to bring down the government.

But on its own, the document had tons in there that will impact the Canadian fintech sector. Below is a breakdown of what you need to know:

Maximum allowable rate of interest

Amending the payday lending exemption in the Criminal Code:

1. to prohibit the sale of credit insurance in connection with a payday loan

2. require a minimum 42 day term on payday loans

3. require payday lenders to accept payment in installments

The industry will have 12 months to comply.

Open banking

• Timeline: Legislation to be tabled in early 2025; rolling out more regulations later in the year; and launching in early 2026, with 12 months for implementation; and a review in 2029.

• Scope of data: chequing, saving, lending & investment products for consumers & small businesses available through online banking portals. Data will be shared in unaltered form free of charge. No payment initiation.

• Accreditation: No tiered participation for fintechs in the initial phase.

• Participation: Large FIs are mandated to participate.

• API vs Screen Scraping: A single technical standard for API driven open banking will be used. Once implemented, screen scraping will be banned.

Credit card fees

Forcing payment processors to pass all credit card transaction fee savings on to small businesses.

Hidden fees

Cracking down on the hidden fees when purchasing tickets to concerts and sporting events.

Money laundering and terrorist financing

• Requiring all reporting entities (not just MSBs) to register with FINTRAC.

• Requiring “company service providers” (law & professional services firms) to become reporting entities.

• Allowing FINTRAC to disclose information to the Canadian election commissioner to prevent foreign interference.

• Introducing a new law enforcement task force focused on financial sector money-laundering schemes. Specifically calling out fentanyl trafficking.

Bigger penalties on financial crimes

Significantly increasing maximum fines for AML/ATF violations:

• Individual fines up to $4m

• Entity fines up to $20m

Sanctions

Allowing the government to seize profits on frozen assets held in Canada.

Predatory debt advisors

Enforcing penalties on unlicensed debt advisors who falsely market themselves as registered insolvency trustees and persuade consumers to file for bankruptcy without disclosing the negative consequences.

AI

Introducing the Canadian Sovereign AI Compute Strategy, which will provide support to researchers and AI firms.

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Have a great week! See ya 👋

-Tal Schwartz