Canadian Fintech: RIP Mortgage 🪦

The bank of mom & dad goes digital. Meet your Open Banking Tsar. Banks love that green.

Apr 04, 2022

Morning!

Welcome back to Canadian Fintech, a monthly recap on fintech, lending and banking. If you're reading this and haven't signed up, join the 4,287 others by clicking below. Thanks!

💰 Funding

The bank of mom and dad is going digital. Walo, a prepaid card for children, snagged $1.1m. Diagram backed Wingocard raised $2m for a similar product last year.
Portage Ventures, the fund behind Wealthsimple, Borrowell & Koho is now one of the largest early stage fintech VCs globally, totaling a self reported $4b in assets.
The Canadian corporate card market is white hot:
- Jeeves is now worth over $2b.
- Float picked up $42m last year.
- Caary crowdfunded $4m last summer.
- Pillar, a neobank for Canadian SMBs and freelancers came out of stealth.
Revenue based financing platform Corl secured a $20m credit line in USD stablecoin. Corl’s co-founders are also co-founders of the accounting data aggregation api Railz. Serious 2020 Jack Dorsey vibes.
How are you paying for that? Calgary based Helcim raised $16m to expand its merchant payments platform. While MazumaGo, a payment platform for construction companies, expanded into the US.

🤝 Acquisitions

SecureKey, the digital identity platform that every Canadian uses but doesn’t know the name of, was acquired by Czech Republic based digital security conglomerate Avast. SecureKey managed to build a digital ID network between every major Canadian bank becoming the de facto sign-in for all government services websites. If you signed into the CRA to file taxes or to apply for Covid subsidies, you likely used SecureKey.
TD became the 6th largest bank in… the US, after acquiring First Horizon. BMO cracked the top 20 after their acquisition of Bank of the West late last year.

🚀 Product

Online stock trading platform Questrade now also offers mortgages. Competitor Wealthsimple has also said that mortgages are on its roadmap, and recently announced a big push into lending.
BMO is the first bank in Canada to allow transgender and non-binary customers to use their preferred name on consumer and business credit cards. 1/3 of people who have shown IDs with a name or gender that did not match their presentation reported negative experiences, including harassment and denied services. Banks make it difficult and expensive to change names on their accounts and cards, nearly always requiring a letter from a doctor, judge or notary.
Samos launched the world’s first surgical accidental death insurance product.

⚖️ Policy

Canada finally has its Open Banking Tsar: PwC’s Digital Banking Director Abraham Tachjian. The appointment comes one year after the Advisory Committee recommended establishing the role, and three years after the committee was created. Tachjian will report directly to the Associate Minister of Finance.
A tax on Canadian banks is back on the table after a power deal with the NDP that will keep Liberals in office until 2025. The 3% surtax on profits over $1 billion would cost big banks and insurers $2.5b over the next four years.
On April 4th Ontario opens up single game sports betting to licensed private operators creating the 5th largest betting market in North America. The move is expected to generate $570m in gross revenue. 15 operators have received licenses and 30 others are pending. This is a watershed moment for Canadian fintech.

🪦 RIP mortgage

⅓ of young Canadians living in cities say they expect to co-own their first home.

Why? With Canadian home values up 20% YoY and salary gains getting rocked by inflation, saving for a 20% down payment is becoming too great a burden for many first time buyers.

In response, fintechs have started to pave alternative paths to homeownership:

Rent-to-own real estate platform Key, just raised $11m to let “renter/owners” move into Key-owned buildings with just 2.5% down. The remaining equity is covered by institutional investors on the platform.
Requity Homes is a fintech that buys your dream home and rents it back to you. The platform also guarantees a buy-back price.

Don’t write your eulogy just yet.

Let’s not forget about good old CMHC, the mortgage insurance crown corporation that makes it possible for first time buyers to put down less than 20%.
Also noteworthy, is Canada’s thriving broker market which is adept at servicing unconventional mortgages. This market has taken off thanks to fintechs like Nesto (broker marketplace) and Homewise (digital brokerage).

💸 Fintech marketplaces rake it in

Building a two-sided marketplace is hard. Companies are forced to create equal levels of demand in more than one user group. For example Etsy needs both buyers & sellers, Substack needs both readers & writers, and Uber needs both riders & drivers.

Getting to that perfect balance is painful but recently in Canada its been working and VCs have noticed:

Village Wellth picked up $400k to build a marketplace connecting business owners and prospective business buyers. The platform qualifies all buyers while keeping them anonymous to the seller.
MaxSold, an online marketplace for estate and moving sales locked in $16m.
Unreserved raised $33m to bring real-time online auctions to home sales. Instead of the usual 3% agent fee, sellers pay a 1% auction fee. Buyers don’t need to worry about blind bidding, bully offers, or hit pieces in the Globe (lol sorry Sasha). Ryan O’Connor, the company’s founder, also launched E Inc, an auction platform for cars that went public in November.
ShopThing closed a $10m Series A for its luxury shopping marketplace that allows its network of shoppers to live stream to potential buyers. Customers are able to make purchases and have them delivered right in the app. The platform has over 500k users.

💚 Banks love that green

Canadian banks have announced new green initiatives in support of the federal government’s “net zero by 2050” target.

When signing on, banks agreed to not only reduce their own emissions but also align their investments and lending. Canadian banks are among the top 25 lenders globally to the fossil fuel industry. That will change:

TD is reducing loans to oil & gas by nearly 30%
RBC signed a long term wind energy purchase agreement
BMO has steadily reduced oil & gas loans to less than 1% of its overall loan book (see chart)