Canadian Fintech: US Banks in Canada 🏦
Lightspeed stays public. DC Bank launches payment acquiring.
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
StackAdapt, a Toronto based demand side ad buying platform raised US $235m from Ontario Teachers’ Pension Plan and Intrepid Growth Partners valuing the company at over US $2.5b.
The company is on track to hit US $500m in revenue this year and IPO in the next couple.
Lightspeed, a Montreal based payments company announced that it will remain publicly traded and do a US $400m share buy back.
The fintech suggested back in Sept that it had hired an investment bank to pursue a sale.
Nuvei, a similar company (Montreal based, Quebec pension fund backed, poorly performing in public markets post covid, etc.) was successfully taken private recently by a private equity firm for $9b.
Trust Science, an Edmonton based credit data and scoring platform received personal investment from Joanna Rees, a board member of FICO & Altro.
🤝 M&A
National Bank closed its $5b deal to buy Canadian Western Bank.
The transaction bump’s National’s non-Quebec loan portfolio by 37%
iA Financial Group, a Quebec based insurance, wealth and auto lending behemoth acquired Global Warranty, an Ontario based insurer of used-cars.
FCT, an Oakville based title insurance company acquired Fintracker, a digital ID tool for the real-estate industry.
Both companies service real-estate brokers.
Sun Life, Canada’s second largest insurer is done acquiring alternative asset management businesses and will now focus on boosting profit.
They’ve spent $2b in the last decade on big names like Bentall Kennedy, GreenOak, and Crescent Capital.
SLC (the group’s parent company) now has $387-b in assets under management across 1,400 institutional clients in 20 countries
LavaReach, a Toronto based 2 person company providing prospect research for sales teams, was acquired by Landbase, a US competitor with a Canadian founder.
A MESSAGE FROM LOANPRO
Transforming Credit Origination: Trends, Challenges & Opportunities
LoanPro and Taktile are teaming up for an webinar on February 13th to explore innovations in underwriting, decisioning, and loan management.
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🚀 Product
Brikli, a Montreal based property management software for tenant payments and service requests launched in beta.
Pinch, a tool for mortgage and real estate brokers to verify borrower information launched with DLC, one of the largest brokerages in Canada.
Beacon, a wallet that can be funded & used by newcomers to Canada pre-arrival, can now also be used to pay bills in India through an integration with the country’s centralized bill payment system.
Questrade, a discount brokerage launched zero-fee trading in a series of Super Bowl tv ads last night. I don’t think the Chiefs agreed.
Dealertrack, a platform connecting lenders and car dealerships partnered with Equifax and Interac to improve their borrower ID verification.
Interac, best known for e-transfer and debit payments, has pushed into the ID verification space since its acquisitions 2Keys in 2019 and SecureKey in 2021.
Digital Commerce Group, which owns DC Bank launched their own payment acquiring tools for merchants, which includes an e-com platform that handles pricing, shipping, tax, etc.
DC is one of the few FIs that both sponsors fintechs and launches its own fintech products.
🏦 Why are we talking about US banks operating in Canada this week?
Last week President Trump accused Canada of preventing American banks from operating in the country.
“Canada is very tough… American banks are not allowed to do business in Canada. Can you believe that?”, said Trump.
Is that really the case? No.
There are over a dozen US banks with Canadian operations
They hold well over $100b in combined assets
So what’s he getting at?
Well, Canadian banking is a tough market to enter:
Getting approved for a banking license takes many years
Very few licenses get approved
If you want to accept retail deposits, the regulatory requirements are massive (setup a Canadian entity with its own board and capital structure)
That’s why most US banks in Canada just stick to wealth and corporate lending.
Now compare that to Canadian banks in the US:
RBC, BMO & TD each individually have more US assets than all US banks combined in Canada
Scotiabank, BMO, RBC & CIBC have all acquired or invested in US banks
TD is in the top 10 of largest US banks
So does Trump have a point after all?
The point, as should be no surprise to frequent readers of this newsletter, is that Canada has a concentrated and non competitive banking market. Which means it’s hard for new entrants to succeed, foreign and local.
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Have a great week! See ya 👋