The 6th annual Canadian Fintech Summit (CFS), hosted by Framework Venture Partners with BDC and MARS, received record numbers of virtual attendees. 600 financial enthusiasts from across the nation tuned in March 23–25 to learn from and connect with institutions, investors, finance experts, successful startups, sales coaches and even international resources for geographic expansion. With a focus on Canadian economic recovery, it was extremely impressive to see important topics like diversity also taking centre stage. While this post couldn’t cover everything, we’ve rounded up the top insights coming out of the Canadian Fintech Summit below for anyone who didn’t get the chance to participate.
Session Title: After the Winter
Presenter: Benjamin Tal, Deputy Chief Economist, CIBC
Benjamin Tal of CIBC gave a timely and insightful presentation focused on economic recovery in Canada, where, like many regions, the service sector was hit the hardest. He pointed out that usually a recession impacts goods first and then it will take effect on the service market, but this pandemic has created the opposite effect. Goods are doing quite well, and the service sector has been impacted instead. Looking just at wages, all of the jobs lost were in low-paying occupations, and high-paying jobs have actually gone up since the crisis began.
The Government of Canada has done a lot to help, injecting $7 into the economy for every $1 decline in wages. Although many have lost their jobs and businesses regardless, the service sector is well-positioned to make a recovery. As an industry, it is more flexible. For example, it’s much easier to open or reopen a restaurant than it is to open a manufacturing plant, Benjamin noted. What’s more is that Canadians are extremely eager to get back to the services they miss and are stocking cash in the meantime. There has been an increase in passive savings upwards of 100B in extra cash from individuals, and another 100B held by businesses.
As business sectors reopen Canadians are very likely to spend their money on services, exactly where jobs are needed. This pent-up demand, combined with personal and business savings, is a recipe for accelerated economic activity in the service industry or in other words a speedy recovery. Benjamin predicts major economic growth in Canada and the US during the second half of the year.
Session Title: The Future Looks Bright — The growing shift in Fintech Market Capitalization
Presenter: Denny Boyle, Managing Director of Fintech, Silicon Valley Bank
If COVID hit 5–10 years ago without the progress made so far in fintech, the impact would have been much more drastic, says Denny Boyle of Silicon Valley Bank. Indeed, fintech spans across so many existing sectors from payments to insurance, real estate, neo banks, wealth tech and lending. What many don’t realize is fintech supports other industries. For example companies like DoorDash are built on fintech infrastructure that makes growth possible, but we think of this company as simply a food delivery service. Fintech enables other sectors to operate remotely, which has been fundamental to their growth. The fintech sector itself is now on the rise more than ever. Denny says financial services have been democratized in a way they have not been in the past, and fintech infrastructure is where he’s seen the most investment in the last 6 months.
Session Title: The Good, the Bad and the Ugly — An Exploration of the Canadian Venture Capital Ecosystem from a Diversity, Inclusion and Equity perspective
Michelle Scarborough, Managing Partner, Strategic Investments and Women in Technology Venture Fund, BDC Capital
Derrick Raphael, Managing Director, Northwestern Mutual Black Founder Accelerator
Michelle Scarborough of BDC, and Derrick Raphael of Northwestern Mutual Black Founder Accelerator, came together on Day 1 of the Fintech Summit for an important discussion around diversity. They pointed out that only 5% of Canadian tech companies have a female founder or CEO, and there are only 8% of VC partners that are black or indigenous. If you break down that last statistic by ethnicity there are even more disparities. With such low representation, many business leaders are being intentional about increasing diversity so they say.
To move into action, the discussion moved to the emerging tools that eliminate unconscious bias. Although these still need to be explored and tested further, Michelle’s team is already putting these into practice. BDC used Diversio for an analysis of their own portfolio. Following Diversio’s audit, BDC was given a diversity score and positioned in a diversity matrix to see where they sat relative to others. Michelle encouraged other businesses to do the same.
Derrick thinks there are two important metrics businesses should look at. The first is spend. He says it’s important to simply ask how much money a business is putting behind their initiatives to gather greater representation from women and visible minorities. While he doesn’t discourage conversation, he believes that it takes funding — and every firm in Canada has the money to invest in change. The second metric is willpower. He advises senior leaders to be intentional about leading the cultural shift internally. He also encourages them to think about the level at which visible minorities and women are represented. For example, if 10% of a firm’s staff identifies as visible minorities but they’re all in junior roles, the company should rethink how they’re going about making change, and promote from within. Overall the Canadian finance sector is starting to see change at the grassroots level, but a larger cultural shift is needed and it requires buy-in.
Session Title: Unblocking Blockchain: How Canada can Lead the Digital Asset Revolution
Presenter: Jerome Dwight, Senior Growth & Operating Executive, Brane Capital
Cryptocurrency is being used by some of the world’s biggest brands now like Tesla, Walmart and even Unicef. PayPal and Visa have brought it into their lending platforms and infrastructure, and as a result, Jerome Dwight of Brane Capital says blockchain and crypto are here to stay. He thinks Canada has an opportunity to lead the crypto revolution. In the 2008 financial crisis, he says Canada led the recovery by giving Canadians access to the fastest-growing asset classes. He thinks a similar opportunity is available now for Canada to do the same by recognizing crypto as a new asset class, and by reframing regulations around it. In fact, Jerome says there is an urgent need for regulators to step in so consumers can gain or maintain confidence in the marketplace. To protect Canadian investors and take advantage of this generational opportunity, Jerome says fintech, financial institutions, and the Canadian Government needs to come together to harness the power of blockchain.
Session Title: Paytm’s Journey from Payments to Financial Services
Presenter: Harinder Takhar, CEO, Paytm Labs
Paytm opens bank accounts in 1–2 minutes and grants their users a debit card immediately online. They have over 63M bank accounts now, which is more than any other bank in India. Through the power of technology, Harinder says they have been able to leverage a new type of problem-solving. Most of their customers didn’t have a bank account before because in remote areas of India it’s not worth it to have a physical branch. The success of Paytm is setting a new precedent for digital banking, and there are practical applications needed in remote areas, not just in India.
Session Title: Personalized Video: Driving Digital Acceleration and Authentic Client Relationships
Presenter: Steve Taylor, CEO, BlueRush
Steve Taylor of BlueRush introduced a personalized video product called “Individeo,” which can be deployed in email, in apps, and more. These videos are sent to consumers to deliver personalized, relevant and contextual messages, which is why they work. In fact, a huge number of financial institutions are already using personalized video marketing to help them reach their goals.
AFP Habitat has had a lot of success using Individeo with their customers. Approximately 70% of the customers they send it to watch their 90-second video, and of those who do 60% were likely to increase their retirement contribution:
Instead of just paper, text-based or email statements, they offer clients complimentary personalized videos about their savings and contributions performance, as well as the ability to interact with the video. Here is an example of the interactive feature of the video that asks their clients how much they think they need to retire:
Depending on the answer given, the customer will get different visual outcomes like this one:
The lift in engagement is telling. Personalized video is working in retail banking. Steve left us with a powerful call-to-action saying “I can get you a minute with your customers, what do you want to do with that minute?”
Session Title: A Career Adventure: How to Add Value at Every Stage from Both Sides of the Table
Joanne Bradford, Growth Operating Executive, Investor Former SoFi, Pinterest, Microsoft
Peter Misek, Founding Partner, Framework Venture Partners
Joanne Bradford and Peter Misek came together for a fireside chat about everything from networking to being a good board member. The vast majority of companies Peter interacts with and the founders he talks to find that their boards are beyond dysfunctional, they’re destructive. They had straightforward advice for VCs and really anyone who sits on a board anywhere:
Session Title: Innovative Vigilance: Building Trust and Safety in the New Digital Economy
Presenter: Steve Munford, CEO, Trulioo
The pandemic has led to an overnight shift to 100% digital operations for many industries, and among other things, this has led to the democratization of financial products in wealth management, says Steve Munford the CEO of Trulioo. His lens is through digital identity verification, which can help fintechs and their customers gain a competitive advantage. However, the complexity of customer onboarding and identity verification gets more difficult as you go global.
Trulioo is able to connect all the dots to apply the right friction where needed around digital onboarding. For example, the system has to consider complexities like a person stating that they’re Canadian but from a US IP address.
Today’s generation of customers expect digital experiences to be frictionless, and this is especially true with younger generations. Companies who don’t choose the right digital partners and solutions for digital onboarding may actually increase friction, and in this case, they will lose a lot of customers who will just move to the next provider or platform. Companies that have streamlined ID verification will win during these turbulent times because those who are resisting are the ones who are losing market share.
Session Title: Funding & Opportunities for Fintechs in Hong Kong and the Greater Bay Area
Presenter: Christopher Chen, Head of Investment Promotion, InvestHK
Hong Kong, part of what’s considered The Greater Bay Area, is the center for investment in Asia. This region holds as much wealth as all of Canada and is as big as Singapore. To perpetuate the success of the region and encourage international participation, InvestHK was created as a Bureau of the Hong Kong Government to support foreign business investment with the Innovation and Technology Commission. The division is run by investment managers who specialize in identifying opportunities for investment, and their venture fund is worth 13B. 2020 saw a slowdown in applications because of COVID 19, but now this fund is coming roaring back and InvestHK is looking for new fintech companies to bring innovation to financial services in The Greater Bay Area and beyond.
Their free services help businesses who want to expand in Asia to establish connections and facilitate opportunities with organizations and governments across Asia. They can also help with R&D, talent development, and sales!
Funding from the Hong Kong Government will give preference towards startups with an established proof of concept and book of business. If you want to expand into China, Japan, and Singapore, but need help making connections and getting there contact InvestHK’s Canadian representative Chris Chen christopher_chen(at)hketotoronto.gov.hk.
Session Title: Develop Your Fintech in Quebec
Mathieu Paquette-Lambert, Director of FinTech Development, Finance Montréal
Marcus Daniels, Founding Partner & CEO, Highline Beta
In 2018 financing was announced to create a new hub for fintech innovation in downtown Montreal. The initiative was led by Finance Montreal, but there was participation from Quebec’s Minister of Finance and other partners. The goal is to create a space for fintech startups to innovate together, and attract attention to the Canadian market around fintech development. The space also serves as a launching pad for foreign startups who would like to start operations in Quebec. The station has a vast partner network through Finance Montreal:
The station offers a four-month accelerator program designed to help early-stage startups in North America grow through the corporate partnership model, which brings value to all stakeholders. Program participants get weekly coaching sessions, as well as guidance around milestones, investment and more. To any fintech startups who want to accelerate their growth, applications are now open to the program. Note the following key dates:
Tenants at Fintech Station (like us!) as well as accelerator participants will have the opportunity to speak at the Canada Fintech Forum that is being held virtually at the end of October. Details are coming soon, so stay tuned.
Session Title: Beyond Capital Series: The Future of Money
Presenters: Amy Dyck, Associate, Framework Venture Partners
Framework Ventures’ Amy Dyck put together a comprehensive analysis on fintech trends and predictions following COVID-19. Initially, the study was released in the Fall but was updated for the Fintech Summit presentation. The study’s big thesis was that “every single financial service that a business, individual and entity can employ will be conducted digitally by the end of 2021.” These expedited changes are the outcome of a forced reality caused by COVID, and center around the following themes:
While many of their predictions are not on track, Infrastructure is one that is likely to come to fruition by the end of 2021. This prediction says “the implementation of cloud as a business strategy will enable large financial incumbents to truly embrace digital.” It’s so on point that performance may actually be ahead of schedule. Pre-COVID just 20% of enterprises expected to be running half their operations with cloud-based infrastructure. During COVID nearly 60% said they expected cloud use to exceed initial plans.
Amy says Infrastructure is one of their predictions that is on track and there has been a giant fast forward in terms of cloud transformation.
Session Title: How Broken is Your Finance Team
Presenter: Michael Frankel, Founder, Frankel + Company
Michael Frankel of Frankel + Company helped guide fintech startups through the best finance team structure by stage in his presentation. He said that seed-stage startups should rely on external resources and that Series A is when to invest in a CFO or Director of Finance. Series B startups should have a full finance team structure. More importantly, Michael says startups need reliable financial data so they can drive more sophisticated data models and analysis. He thinks the sophistication of your finance team has to evolve and scale as the complexity of your business does. Too often startups get into raising too early and are then forced into that evaluation. Finance should be driving these decisions, but are often under-performing.
When your CFO is the most aggressive in the room that’s a problem. They should be the most conservative. So what does a good team look like? Finance teams should understand the nuances in the sales organization, not just the big picture, and know when to pull back and move resources to sections of the business that aren’t doing well.
Startups need to shift towards a high-performing finance team, and that sometimes means constructive friction between finance and the rest of the organization. To be successful, Michael shared what he thinks is a recipe for a high-performance team finance team:
It was difficult to surface only the top insights from so many talented presenters, so here is a bonus section with a handful of quote-worthy moments from CFS:
“Bottom up is another way of saying community” — Joanne Bradford, Growth Operating Executive/Investor Former SoFi, Pinterest, Microsoft
“It’s more than a cheque. It’s a relationship. (…) What other value does that lender provide?” — Tony Barkett, RBC Managing Director Tech & Innovation Banking on how startups should assess VC providers
“With digital banks, customer service becomes a moment of truth and may be the only human interaction a customer has.” — Kartik Kamat, Sr. Director, Digital Banking Payments & Innovation, Equitable Bank
“Dealing with the pandemic is not just about returns it’s about your purpose beyond profit.” — Jose Ribau, Executive Vice President, Digital and Innovation, Cadillac Fairview
The Canadian Fintech Summit was a smashing success from our seat. It was great to see fintech leaders from around the world tackling tough topics head-on and leading a discussion for both recovery and change. The Canadian Fintech Summit is not about sugar-coating anything, it’s about having an open conversation on how the finance industry can collectively move forward. The breadth of topics covered and the depth from every single presenter was extremely engaging. CFS 2021 definitely had something for everyone.
Beyond sessions, there were pitch battles on Day 1 and 2 with six competing startups per category. Congratulations to SoLo, winner of the Payments & Financial Inclusion Pitch Battle, and to Pocketnest, winner of the Fintech & Artificial Intelligence Pitch Battle.
The next Canadian Fintech Summit is taking place April 5–7, 2022 in Toronto and the organizers are hoping to host this event in person. We hope to see you there! In the meantime, we’ll be checking out CFS Host, Peter Misek’s reading recommendation: The Hard Thing About Hard Things.
So in my view an appropriately diversified portfolio should have enough exposure to different asset classes, that its able to withstand a wide range of market disruptions. Usually, it’s some kind of negative or positive event… they’ll affect different asset classes differently. So by having your eggs in different baskets you’ll be well insulated from major risk. For example, there’s some kind of change in the housing market… both by having some exposure to it, you won’t miss out on the opportunity to make money. But if it’s something negative, you’re also not going to lose all your money if all of it were in the housing market for example. So at a high level, a properly diversified portfolio should grow in a growing market and yet not be at risk of major losses in a declining market.
You asked also about an efficiently diversified portfolio, and I would say that that’s a portfolio that achieves those goals with a minimum of different positions. There’s a lot of good reasons to have fewer positions in your portfolio. Being less complex means a portfolio is easier to rebalance and administer. Every time part of your portfolio goes up or down, you're going to need to rebalance it a little to make sure that it stays with the right allocations and the fewer positions you have, the easier it is to do that..the less trading fees you incur doing that.
There is a tradeoff between being completely diversified and being efficiently diversified. If you were completely diversified then you’d have a proportional segment of absolutely everything you could invest in under the sun, like shares of palm oil futures or something like that. I don’t think everyone should have palm oil futures in their portfolio but I’m not a wealth manager. I think it comes down to your portfolio and how large it is (probably the Canada Pension Plan has a proportion of palm oil futures in it). You’re going to have to talk to your advisor and choose a degree of complexity that’s right for your portfolio.
CN: Let’s just take a step back - what does a typical portfolio look like and has that changed over time?
RB: Yeah, so I'm not entirely sure what a typical portfolio looks like these days because it's actually changed quite a lot over time. I think common wisdom used to be that the classic balanced portfolio was 60% public stocks and 40% bonds. These days that's ancient history. Most would say that the bond allocation should be a lot lower these days in this age of unprecedented low-interest rates. These days it’s the stock portfolio that’s been driving a lot of the growth. I think a well-diversified portfolio in the modern era should absolutely include exposure to all kinds of alternative assets (that aren't even really that alternative but still kind of fall out of that traditional bucket). So you know I mentioned real estate, private companies, maybe for example commodities or other types of investments. So I think that there are a lot of things that you can invest in and your advisor can guide you on what’s appropriate for you.
CN: Yeah that makes a lot of sense. Talking about alternative investments, we’ve heard a lot this year about ESGs, impact investing, alternative investments… do you think there’s more of an appetite today for these types of investments than in the last ten years?
RB: Yeah that’s a topic that’s close to my heart having previously started an impact investment company. It’s definitely been a gigantic increase in interest. I think when I started my previous company we were speaking to large wealth managers and having them say “we’re barely getting a grip on early ideas.” Like not including gun manufacturers or tobacco companies, and now these same companies are launching impact portfolios and marketing this aggressively. So there’s definitely been a seat change, it’s a real industry, and there’s a lot of studies out there and data showing that ESG or impact investing can equal or outperform non-impact investments. So I think it’s a huge part of the market these days. That said, one of the things that’s driving it is people’s interest in it. I think that one of the stories of the investment industry has been the personalization of it. People’s portfolios are being tailored to their own needs and circumstances. Impact investing is definitely a piece of that. People are environmentalists, but an institution is not an environmentalist. It doesn’t live and breathe the impact on the environment the way an individual does. The person who is active in the David Suzuki Foundation for example is going to be active as an impact investor and it’s appropriate for them to be.
That’s a great question. I think there's a lot of advantages and you gain a lot with an automated platform. For me, it's a lot easier to manage. I have some of my money in one of these platforms and I barely think about it. It's being rebalanced all the time. The costs are much lower in terms of expense ratio for the same kind of rebalancing. Again you're missing a lot with that, but on just the mechanical portfolio rebalancing you're getting a great deal there. I would say that two other advantages are up-to-the-minute reporting, so you always have that login where you can see your position, see how your portfolio is doing historically. And finally, this is an advantage for me and anyone who doesn't love doing taxes, but typically they’ll take care of your tax forms for you, and end up with much simpler tax forms, so it kind of works out what your cost basis was and how much you have to report.
CN: So let's talk about the other side of the coin then...what are the risks of not having a seasoned professional managing your money?
RB: I wouldn’t exactly phrase the question that way. You know it's more what’s the benefits of having a real wealth manager? Some of the clients of robo advisory firms may not even be aware that they're missing out. A wealth manager isn't just balancing your stocks and bonds, that's kind of the very lowest mechanical level of what you get out of the wealth manager. Really they're your advisor on your life. Intimately intertwined with you because you're thinking about retirement planning, on planning for college for your kids, when is the right time to buy a house, and when should you get life insurance, for example. An advisor can help you with all of those decisions and they can connect you with service providers like a mortgage broker when you may be in need of one. So I think that you get a lot of value out of having one of these advisers, particularly when you get to a stage in life when these kinds of services are more about the long-term and your life circumstances are far more critical.
CN: There are clearly pros and cons and two sides of the story depending on who you're asking. Like you said, what stage of their life they’re in ...but do you think the platforms that we’re seeing emerging like to Qtrade, Wealthsimple, and all the rest will ever become status quo?
RB: Yeah, I do actually. I think that similarly to how you know we’re using online platforms to automate everything for us (I can’t think of the last time I used to travel for example), everything you’re going to be trying to do with your money is going to be automated, and it’s going to be appropriate to be handled by one of these one of these platforms. In particular, for most people at an early stage in their lives that have few assets to manage, not a lot of complexity, not a very extended personal family circumstance, it’s gonna make a lot of sense to have a low fee robo worry about it. But at some point their life circumstances are going to get more complex and you’re gonna get married, or maybe you’re not, or you may have other objectives that you may want some advice on and at that point it may make sense to either supplement the robo advisory portion of your portfolio, or graduate to a more holistic wealth management view.
CN: Thank you so much Raph, these answers were great. It’s always insightful chatting with you so thanks for sharing those answers with us today.
RB: It’s my pleasure.