MintChip buyer seeks banking licence

TORONTO • A Toronto-based payments company that bought the Royal Canadian Mint’s digital-cash platform and that is backed by a former economic adviser to U.S. President Donald Trump is now interested in acquiring a banking licence.

Recent notices in the Canada Gazette show Nanopay Holdings Inc. plans on applying to the Minister of Finance for a legal instrument, letters patent, needed to incorporate a bank in Canada. Nanopay’s bank would do business as “payments bank,” the announcement says, and its head office would be in Toronto.

Nanopay was founded in 2013 by former telecom executive Laurence Cooke. In 2016, it was announced the company bought MintChip, a digital-payment technology developed by the Royal Canadian Mint, for an undisclosed sum.

Since then, Nanopay has been selling businesses and banks on payment and liquidity-management products that are built on the company’s “hybrid blockchain” technology. Nanopay also continues to eye opportunities to provide digital currency for central banks, such as the Bank of Canada, which has considered the idea.

Cooke, however, sees the pace of financial innovation in Canada as relatively slow. Years-long efforts to modernize the country’s payments system and the federal government’s review of open banking, for example, are still ongoing. Meanwhile, the global payments business has recently become a hotbed for investment and rife with competition from non-banks.

Nanopay’s idea now, if approved, is to open a bank acting as a “national payments utility,” Cooke said. Rather than taking deposits and making loans, it would offer financial-technology firms and other businesses a different route to accessing the payment system.

“We’re hoping that this way we can stimulate the Canadian economy, we can make all of these Canadian businesses competitive at a global level and we can offer consumers and businesses in Canada much better payment solutions,” Cooke said in an interview. “The big concern is if we don’t do anything and carry on with the speed that we’re at right now, the big non-bank technology platforms and foreigners will come and eat our lunch.”

In addition to not actually lending or accepting deposits, Payments Bank also wouldn’t offer any investment advice. As its name suggests, it would instead be all about payments, which would be provided via secure online channels.

“The proposed bank will engage in payment processing, clearing and settlement activities for customers, including fintechs, payment technologies, large billers, payroll, tuition, rent payments and insurance companies,” the notice in the Canada Gazette said. “The bank will offer both domestic and cross-border payments services through application programming interfaces (APIs) and white label web interfaces.”

If it gets all the necessary approvals, a bank owned by Nanopay could do something that Nanopay itself cannot currently do: participate in the national payment systems overseen by Payments Canada. A banking licence could also allow Nanopay to become a participant in Interac Corp.’s debit network. This lack of direct participation can leave startups relying on approved financial institutions, which Cooke said can cost a company time, money and data.

Also included in the Gazette notice was that approximately 64 per cent of the issued and outstanding shares of Nanopay are collectively owned by the members of its board of directors. Those directors include Cooke, its founder and chief executive officer, but also Gary Cohn, the former director of Trump’s National Economic Council and a previous president and chief operating officer of U.S. investment-bank Goldman Sachs Group Inc.

Cohn has dabbled in fintech since leaving the

Trump administration, joining a blockchain startup as an adviser and the board of a mobile-gaming company, as well as investing in Nanopay around two years ago, Cooke said.

Cohn announced he would leave the administration in March 2018, a move that reportedly came amid an internal disagreement over steel and aluminum tariffs.

The merchant-banking division of Cohn’s former employer, Goldman Sachs, was also part of a $10-million funding round that Nanopay completed back in 2016. Goldman’s shares of Nanopay have since been repurchased by Nanopay and cancelled, Cooke said, due to difficulties posed by U.S. laws around a bank owning another bank.

Nanopay still has regulatory hurdles and reviews left to clear before its bank can open for business, but Cooke was optimistic about the concept of a payments utility, which has been tried in countries such as the United Kingdom.

“We believe this will transform payments in Canada,” he said. “The intent really is to create a platform for innovation on top of which all of these fintechs and paytechs can innovate.”