Local fintech is on the rise
Toronto-Waterloo region is up five spots to seventh place on the global list
The modernization of how Canadians save, loan, invest and transfer money has been anything but fast.
Financial experts often criticize Canada’s risk aversion and “remain skeptical” about the speed of implementation for any new digital financial framework.
New data, however, paints an optimistic picture for the future of our financial technology (fintech) industry.
San Francisco-based policy and research organization Startup Genome released a new report ranking the top global ecosystems for fintech startups.
Toronto-Waterloo (categorized as a single ecosystem) was the third biggest mover on the list, shifting five spots from its 12th-place finish in a 2020 fintech report to seventh in the world. Now it’s behind only Silicon Valley, New York City, London, Singapore, Hong Kong and Beijing. How this happened According to the report, Toronto-Waterloo’s improved funding factor score helped it shift in the ranking higher. This is partly thanks to Wealthsimple’s $600-million May 2021 private equity round, the highest fintech deal in the ecosystem in 2021. What challenges still face the Canadian fintech industry? As a senior adviser at MaRS Discovery District, Rob Baldassare continues to see challenges facing fintech startups.
“Canadian fintechs continue to suffer from inadequate means of connecting to financial systems, financial data and efficient modern payment rails,” says Baldassare. “Consequently, they are forced to use methods that introduce risk and potentially cause consumers to violate their user agreements with incumbent financial institutions. Concentration and lack of competition throttles the pace of innovation and robs consumers of better services.” How can Canada become a global competitor? “To continue nurturing this innovation, there needs to be a stronger focus on creating a level playing field through open banking and regulatory frameworks,” says Robert Hyde, CEO of Payment Source, a Canadian company that provides alternative payment solutions to organizations like governments, e-commerce retailers and telcos.
Open banking refers to a system that securely provides users’ financial data to independent apps and other third-party platforms.
Hyde says once this is complete, “then, we should look carefully at anti-competitive behaviours from the banks to ensure that the fintech market is not inhibited from innovating locally.”
Weaning Canadian airlines off of gas
Just before the pandemic drastically impacted air travel, global aviation accounted for two per cent of total greenhouse gas emissions. Although emissions from aviation are among the lowest of the transport sectors, decarbonization will be no easy task. And with pandemic-related travel restrictions easing, pressure is growing to do just that.
The Canadian government recently launched an updated climate plan for the aviation industry. Part of Canada’s Aviation Climate Action Plan 2022-2030 will focus on the “aspirational target” that 10 per cent of airline fuel should be sustainable and derived from nonpetroleum sources — like forestry or agricultural waste, used cooking oil or green hydrogen — by 2030. Quick facts: Traditional jet fuel is made up of carbon and hydrogen molecules that are refined from crude oil and produces greenhouse gas emissions. Sustainable aviation fuels (SAF), on the other hand, can reduce emissions by up to 80 per cent and can be integrated without significant modifications. What are the experts saying: Greg Nuttall leads Woodland Biofuels, a Toronto-based company whose technology uses waste biomass (like forest industry, agricultural and municipal waste) to generate low cost, carbon negative hydrogen, renewable natural gas, methanol or ethanol. Nuttall says that “the technology behind such alternative fuels is no longer a hurdle here.” He adds that the “world is waking up to decarbonizing our energy mix and alternative fuels are a completely viable option.”
Right now, Woodland Biofuels’ customers include industrial users and the fuel cell market (to name a few) but the company’s technology lends itself to the aviation fuel industry. It’s a market Nuttall says he is “looking at more closely, especially because of increased demand.”
Demand is not the key word here, however. The key word is supply.
Unlike the U.S. and Europe, which have refineries in SAF production, Canada has no meaningful domestic production. Industry experts say that this needs to change and the Canadian government could learn from policy and regulatory moves south of the border. Up in the air: “I think the number one priority for the Canadian government is to react and match the U.S. Inflation Reduction Act, which has really aggressively paved the way for the adoption of some lowcarbon fuels,” says Nuttall. He adds that additional tax credits and other financial incentives aimed at making clean energy options more accessible could not only level the playing field, but tilt it towards Canada.
IN OTHER NEWS
■ Digital solutions provider for banking and lending Q2 Holdings has acquired Toronto-based expense management startup Sensibill. According to a company release, Sensibill will enrich Q2’s data portfolio and enhance the potential of Q2’s machine learning capabilities.
■ Ottawa cybersecurity company Field Effect has raised $30 million (U.S.) led by Edison Partners, a growth equity firm. The company says the funds will support product and service evolution, scaling and development of commercial operations.
■ Biotherapeutics company Lactiga has deeper pockets after an oversubscribed pre-seed financing round, raising $1.6 million in new capital. The company is hoping to use human breast-milk to create the next generation of anti-infectives, medicine that battles pathogens and inhibits or kills infectious organisms.
■ North America’s largest urban innovation hub, MaRS Discovery District, has launched the latest cohort of the RBC Women in Cleantech Accelerator. The program aims to help Canadian women scale their ideas into climate change solutions. Some of the most exciting cleantech companies from across the country have been selected, including some that use innovative new solar power technology, artificial intelligence for insect farming and sustainably produced clothing textiles.
■ Vancouver-based robotic welding innovation company Novarc Technologies has received a Series A investment from Graham Partners Growth. A company release explains that this is a pivotal capital investment, which will allow Novarc to broaden its robot and AI product line and accelerate its global expansion.
■ Avidbots, a maker of commercial cleaning robots, has raised $70 million (U.S.) in a Series C funding. The Kitchener company says that additional funds will help expand its existing fleet of commercial-cleaning robots and add-ons.
AMANDA WHALEN WRITES ABOUT TECHNOLOGY FOR MARS. TORSTAR, THE PARENT COMPANY OF THE TORONTO STAR, HAS PARTNERED WITH MARS TO HIGHLIGHT I NNOVATION I N CANADIAN COMPANIES.