Supporting Financial Health Fintechs in Canada 20202020 - Innovate ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
2020
2020
Supporting
Financial Health
Fintechs in
Canada
Trends, Challenges,
and Opportunities
Supporting Financial Health Fintechs in Canada 1
INNOVATE FINANCIAL HEALTH
We would like to express our deep gratitude to everyone who offered their time and shared their
knowledge with us over the past several months in the research and writing of this report, without
whom this report would not have been possible.
Acknowledgements About Us
We would like to thank JPMorgan Chase for their support. We would also like to Innovate Financial Health (IFH) is a national non-profit organization focused
thank our partners Prosper Canada for their continuous and dedicated support on supporting the creation and scaling of products and services that improve
throughout the design, research, and editing of this report. the financial lives of Canadians, particularly those more financially vulnerable.
We extend our gratitude to the members of our advisory board for their direction How to cite this report:
and generous constructive feedback and critique that have been critical to honing Innovate Financial Health, “Supporting Financial Health Fintechs in Canada:
the thinking and insights presented here: Hannah Calhoon, Dean Estrella, Trends, challenges, and opportunities,” Toronto: Innovate Financial Health. 2020.
Dinaro Ly, Allison Meserve, Elizabeth Mullholland and Brenda Spotton Visano.
The authors of this report are Elvis Wong and Molly Willats.
Supporting Financial Health Fintechs in Canada 2
INNOVATE FINANCIAL HEALTH
A Note on COVID-19 Executive Summary
This report was written prior to the emergence of Millions of Canadians are struggling with In our research, we identified over 80 financial
COVID-19 and the declaration of a global pandemic. their financial health – struggling to pay bills, health fintechs working on solutions such as:
As of writing, the full impact of this outbreak remains to get out of debt, to build emergency funds,
unknown but already around the world we are seeing and to save for their futures. According to TD’s • Increasing access to traditional financial
just how devastating the social and economic fallout 2019 Financial Health Indexii which surveyed products for a more diverse population
of a public health crisis of this scale can be. over 10,000 Canadian adults, over half reported • Distributing financial health solutions through
spending more than or equal to their income in employers and partners
As of March 30th, 2020, nearly one million Canadians the last 12 months. Seymour Consulting Inc.’s
had applied for unemployment, while an Angus longitudinal Financial Health Index found that in • Integrating new approaches to encourage
Reid survey found that 44% of households had 2019, 38 per cent of Canadians were unable to savings and emergency funds
experienced job or wage lossi. Countless small pay all their bills on timeiii.
businesses across the country are in danger of • Making financial education more experiential
permanently shuttering their doors. Gig-workers, Technology can play a key role in addressing and actionable.
artists, informal economy workers – all those already some of these challenges that Canadians face
at the economic margins will be and are being hit on a day-to-day basis. Over the last five to ten While working on exciting solutions, many
hardest by this crisis. years we have seen a growing number of these financial health fintechs express
of companies, called fintechs, that primarily significant challenges in:
If before COVID-19, millions of Canadians were use technology to change and enhance the
already financially vulnerable, after months of • Accessing relevant industry-specific expertise
way we do banking or access financial advice
economic stoppage, social distancing, and job loss and mentorship
and services. Many of these companies are
we can only expect the numbers to rise. This crisis building products that are specifically meant • Navigating and establishing partnerships
has quickly uncovered the gaps in our approach to help Canadians improve their financial with financial institutions
as a country to household financial insecurity and health. The purpose of this report is to explore
missing links in our social safety net. Now more the existing financial health fintech landscape • Securing financing
than ever it is time to invest in entrepreneurs and in Canada, the challenges that these companies
innovators who are building products and services • Building trust and consumer adoption.
face, and how an accelerator program that
that help Canadians build financial health, that provides mentorship and resource supports
increase the accessibility of critical financial advice over a defined time-frame can better help
and products, and that give Canadians the resources these financial health fintechs grow and
and knowledge they need to weather future storms, thereby help improve the financial health
whether personal or global in nature. of people across Canada.
Supporting Financial Health Fintechs in Canada 3
INNOVATE FINANCIAL HEALTH
Many early-stage startups go through some We believe that there is a need for the design
sort of program that helps them access and development of an accelerator program
mentorship and resources to facilitate growth. in Canada that is specifically geared towards
Although various terminology can be used, we the needs of financial health fintechs.
identify these programs as accelerators for the This program should:
purposes of this report.
• Focus on financial health fintechs that already
In Canada, there is a wide range of accelerator have developed a product and have test users
type support available to startups and in recent
years, there has been a growth of fintech- • Offer a level of flexibility and customization
specific accelerator programs. These programs that is inclusive to the needs of the founders
are incredibly important in developing the and financial health fintechs
broader fintech ecosystem in Canada. Financial • Leverage a coalition of financial institution
health specific fintechs, however, feel that partners and investors
these programs do not necessarily address
their specific needs. Globally, there exist • Provide specific resources and partnerships
many financial health specific accelerators that enable financial health fintechs to remain
that help these types of companies grow while mission-driven.
maintaining their mission of improving the
financial health of their clients. With this in mind, Innovate Financial Health
launched a pilot accelerator in January 2020.
By establishing this program in Canada,
we believe we can catalyze the growth of the
financial health fintech ecosystem in Canada
and encourage more founders, financial
institutions, investors, and non-profits to
invest in this space. By doing so, we believe
this accelerator program can be a catalyst for
advancing technology for the benefit of the
financial health of people across Canada.
Supporting Financial Health Fintechs in Canada 4
INNOVATE FINANCIAL HEALTH
Definitions
Financial Health: Fintech: Financial Health Fintech:
The holistic ability to balance the Otherwise known as financial A technology solution that helps to improve the
financial needs of today with those technology, fintechs are products financial health of people, addressing at least
of tomorrow to build long-term and services that primarily use software one of the financial health indicators outlined
resilience and opportunity as defined and other modern technologies to by the Financial Health Networkiv:
by the Financial Health Network. enable and improve traditional financial
and banking services. Fintech companies 1. Spend less than income
often refers to startups but larger
technology companies, non-profits, 2. Pay bills on time and in full
and legacy financial institutions can
3. Have sufficient liquid savings
Accelerator: all build fintechs.
A fixed-term, cohort-based program 4. Have sufficient long-term savings
that is focused on catalyzing startup
growth through intensive mentoring, 5. Have a sustainable debt load
educational programming, and access to
resources such as office space and legal
Support Ecosystem: 6. Have a prime credit score
services. Programs may offer some sort The infrastructure and network of
of funding in the form of a prize, a grant, organizations, programs, mentors, 7. Have appropriate insurance
or in exchange for partial ownership of investors that connect to support
the participating startups. startups and entrepreneurs within 8. Plan ahead for expenses
a specific geography, demographic,
and/or industry.
Supporting Financial Health Fintechs in Canada 5INNOVATE FINANCIAL HEALTH
Financial Health in Canada
In general, Canadians are understood to be • Over half of those surveyed have a liquid savings One area of opportunity comes from using
a population well-served by our financial buffer of only two months or less technology and the startup ecosystem. Advances in
institutions. The relative stability of our banking technology can play a larger role in addressing the
•A quarter regularly use credit to buy food or pay issues Canadians are facing by increasing access
system helped Canadians weather the 2008
expenses because they have run short to, reducing the cost of, and improving the quality
financial crisis, and our robust social safety net
on money. of financial services for certain demographics.
alleviates certain drivers of consumer debt seen
These technology-based solutions, however, require
in other countries, such as medical expenses. These statistics are further troubling when we
an ecosystem of individuals, organizations, and
Millions of Canadians, however, continue to consider how financial health affects mental and
institutional partners who share a commitment to
struggle day-to-day to pay their bills, to manage physical well-being. The Financial Health Index report
improving Canadians’ financial health and a belief
debt, and to build savings. found that over half of Canadians lose sleep at night
in the potential for technology to play a role.
because of money worries.
According to TD’s 2019 Financial Health Indexv which Over the course of this report, we will analyze the
Addressing these challenges that Canadians are
surveyed 10,305 Canadian adults, only 27 per cent existing financial health fintechs that currently exist
facing will require a concentrated effort from multiple
are considered “financially healthy” while almost in Canada, the challenges that these companies are
stakeholders including politicians, policymakers,
40 per cent are classified as either “financially facing in growing, and how an accelerator program
community organizations, and financial institutions.
vulnerable” or “financially coping (low)”. Over can create a more centralized support ecosystem that
Currently, efforts to address this challenge have
half reported spending more than or equal to their addresses the needs of these companies and in turn
prioritized financial literacy. For example, in 2015,
income in the last 12 months and almost one third improves the financial health of Canadians.
the Financial Consumer Agency of Canada released
indicated that they were unable to pay all their bills
the National Strategy for Financial Literacyvi and
on-time and in full.
efforts have focused heavily on learning activities Methodology
such as events, workshops, and courses. This focus
These results are supported by Seymour Consulting From July through November 2019, Innovate Financial
on financial literacy is consistent with the corporate
Inc.’s longitudinal 2017-2020 Financial Health Health conducted interviews with 20 financial health
responsibility initiatives of many of Canada’s banks.
Index studiesiii which surveyed over 3,000 primary fintechs, 14 global and Canadian accelerators, and
While these financial literacy and education efforts
or joint financial decision makers across Canada ten end users, as well as conducted a survey of over
are important, these initiatives by themselves are
excluding Quebec. This report indicated that: 150+ end users to answer these questions.
not adequate in addressing the increasing financial
vulnerability that millions of Canadians are facing.
• 38 per cent are unable to pay all their bills on
time versus 25 per cent in 2017
Supporting Financial Health Fintechs in Canada 6INNOVATE FINANCIAL HEALTH
Financial Health Fintech
Credit
Products that help individuals access
affordable short-term credit
19
Landscape
17
According to Toronto-based consulting
Savings
firm Fintech Growth Syndicate, there were Products that help individuals build or
over 800 fintech startups headquartered increase savings
or operating in Canada with over 31,000
employees as of January 2019vii. These
fintechs tackle everything from payments,
accounting, insurance, wealth management
to cryptocurrencies.
Financial Planning
Products that help individuals budget
or plan for the future
13
In our analysis, we identified over 80 fintechs
specifically focused on positively addressing
9
the day-to-day financial lives of Canadians, Wealth Management
hereby called financial health fintechs. Products that increase access
Important to our definition of financial health to investing
fintechs are that they are designed to be Figure 1:
accessible to the average Canadian and as Breakdown of Canadian
such, we have excluded startups focused on Financial Health Fintechs as
9
cryptocurrencies or products for accredited
Payments
Products that make payments of November 2019
investors and financial advisors that may more affordable, including
improve the financial outcomes of their users remittances
but only tailor to a specific, relatively-privileged
user base.
Financial Education
Products that help individuals
gain the knowledge, skills, and
confidence they need to make
9
well-informed financial decisions
Insurance
Products that increase
individuals’ access to
insurance and benefits
7
Supporting Financial Health Fintechs in Canada 7INNOVATE FINANCIAL HEALTH
Financial Health Fintech Trends
The fintechs emerging and growing in the financial health space are creating new, innovative,
and exciting solutions to a range of problems facing Canadians.
In particular, we’ve identified four interesting Similarly, we see the same democratization of and cost-effective method to acquiring customers.
developments in the financial health fintech landscape: access being worked on in other financial products. For employers, there is growing evidence from other
PolicyMe, for example, is digitizing the life insurance markets that more financially healthy employees
1 Increasing access to financial
products for a more diverse population
process to make it faster and cheaper to purchase
the appropriate life insurance. Common Wealth
result in better attrition, retention, and performance.
With advances in technology, intuitive user design, Retirement and Blue Pier, on the other hand, are For example, both Instant Financial and Zayzoon
and marketing, fintechs have focused on simplifying both focused on making pensions more available to provide employees with access to wages-on-demand.
processes and lowering fees to make certain financial non-standard workers and employees of small and By providing access to wages earlier, these products
services more accessible to the general population. medium-sized employers respectively. help employees pay their bills on time, avoid non-
The most prominent of these examples has been with sufficient funds (NSF) fees, and reduce the need for
the growth of robo-advisors, digital platforms that
provide automated wealth management services,
2 Distributing financial health products
through employers and partners
payday lenders. Instant Financial partners directly
with employers, whereas ZayZoon partners with
such as Wealthsimple and Nest Wealth. These tools Increasingly, fintechs in Canada are distributing payroll providers. Another fintech Cacheflo uses a
encourage individuals that previously may have been their products through employers and other partner behavioural-based cash flow management software
too intimidated to invest their money to access wealth organizations that have access to a large client base that helps non-profits, credit-unions, and financial
management services. rather than directly to end users themselves. For advisors better serve their clients by using technology
certain fintechs, these models can be a more efficient to identify areas where end users can save.
Supporting Financial Health Fintechs in Canada 8INNOVATE FINANCIAL HEALTH
3 Integrating new approaches
to encourage real savings 4 Making financial education
more experiential and actionable
The first wave of fintechs addressing personal financial management focused on budgeting. Financial education remains a core component of
Mint, which was founded in 2006, aggregated information from multiple financial institutions financial health. Increasingly, we’re understanding
onto a single platform so that users can have a clear picture of their full financial lives. While that the traditional way that financial education is
this can be useful, many have realized that aggregated information alone does not often result taught – in classrooms and in workshops – does not
in changes in behaviour or outcomes. Newer fintechs are increasingly introducing features that necessarily change behaviour or help individuals
employ elements of gamification and behavioural economics to more directly affect savings. achieve financial outcomes. Instead, financial health
These features include: fintechs are focused on making financial education
more experiential and relevant to specific life events.
For example, altruWisdom is a subscription-based
platform that provides actionable advice based
on life events such as marriage, having children,
the death of a family member, and starting
Goal-based savings Prize-linked savings where Round-up savings where post-secondary education. Abacus and WALO are
where users can track users have a chance to win any purchases made are both focused on making financial education more
their progress to a sum of money based on rounded up to the nearest experiential for youth and more realistic to how
a specific savings goal. how much they’ve saved. dollar with the difference money is truly experienced today via a pre-paid
Vacation Fund, for Quber, for example, will put into a savings or card and corresponding mobile application for
example, is a vacation run monthly Save to Win investment account. children and teenagers. Forward Vision Games,
saving platform where contests where for every Not only have fintechs on the other hand, is a simulation-based game
employees can direct $20 saved within the Quber like Mylo and Koho with an indigenous focus that help students
a portion of their paycheck app, a user will get a ticket provided round-up savings experience real world financial decisions.
into a separate target for a monthly draw of $500 but so too have financial
vacation goal. and annual draw of $5,000. institutions such as
Tangerine and Scotiabank.
Supporting Financial Health Fintechs in Canada 9INNOVATE FINANCIAL HEALTH
Financial Health Fintech Challenges
While there is a growing number and community FINTECHS FOUNDERS NEED
of financial health fintechs, our review of literature and
interviews with fintech founders and end users has SECTOR-SPECIFIC EXPERTISE
revealed a common set of challenges. AROUND TOPICS SUCH AS
NAVIGATING REGULATION.
These challenges exist for fintechs in general sensitive topic of financial services and money,
but are compounded by the financial health the fintech found that the advice was difficult
nature of these products. Financial health to apply for their specific situation.
founders must find the balance between
launching and scaling a commercially-viable Fintech entrepreneurs actively seek out
product while remaining focused on the mentors and advisors on their own when formal
mission of improving financial health. pathways to these individuals and networks
do not exist. They draw on networks from their
Lack of access to industry-specific past careers to find mentors and support.
1 financial services expertise and
mentorship
Some seek out support from other founders
in their local ecosystems. But these informal
pathways are time-consuming and limited.
For many fintech founders, it is difficult to
When expertise is needed in an area outside
access the industry-specific expertise that they
the scope of a founder’s network, or when
are looking for, even if they can access general
someone is a first-time founder and does
mentorship and resource support elsewhere.
not have established networks, they may
While these general (i.e., sector-agnostic)
not find the support they need. One founder,
support programs can be immensely beneficial,
sharing his desire for greater access to
fintech founders need additional sector-specific
advisors with backgrounds in finance,
expertise around topics such as navigating
expressed his frustration:
regulation and establishing partnerships with
financial institutions.
One interviewee shared a story about getting
feedback on their user testing process by
a mentor. While the mentor was an experienced
entrepreneur, they didn’t have expertise in
financial services. Because of the uniquely
Supporting Financial Health Fintechs in Canada 10INNOVATE FINANCIAL HEALTH
“There’s probably a lot of middle tier
management that are very knowledgeable 2 Challenging to navigate and establish
partnerships with financial institutions
that have between 15 and 20 years in
For fintechs, partnerships with established
banking [experience] that would probably financial institutions can be invaluable to
lend themselves and love the opportunity success. These partnerships allow fintechs
to shape smaller, solution-based type of to access relevant customer banking data
enterprises...I don’t even know where to and a significant customer base. For financial
look [for these types of advisors]...that’s institutions, they can take advantage of
definitely the most time consuming and these partnerships to improve their internal
difficult part.” operations or to provide more customer-centric
products and services to their clients. In the
In search of more formalized fintech and Canadian market, however, it is oftentimes
financial health-specific support, several of our challenging to establish these partnerships
interviewees decided to apply for and participate with financial institutions.
in accelerator programs outside of Canada,
specifically in the US and Singapore. At the Unlike the U.S., which has over 10,000
time of application in early 2017, one founder financial institutions (over 5,000 federally
FOR FINTECHS, lamented that existing Canadian accelerators insured commercial banks and savings
PARTNERSHIPS WITH were too generic and that the decision to travel
was based on the need for a program that is
institutionsviii and over 5,000 federally insured
credit unionsix) that fintechs can potentially
ESTABLISHED FINANCIAL “strategic in nature, that has a fintech flavour, access for partnerships, the Canadian market
that can bring relationships, and that get us is significantly more concentrated. Canada only
INSTITUTIONS CAN more knowledge about how banks are operating has approximately 300 financial institutions
across the globe and in Canada.” (86 federally regulated banksx, of which 36
BE INVALUABLE TO are domestic, and 239 credit unionsxi).
Not all founders, however, are able to relocate
SUCCESS. temporarily to another country to access
Of these financial institutions, the “Big Five”
banks of Bank of Montreal, Bank of Nova Scotia,
support. Additionally, our conversations showed Canadian Imperial Bank of Commerce,
that these challenges in accessing mentorship Royal Bank of Canada, and Toronto Dominion
seemed to magnify for companies based outside own over 80 per cent of total commercial
of Toronto and Montreal, both of which have banking assetsxii.
relatively established fintech ecosystems that
entrepreneurs may be able to tap into. Fintechs
in Vancouver, Calgary, Atlantic Canada, and
other regions have a significantly more difficult
path to accessing the right expertise.
Supporting Financial Health Fintechs in Canada 11INNOVATE FINANCIAL HEALTH
In this market, fintech founders allowing consumers to share their banking
overwhelmingly reported difficulty in data with fintechs, it has been difficult for
navigating Canadian financial institutions these fintechs to provide the level
and establishing partnerships, often of service that they intend to.
leading to a sense of frustration and
pessimism. These fintechs experience While it is hard for us to evaluate the
both organizational and strategic barriers. motives of the financial institutions, there
It is often difficult to understand corporate is no doubt that financial health fintechs
structures and get in front of the right find it challenging to establish beneficial
individual at a financial institution who partnerships with financial institutions.
is both strategically aligned and has
the decision-making power to develop
a partnership. Many times, startups feel
3 Difficulty accessing
investment
as if they are sharing their knowledge Funding is, of course, top of mind for any
without a true interest from the financial early-stage startup. Startups in general FINTECHS FIND IT
institution. Additionally, the perspective will always have a challenge convincing
of entrepreneurs is that many of these investors and sources of financing to DIFFICULT TO UNDERSTAND
financial institutions don’t have in-place
processes that can better facilitate
provide funding for their company.
Financial health fintechs, in particular,
CORPORATE STRUCTURES
potential partnerships. Instead, the
procedures seem ad-hoc and highly
expressed specific concerns that existing AND GET IN FRONT OF THE
funding sources do not necessarily align
dependent on a single individual within with the priorities of their businesses. RIGHT INDIVIDUALS AT
the organization acting as a champion.
Venture capital (VC) is typically a A FINANCIAL INSTITUTION.
One interviewee believed that the existing significant source of funding for the
financial institutions prioritize working startup ecosystem. In recent years, there
with fintechs that help improve the has been an increase in fintech-specific
institution’s own processes and services venture capital firms in Canada which
over ones that are more focused on end has helped bolster the fintech ecosystem
users. Another fintech decided in the across Canada. For example, Luge Capital,
summer of 2019 to exit the Canadian a Montreal-based fintech VC announced
market entirely and to focus on the U.S., raising $85 million in 2019 to invest
quoting the headwinds of Canadian in Canadian fintechs whereas Portag3
banking. Specifically, because financial Ventures closed $427 million in their
institutions have been resistant to second fintech fund in December of 2019.
Supporting Financial Health Fintechs in Canada 12INNOVATE FINANCIAL HEALTH
Several of our interviewees, however, were concerned And of the few that are focused on funding technology ($500 million USD fund). These types of investors
that the economics behind venture capital financing companies, almost none are focused on financial that are both fintech-focused and specifically aligned
were not strategically aligned with the mission of their services. According to the Responsible Investment to the mission of increasing financial health are yet
businesses. Many created their companies with the Association’s 2018 Canadian Impact Investment to exist in Canada.
intention of helping a specific demographic and felt Trends Report, only 4% of 59 surveyed Canadian
that in their experience, potential investors would impact investors invest in financial services Without funds that are explicitly designed for financial
exert pressure to abandon particular customers to (excluding microfinance)xiii. This is in direct contrast health fintechs, it becomes difficult for founders to
target less mission-aligned demographics (e.g., high to GIobal Impact Investing Network’s 2018 Annual gauge which particular individuals and investors are
net-worth individuals, high-earning millennials) that Impact Investor Survey of 229 leading global impact open to these ideas. Overall, we find that there is a
are perceived to have more growth or profit potential. investors where 45% of respondents had at least lack of available funding in the market for financial
some allocation to financial services (excluding health fintechs and since there isn’t an established
The impact investment industry – investors that microfinance)xiv. In Canada, the top sectors are food / market, founders need guidance on whom specifically
aim to generate specific beneficial social or agriculture, housing / real estate, and energy. to approach that are aligned with their missions.
environmental effects in addition to financial gains
– should theoretically offer an alternative to these In other markets, investors focused specifically on
more mission-driven companies. In Canada, early-stage financial health fintechs have emerged
however, there are still relatively few impact to help tackle these issues. In the United States,
investors that are focused on early-stage technology for example, these investors include Accion Venture
companies. Most are focused on larger-scale projects Lab ($42 million USD fund), Core Innovation Capital
such as affordable housing and renewable energy. ($70 million+ USD fund), and Flourish Ventures
Supporting Financial Health Fintechs in Canada 13INNOVATE FINANCIAL HEALTH
Figure 2:
4 Relatively slow consumer adoption
of fintechs Drivers and Barriers of Fintech Adoption in Canadaxvi
Over the past several years, Canadian
consumers have greatly increased their use Top reasons driving Canadian consumers to fintech services:
of fintech solutions but continue to trail global
peers according to findings from Ernst and
Young’s Global Fintech Adoption Indexxv.
Fintech adoption in Canada has more than
doubled since 2017, rising from 18 to 50 per
cent in 2019. The global average consumer
adoption, however, is 64 per cent and out of
42% 19% 10%
27 markets, Canada is ranked twenty-third in
adoption. China and India lead the way at
87 per cent adoption whereas in the UK,
consumer adoption is at 71 per cent. Better rates and fees Ease of setting up More innovative
an account products and services
According to Ernst and Youngxvii, the top reasons
Canadian consumers started using fintechs
were because of better rates and fees
(42 per cent), ease of setting up an account Top reasons why consumers in 2019 opt to use an incumbent
(19 per cent), and more innovative products and financial institution:
services (10 per cent). The top reported reasons
why consumers were opting to use incumbent
financial institutions stemmed from lack of
awareness of how fintechs work (29 per cent),
29% 24% 17%
greater level of trust (24 per cent), and the fact
that they don’t see the advantage of fintechs
(17 per cent).
Lack of awareness of how Greater level of trust Don’t see the
fintech companies work advantage of fintech
Adapted from EY’s Fintech Adoption Index 2019 - CanadaXIV Supporting Financial Health Fintechs in Canada 14INNOVATE FINANCIAL HEALTH
Our end user survey targeted towards more Particularly with several recent high-profile data According to Oliver Wyman’s Reimagining Financial
financially vulnerable individuals also found that breaches of financial institutions, Canadians are Inclusion report, “the psychological effects of
lack of awareness was the biggest barrier to use increasingly aware of data security issues and the financial scarcity make it especially difficult for
(38 per cent) followed by the related issue of being vulnerability of their personal financial data. With low- and middle- income consumers to plan for the
unsure of how to choose which product to use that in mind, fintechs must be careful in their future – they are often too busy putting out fires in
(28 per cent) and concerns with privacy (26 per cent). design and usability to communicate trust. In the present.”xvii This was clear in discussions with
interviews with end-users, several expressed end users.
Clearly, for fintechs to reach a mass market of hesitancies to use fintechs after experiences of
Canadians, there is still much work to be done glitching or without seeing evidence of reliability “It’s hard to address my financial situation
in terms of addressing awareness, trust, and and trustworthiness from reviews by users or without addressing some of the emotional,
the perceived need for fintechs. With Canadian online sources. One end-user interviewee shared: social, and community issues that are part of
financial institutions increasingly integrating fintech ‘money’ in our society. [...] “I wish financial
into their service offerings through products like “It felt weird to put my money somewhere,
management courses and organizations
budgeting apps, and given overall levels of consumer but I was OK with that but then it started
incorporated information about how to tell your
satisfaction with traditional financial institutions, glitching too and having issues and I kind
kid that they can’t have a birthday party at the
the bar for quality and value is high in the Canadian of freaked out and I said you know what
escape room like their friends, or how to keep
market. Fintechs need to demonstrate a strong I’d rather just have my money in one place
friends in your life if you can never afford to go
value proposition and offer tangible improvements in my bank. Because I’ve always had banking
out with them, or how to do basic maintenance
to existing products. The entrepreneurs that we you know, so that’s my only reference of trust.”
on a $500 car so it will last a few months longer.”
interviewed were very aware of this dynamic:
Another end user interviewee suggested: Despite these challenges, clearly more and more
“We have a very stable financial system in
people are comfortable with using fintechs to
Canada with a lot of major players...getting the “If something is accessing my bank information,
address their financial services needs. Beyond
word out there [is the biggest challenge]. Close I definitely need to know it’s a secure and
building better products and services, fintechs
second I would say is the trust factor – having safe program, company, etc....with my bank’s will also need to continue focusing on building
so many big banks plus the hundreds of credit programs...I just trusted that off the bat.” awareness and trust amongst users for the
unions...having the notoriety and the trust when companies to have a chance of growing
For financial health fintechs that deal with more
it comes to financial data is a huge challenge low- to moderate-income users, these challenges and succeeding.
and barrier that we keep front and centre when are more acute as these populations are less likely
it comes to our design process.” to currently use fintech or contemplate using fintech.
Supporting Financial Health Fintechs in Canada 15INNOVATE FINANCIAL HEALTH
Current Fintech Support Ecosystem in Canada
While financial health fintechs in Canada are expressing challenges in accessing relevant mentors,
financial institution partners, investors, and users, we have seen significant growth over the past
five years of fintech-specific accelerator and support programs (see Figure 3).
As we previously noted, fintechs deal with unique challenges around data, regulation, and partnerships that other startups may not have to address.
Accelerators are important as they can provide the focused support required to grow a fintech.
These programs range in their duration, delivery, and services, which can include:
Funding: Technical Assistance: Exposure Opportunities:
In the form of a grant or in exchange for Advisory or consultancy services that Opportunities to promote their startup through
partial ownership of the participating startups provide one-on-one support and feedback on news articles, podcasts, demo days, and at
(i.e., funding in exchange for equity). a startup’s product and/or business model. industry events (Fintech Forum, Money 2020, etc.)
Can range from low-touch advice such as pitch
deck reviews, market research, and fundraising
Capacity Building: support to hands-on customized support Additional Resources:
on more specific topics such as product
Workshops and training sessions to develop key roadmaps, UX/UI testing, etc. Pro-bono or heavily discounted resources such
management skills. General curriculum-based as professional service hours (e.g., accounting,
content is more valuable for first-time founders. legal), cloud credits (e.g., AWS, Google Cloud),
Access to Investors and a data sandbox (e.g., Flinks), or workspace.
Networks: Partners:
Access to mentors and advisors with Access to investors and partners either via
relevant backgrounds. a pitch night or one-on-one matchmaking.
Supporting Financial Health Fintechs in Canada 16INNOVATE FINANCIAL HEALTH
Since many of these programs are funded internal innovation or to advance the
by or well connected to larger financial fintech community overall. As a result,
institutions such as RBC and National however, financial health fintechs can
Bank, they are well equipped to address often be left out of the picture. For
the needs of fintechs. example, none of RBC Reach program’s
first cohort of four can be considered a
For financial health fintechs, however, financial health fintech and only two of
there is still a gap in the ecosystem. The eight fintechs in the Holt Accelerator’s
accelerator programs that are geared 2019 cohort (Manzil and Ireland-based
towards more socially impact-driven ConfirmU) and three of fifteen fintechs
businesses are earlier stage and are run in Fintech Cadence’s 2020 cohort
in the form of competitions or hackathons (Benefi, Emma, Sprout Financial) can be
– a multi-day event where teams come considered financial health fintechs.
together to quickly develop a business
idea and prototype to solve a particular This is to say, if it is important to support
challenge. For example, the goal of technology solutions solving for the
the Desjardins Cooperathon is to take financial challenges that Canadians are
aspiring entrepreneurs and help them facing, there is opportunity for more
start businesses. These are important accelerator-based support programs for
initiatives to direct individuals to starting financial health fintechs.
mission- driven businesses and several
of the graduates of the Cooperathon have We are beginning to see this type
gone on to launch active businesses such of support develop here in Canada.
as WALO, a financial education application Innovate Financial Health launched
for children and Kaira, a financial wellness a pilot three-month accelerator
coach. After this stage, however, these
program in January 2020 for four
companies will continue to need hands-on
startups addressing financial health
support to fuel growth.
challenges in Canada. Moreover,
Other existing programs encompass all National Bank also announced
types of fintechs besides those that are a six-month innovation competition
financial health specific. Of course, for in October of 2019 where five teams
existing programs, this makes sense as working on products that help
their goals are not necessarily to advance Canadians better manage their money
financial health in Canada. Instead, their will compete for a $100,000 cash prize.
goals may be financial or to support
Supporting Financial Health Fintechs in Canada 17INNOVATE FINANCIAL HEALTH
Figure 3:
Overview of Select Active Canadian Fintech Accelerator Programs
Note that descriptions are summaries and not official language from each program. Accelerator is used as a term to encompass all support programs for early-stage
startups. Some programs listed will self-define with alternative terminology.
Accelerator Year Duration # of Funding Focus Select Key Services
Programs Launched Startups
Desjardins 2016 2 months 260 total Up to $15,000 grant Social impact • Capacity Building: Five workshops
Cooperathon and $50,000 in startups addressing that take entrepreneurs through team
in-kind services the UN Sustainable formation, ideation, design, and
Development Goals. prototype development
Finance is one
of six tracks • Access to Investors: Two-staged
pitch competition for monetary and
in-kind prizes
Diagram 2017 18-24 6 total Case-by-case Insurance or financial • Technical Assistance: Diagram
Ventures months technology co-founds companies with
experienced entrepreneurs
•N
etworks & Access to Investors:
Power Financial, Portag3 ventures,
and 50+ angel investors as mentors
for the program
Fintech 2018 3 months 15/cohort N/A Fintechs •N
etworks: Weekly mentorship with
Cadence fintech experts
Ascension
• Capacity Building: Four optional
workshops on topics such as team
& leadership
• Access to Investors: A demo day to
investors that costs $250/startup
to cover costs
Supporting Financial Health Fintechs in Canada 18INNOVATE FINANCIAL HEALTH
Figure 3 - continued:
Overview of Select Active Canadian Fintech Accelerator Programs
Accelerator Year Duration # of Funding Focus Select Key Services
Programs Launched Startups
Holt 2018 3 months 10/cohort Up to $125,000 Fintechs •N
etwork & Access to Investors: 50+
Accelerator in funding advisors and demo day to investors
• T echnical Assistance: Access to
experts in Stradigi’s AI lab for weekly
consultations
•C
apacity Building: Tailored training
for teams in areas such as pitching
and leadership
•A
dditional Resources: 4 months of rent,
CFO services, legal & account set-up
RBC Reach 2018 3-6 4/cohort Up to $100,000 Health and wellness, •A
ccess to Partners: Expedited path to
months equity mobility, and a commercial agreement with RBC
solutions for small
and medium-sized •N
etworks: Mentorship from RBC and
enterprises Highline Beta executives
• T echnical Assistance: Access to RBC
technologies and divisions such as
Borealis AI and RBC’s Cybersecurity Lab
• Additional Resources: Office space
National Bank 2020 6 months 5/cohort $100,000 cash prize Fintech solutions to •A
ccess to Investors: Opportunity to pitch
Innovation for winner help individuals better their business and technology solutions
Competition manage their money to a panel of National Bank executives,
venture capitalists, and tech leaders
•A
dditional Resources: Access to Flinks data
Supporting Financial Health Fintechs in Canada 19INNOVATE FINANCIAL HEALTH
Global Financial Health Fintech Accelerator Programs
While financial health fintech specific accelerator
programs are just starting in Canada, there are many
established initiatives globally that support these
types of companies that we can learn from in designing
and developing a similar initiative here in Canada.
As part of this knowledge-gathering Projects can include everything from creating
process, we spoke to eight global accelerators and understanding customer personas to
(see Figure 4). helping build an analytics dashboard. Over
the course of the program, each fintech will
At a high level, we found that because of go through three of these sprints.
the specificity of these programs, they
were significantly more customized to the Additionally, while a general accelerator
unique needs of their cohort than a standard program will provide access to a wide range
accelerator program. While some sort of of mentors from a variety of industries,
standardization is required for efficiency these programs can provide very specific
purposes, many of our interviewees talked and relevant expertise. For example, Village
about how they prioritize customized support Capital’s Finance Forward program has an
over “101”-level education in the design of advisory board that consists of other financial
their programs. health fintechs (e.g., MPower Financing,
LendUp), impact investors (Fluorish Ventures,
The most customized of these programs was Core Innovation Capital), and financial
the BFA Catalyst Fund, which works with each institutions (PayPal, MetLife Foundation).
of their cohort members to diagnose a specific
challenge or need that they are working on.
The Catalyst Fund then provides a team of
consultants for a multi-week sprint to address
these needs. The team can consist of specialists
in topics such as product management, design,
analytics, regulation, and user research.
Supporting Financial Health Fintechs in Canada 20INNOVATE FINANCIAL HEALTH
We also find that these global accelerators have Since the mission of these programs are stated from Looking back through our interviews with fintech
a wider range of partners than the existing fintech the outset, the investors that they recruit are also founders, we can see how the design of these
accelerators in Canada. Since Canadian fintech aligned to this mission. In the case of the BFA Catalyst global accelerator programs can be more suited to
programs are typically aligned to one single financial Fund, they use an investor advisory committee with addressing their need to access relevant mentors,
institution, participating startups only have formal six experienced fintech investors – Accion, Anthemis, partners, mission-aligned funding, and customers.
access to that one relationship. While this allows Flourish Ventures, Gray Ghost Ventures, Quona Capital, Through these programs, we can get inspiration
for a deep relationship with a particular partner, and 500 Startups. They also have a larger circle of 50+ in developing our own financial health fintech
it also forces fintechs to focus on a single partnership investors that are part of the network and kept up to accelerator here in Canada.
that may or may not develop further. Interviewed date about their cohort companies.
programs have a wider range of partners that can
Finally, these programs have discovered unique ways
be used. For example, the Financial Solutions Lab
to get in front of customers to both encourage customer
is supported by founding partner JPMorgan Chase
adoption and to ensure that the startups are building
and managed by the non-profit Financial Health
with customer adoption in mind. For example, a core
Network and therefore, participating fintechs
tenet of Blue Ridge Lab’s Catalyst program is inclusive
have the potential to access hundreds of financial
user design. As such, they established a Design Insight
institutions that are part of the Financial Health
Group which consists of a group of 500+ low-income
Network’s member base. As such, it significantly
New Yorkers that startups can access to test their
increases the likelihood of those fintechs to be products. These participants are paid US $25/hour to
introduced to a potential partner. conduct testing.
Supporting Financial Health Fintechs in Canada 21INNOVATE FINANCIAL HEALTH
Figure 4:
Overview of Global Financial Health Fintech Accelerator Programs
Note that descriptions are based on our summaries and not official language from each program.
Accelerator Duration # of Delivery Funding Focus Key Services
Programs Startups Method
Blue Ridge 6 months 5-10/ In-person Up to US $60,000 Tech for Low-Income • T echnical Assistance: Floating Chief
Labs Catalyst cohort (NYC) in recoverable grant Technical Officer (CTO), hands-on
advisory on technology, impact
measurement, talent, funding, etc.
•A
dditional Resources: Access to Design
Insight Group for user testing,12 months
of office space, executive coaching
Catalyst Fund 4-8 5-10/ Virtual Up to US $100,000 Inclusive Fintech •C
apacity Building: Support in areas
months, cohort grant such as customer insights, persona
rolling cohort development, UX/UI testing,
regulatory advice
• T echnical Assistance: Customized
“sprints” from small consulting
teams on topics such as machine
learning, building dashboards,
product architecture
•A
ccess to Investors: Access to investor
pool (Omidyar, Accion, 500 Startups, etc.)
•A
dditional Resources: Invitations to
key industry invites including SOCAP
and Fintech Forum
Supporting Financial Health Fintechs in Canada 22INNOVATE FINANCIAL HEALTH
Figure 4 - continued:
Overview of Global Financial Health Fintech Accelerator Programs
Accelerator Duration # of Delivery Funding Focus Key Services
Programs Startups Method
DFS Labs 6 months 4-5/ Virtual US $25,000-$100,000 Inclusive Fintech • T echnical Assistance: Venture building
cohort grant support from an entrepreneur-in-
residence in local and domain
expertise and on product market fit
and fundraising
•N
etwork: Connections to extensive
network of fintech experts
Fast Forward 3 months 8-10/ Virtual US $25,000 grant Tech Non-Profits •N
etwork: Mentor “speed-dating”
cohort (in person events with San Francisco-based
in San tech companies
Francisco
every two •A
ccess to Investors: Donor demo
weeks) day with 80% of audience from
institutional donors
Finance 9 months 12-16 In-person No guaranteed Financial Health •C
apacity Building: Personalized
Innovation fellows/ (London, funding Fintech leadership and venture building
Lab cohort UK) training via monthly business strategy
sessions and leadership retreats
•N
etwork: Access to experts in ethical
finance, regulation, etc. via monthly
speaker series
Supporting Financial Health Fintechs in Canada 23INNOVATE FINANCIAL HEALTH
Figure 4 - continued:
Overview of Global Financial Health Fintech Accelerator Programs
Accelerator Duration # of Delivery Funding Focus Key Services
Programs Startups Method
Financial 8 months 5-10/ Virtual Up to US $125,000 Financial Health •N
etwork: Mentorship and advisory
Solutions Lab cohort with select convertible note or Solutions from JPMorgan Chase and Financial
in-person grant for non-profits Health Network and access to a broader
meetings financial services ecosystem
•A
dditional Resources: Pro-bono
office hours from resource partners
in accounting, behavioural economics,
legal, consulting, etc.
• E xposure: Access to FinHealth
Network’s national platform and key
events such as EMERGE: Digital
Financial 6 months 5/cohort Virtual Between US $50,000 Fintech • T echnical Assistance: Customized
Venture Studio and $1 million coaching and mentorship from
investment FVS partners
•N
etwork: Connections to financial
institutions, media outlets, thought
leadership, etc.
Village Capital: 3 months 10-12/ Virtual US $75,000 grant for Financial Health •C
apacity Building: Three four-day
Finance cohort (two to two peer-selected Fintech workshops across the US with in-depth
Forward three selected ventures peer feedback
in-person
sessions) •N
etwork and Access to Investors:
One-on-one meetings with 50+
investors and mentors
Supporting Financial Health Fintechs in Canada 24INNOVATE FINANCIAL HEALTH
Moving Forward: The Design of a Canadian Financial
Health Accelerator
We believe that Canada needs an accelerator
program specifically geared towards the needs
of financial health fintechs.
We know that the current state of financial We also know that there is a significant
health in Canada is deeply concerning. pipeline of financial health fintechs doing just
Millions of Canadian households are financially this work, and that these fintechs are looking
precarious, and those numbers are growing for support in accessing mentors, partners,
year after year. Canadians are increasingly funding, and users. There is a both significant
living paycheque-to-paycheque, bearing opportunity, and significant demand from
the weight of mounting consumer debt, and financial health fintechs for a program that
struggling to save for retirement or to plan for can help them address the financial needs
their family’s future. of Canadians. This demand was validated with
over 40 fintechs applying for Innovate Financial
Currently, efforts to address these challenges Health’s pilot accelerator program.
have focused heavily on financial literacy.
But financial literacy alone is not enough
to address the needs of a growing segment
of Canadians who are struggling with their
financial health. More needs to be done to
support interventions that help people learn
new behaviours and change harmful ones, that
provide just-in-time advice and resources to
support better decision making, and that make
beneficial financial products more affordable,
accessible and appropriate for a broader
segment of the population.
Supporting Financial Health Fintechs in Canada 25INNOVATE FINANCIAL HEALTH
From this experience and our research into The accelerator should be designed Secondly, we believe that the more customized the
global accelerators and the needs of Canadian
financial health fintechs, we have the following 2 inclusively and as customized to the
cohort as reasonable
program, the more effective it can be in addressing
specific challenges and needs of these fintechs. For
recommendations for the design of this financial We believe that the challenges of financial health example, the partners and advice that an insurance
health fintech accelerator: fintechs are unique from other sectors. Our belief fintech will be seeking are different than those of
is that for the most impact, this program should be a savings fintech. Customization will depend on
The accelerator should support financial resource restraints but in approaching the design
designed inclusively as many of the interviewed
1 health fintechs that already have a product
in the market and have active users global accelerator programs have been. and development of the accelerator, it makes sense
to dedicate resources to adapting the program
Where accelerator programs can be useful for all Many traditional accelerator programs require throughout each cohort to the specific needs of
startups, we believe that for the most impact, this founders to relocate to a specific location over that particular group of fintechs – be it by recruiting
program should focus on companies that already defined period (typically 3-months or more) additional mentors and partners or by designing
have at least a minimum-viable product development through a pre-determined curriculum. These different educational content.
and have active test users. These companies are programs, however, are more difficult to access
The accelerator program should involve
for fintechs with established teams and office
3
more likely to have fintech-specific and financial a coalition of financial institution partners
health-specific challenges such as establishing spaces as well as founders whose life circumstances and investors
financial institution partnership and navigating don’t permit a three-month move (e.g., parents).
regulation. As well, they are less likely to pivot Instead, most of the global accelerator programs we To ensure that these financial health fintechs find
significantly and more likely to continue on the interviewed offer virtual programs with periodic appropriate partners and investors that can help
mission of financial health. Companies that do not in-person sessions. By doing so, these programs them scale, this accelerator program should focus
have a product developed yet can take advantage can be more inclusive to both later-stage companies heavily on building a coalition of supporters. While
of existing resources and support in the Canadian and a diverse group of founders. Since a financial certain accelerator programs are primarily created
ecosystem to guide them through the initial stages health fintech accelerator program is already narrow to develop a single partnership between a financial
of launching a fintech. By focusing on later stage in terms of the industry, it would be difficult to institution and the cohort, we believe that it is in
access a significant pipeline if the program is better interest for the fintechs to be exposed to
companies, this program will increase the likelihood
additionally restrictive. multitudes of potential partners and investors as
and speed in creating success stories. Through
part of an accelerator program.
growth and success, these financial health fintechs
have the opportunity to inspire a next generation
of entrepreneurs that also pursue the financial
health sector.
Supporting Financial Health Fintechs in Canada 26You can also read
