Stephen Preston, VP of Exempt Edge and Chair of the FinTech and Innovation committee for the PCMA breaks it down:
If you are in the financial services industry there’s a good chance you’ve heard the word FinTech being thrown around. For those who aren’t familiar with the term, FinTech can be described as the rapid innovation of financial services through technology.
It’s a tidal wave of change empowering people globally by giving them more options for everything related to money including: how people invest, borrow, lend and manage their finances. Artificial Intelligence, Crypto Currency and the Blockchain – are all FinTech innovations that WILL impact every Canadian and every professional in our industry – the only question is when and by how much?
According to KPMG, global FinTech investment topped US$31B for 2017, bringing the total investment over the past three years to US$122B (1). It’s a large industry that’s only going to get bigger.
So how is Canada positioned in the global FinTech revolution? You’d think that with such an entrepreneurial and tech savvy population we’d be leading the FinTech charge but in reality we are woefully behind our peers. Countries like the UK, Australia, Singapore, and the USA are years ahead of us and their citizens are benefiting tremendously from the availability of new innovative financial products and services.
So why are we so far behind?
According to a report by Deloitte (2), regulation is one of the most important factors in creating an environment where FinTech companies can prosper. In Canada, we lack a national FinTech strategy and our provincial securities regimes makes operating a FinTech business difficult.
But it’s not all bad news. Recent developments show that Canada may be headed in the right direction. A report released in December 2017 by the Competition Bureau of Canada made a host of recommendations to foster an innovative FinTech environment in Canada. John Pecman, the Commissioner of Competition hit the nail on the head when he said:
“The future is now. Let’s get it right by providing policy makers with the information they need to nurture a competitive environment that allows Canada’s FinTech companies to innovate and grow globally.” (3)
Along the same lines, the OSC posted a release on their website on November 22nd 2017, requesting applications for a FinTech Advisory Committee, adding that members would be selected based on their experience in the following areas:
Digital platforms (e.g. crowdfunding portals, online advisers);
Cryptocurrencies or distributed ledger technologies (e.g. blockchain);
Venture capital, financial services, securities, legal or accounting, with a focus on the FinTech or technology sector;
Data science or AI (artificial intelligence);
FinTech or technology entrepreneurship;
Compliance or RegTech solutions; or
Cryptography or cybersecurity. (4)
Between this initiative, and the OSC Launchpad which “strives to keep regulation in step with digital innovation”, the OSC deserves a lot of kudos for doing many of the right things to foster FinTech innovation in Canada and is going in the right direction.
For the PCMA and NEMA (at the time), it was important that someone from our industry was included on the advisory board to ensure that the voice of the Private Capital Markets were part of the conversation. Though three suitable candidates were put forth by the associations, not one was selected.
We felt snubbed, left out and truthfully – a little upset. How could the OSC not include one of our own? Don’t they know that billions of capital pours into the Private Capital Markets by tens if not hundreds of thousands of Canadians each year? Is our industry not innovative and at the forefront of investing?
I was immediately compelled to write an article on the subject which, in my mind, was sure to be laced with a little criticism. When I finally sat down to begin the article, however, my tone changed. Having been critical of the state of technology in the Private Capital Markets for some time, how could I write about what we bring to the table in terms of FinTech and Innovation without being a hypocrite?
As an industry, we are only now beginning to see the adoption of very basic tech functionality like digital signatures and paperless transactions – tech that has been commonplace in other industries for close to a decade (for reference, Docusign, one of the largest digital signature solutions has been around since 2003). As an industry of entrepreneurs and innovators, we can and we must do better. Technology has the power to revolutionize the Private Capital Market while opening new doors along the way.
Ask a millennial to invest in a private equity deal and see how quickly their excitement turns to shock when you outline the paperwork and the process involved in a transaction. You mean I have to print this giant stack of paperwork? Can’t I just sign up online like I did with WealthSimple? What do you mean I might receive three different statements for my investment –can’t I just login and get my statement and view my holdings online?
So in closing, should we be upset that the OSC did not include us on their FinTech Advisory Committee? Yes we should, but we should be upset at ourselves for not being at the forefront of financial innovation and we should be upset at ourselves for not giving the OSC a million reasons why we are a vital and indispensable component of the FinTech landscape in Canada.
In 2018, let’s strive to make FinTech synonymous with the Private Capital Markets for the benefit of ourselves, our clients and our industry. Let’s let our innovating do the talking so that no conversation about FinTech is complete without our voice.