What is Fintech?

Fintech refers to technology enabled business models that disrupt the traditional financial services industry. The financial services industry is a $131 Trillion global market that has long been protected by proprietary technologies, strict regulations, and high capital requirements. As such this is a massive industry that is ripe for disruption. It is no surprise, then, that the emerging Fintech market attracted more than $22B in financing globally in 2015, up more than fives times the $4B invested in 20132. In the first quarter of 2016 an additional $5.4B3 was invested globally – up 67% from the same period a year earlier. In Canada, Fintech companies have raised over $1B as of end of 2015.

Total Global Fintech Financing

Fintech Shaking up the Financial Services Industry

Fintech startups are shaking up traditional financial business models with the backing of deep-pocketed VCs and strategic investments from incumbents and players in other industries. Traditional financial services providers such as big banks have used proprietary technologies and strict regulations to dominate their markets. They offer a broad range of financial services to both consumers and businesses that include banking, lending, insurance, wealth management and credit cards among others. These financial services are now being unbundled by nimble and technically savvy entrepreneurs. This will cause the financial services industry to go through a massive transformation over the next decade with profit pools in the hundreds to billions of dollars up for grabs. Goldman Sachs is estimating Fintech upstarts could steal up to $4.7T8 in annual revenues and $470B in profits from traditional companies.

What is Driving Fintech?

Major developments in technology, changing customer needs/behaviours, and easing of some of the regulatory barriers are converging to give rise to the next generation of financial services providers and forcing traditional companies to either partner, innovate or risk losing significant parts of their business, or worse – become obsolete.  No company is too big to fail as markets have learned from the likes of Nokia, Lehman Brothers, and Nortel.

Advances in Technology

Continued advances in technology including the proliferation of smartphones, cloud computing, open standards, data analytics, and the decreasing costs of starting a technology business are making it much easier for entrepreneurs to offer more innovative financial services.

Changing Consumer Behaviours

Changing consumer behaviour and increasing comfort with transacting online is opening up new opportunities. The modern consumer doesn’t want to wait in lines at a local branch or spend hours on the phone. Consumers expects “Uber” like service from its financial services provider that are as easy as a click of a button or a swipe of a finger.

The stakes are extremely high as waves of innovation disrupt and redistribute vast profit pools in the financial services industry. Capital from traditional venture capitalists and corporate investors are flowing like a river into the Fintech sector. Over the past 5-years over $50B has been invested globally into Fintech with 2015 alone accounting for over $22B.

Financial Services Industry Ripe for Disruption

Financial services is the largest industry in the world. In both the U.S. and Canada the industry accounts for about 7% of GDP or $1.2T and $140B respectively. At close to 10%4, the UK financial services sector has the highest share of GDP of G8 countries, with London being world’s largest financial center.

Over the past few decades the financial services sector in most developed economies, especially in Canada, has gone through a significant amount of consolidation. Large financial institutions, such as big banks, have scaled by providing a broad, integrated service model covering consumers, business and everything in between. By focusing on specific niches and providing a better end user experience, various Fintech innovators have been able to disrupt pieces of the big bank value chain and start building market share in their focused segment. Other Fintechs have chosen to leverage the incumbents themselves by partnering with or selling to the large institutions to enable them to better service their existing customer base.

What fintech startups do better

Fintech startups are taking a playbook that has helped disruptive startups become leaders in other industries and applying it to the financial services sector. The centerpiece of their value proposition is the customer experience, which arguably has not always been the case with traditional service providers. Some of the things that startups are doing better include:


Today’s customer has become accustomed to having a frictionless experience in everything from booking airline tickets and accommodation to “hailing” a cab. Fintech companies are applying this “ease of use” mindset to persuade customers away from traditional service providers. For example, new Fintech lenders can utilize quick and easy loan applications that are completed online and then apply data driven algorithms to render an approval decision in a fraction of the time of a large institution.

Eliminating middlemen

Facilitation of peer-to-peer transactions such as directly connecting borrowers with lenders cuts out the middle-man and makes the transaction much more efficient and less expensive.


As with other startups, automation technology is being used to improve customer service at lower costs. One such example is portfolio advisory or “Robo Advisors” that eliminate the need for “expensive” financial advisors or relationship managers.

Top Reasons Consumers Adopt Fintech Solutions

Source: Fintech Ranking5

The Fintech scene in Canada

Canada is not yet among the global leaders in Fintech but it is quickly rising above its weight class with a vibrant and burgeoning Fintech community. Not surprisingly, Canadian Fintech startups are mostly concentrated in major cities such as Toronto, Montreal and Vancouver. However, successful startups are also being created in other cities across the country such as St. John’s, Kitchener and Calgary. There are well over 100 Fintech startups covering all major sub-segments of the financial services sector and these companies have attracted more than $1B in investment as of end of 2015 – this pace has continued into 2016 with notable deals including Bench, Blockstream, Nvest and Q4. This year has also seen the creation of at least 3 Fintech focused venture capital funds in Canada; Impression Ventures, Information Venture Partners (with fund managers originally from RBC) and Portag3 Ventures (with backing from Power Financial)

Canadian Fintech Startups

1 Billion+ Capital by Segment

Notable Canadian Fintech Raises

Canadian fintech

Canadian Fintech Startups
by Category

Click to view the interactive market breakdown

Global Leaders in Fintech

In addition to increasing competitive tensions amongst financial services providers, another battle is emerging between countries and between cities. The financial services sector plays a vital role in many national economies and any shift in the current competitive positioning may have a dramatic impact on multiple regions. It should be no surprise, then, that traditional financial centres such as New York, London, Singapore, and Hong Kong are highly active in trying to attract Fintech startups away from innovation hubs such as Silicon Valley, Tel Aviv and Stockholm. The race for global Fintech leadership is best illustrated by the investment map below.

Global Fintech Investment Leaders

Source: Fintech Ranking5

Highest Valued Fintech Companies In The World

Source: Fintech Ranking5

Want to dig deeper?

In this report we have provided an overview of the emerging Fintech industry. Given the sheer potential of the opportunity and its impact on not just the global financial services industry but the global economy as a whole, there have been a number of reports written by industry analysts, consultants and even venture capitalists.  We have selected a few of these reports and links are provided below to help you with your research.


  • McKinsey Global Institute, Investopedia
  • 2 Citigroup
  • Accenture
  • Office of the National Statistics, UK
  • Fintech Ranking
  • Omers Ventures
  • EVP
  • 8CB Insights

Invest in Alternative Assets Online

More Articles on the Blog