A U.S. Perspective: Can Canadian Alternative Finance Contend?

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NCFA Canada | John Neal | July 6, 2016

As an intern from the States I have had the pleasure of living in Toronto for the last month while working for NCFA Canada under a study abroad experience. While adapting to Canadian culture is simple, you learn to navigate the subtle differences such as use of metric system, reading temperatures in Celsius, the typical American adjustment.

Canada vs the U.S.

When I think of U.S. Canada relating to each other I think similar lifestyle, similar culture and perhaps similar economic activity just proportionate to each other’s respective size. Yet, while learning about the Crowdfunding industry in Canada compared to the UK and the US there seems to be major disconnect.

For example, the U.S. outweighs Canada in Crowdfunding numbers by $36,000,000,000 to 190,000,000 in 2016. Let’s put this into perspective Canada’s numbers are 0. 00000527% of the United States. That’s 5 one millionth of the U.S.’s numbers (Download:  2016 Alternative Finance in Canada report).

Source: NCFA 2016 Alternative Finance Industry Report

Alternative Finance Crowdfunding and FinTech are common global trends spreading like wildfire internationally but at a much slower pace here in Canada (from what I can see). I’m aware of the innovation in Canada and the willingness to be a catalyst for change. However, in the States there are two cities that champion FinTech, San Francisco (Silicon Valley) and New York. These two global hubs amass for a large portion of the technological innovation within the U.S. To grow Canada’s Alternative Finance sector, there must be some form of change soon of how these portals are regulated.

See:  Competition Bureau suggests Canadian FinTech sector’s slow growth due to regulation, consumer complacency

In 2015 S.E.C. in the United States adopted rules to permit crowdfunding on a larger scale. Proactive measures have taken place States side, the question remains can Canada essentially foster the innovation that is present South of the border and nurture Alternative Finance to become a viable source of financing for Canadian companies and likewise an opportunity for domestic and global investor?  The power of alternative finance, evolving digital platforms and online digital trends is becoming an authentic form of raising capital.

New forms of finance have been empowered by consumer driven online marketplaces (i.e. Crowdfunding) which has led to the creation of countless new opportunities in the financial sector.” – Cato Pastoll, Co-Founder & CEO of Lending Loop.

U.S. ability to adapt to change

United States crowdfunding has shown promise according to the dollar $ numbers raised, however there are continued measures to fix bugs and strengthen regulatory actions. For instance, the “H.R. 4855 Bill “Fix Crowdfunding Act” passed by the house in the States on July 6th, 2016. We can see that in the U.S. there are continued efforts to alter regulations in favor for efficient crowdfunding. Another significant modification that separates U.S. and Canada is the use of advertising for crowdfunding. In Canada, there are restrictions for crowdfunding advertising and solicitation (Read more here!) while  in the United Sates advertising is allowed for crowdfunding for issuers. Limiting crowdfunding offer distribution channels can be seen as hindering education, and impeding the growth of the Canadian industry.

Funding options for a new generation

I have noticed University students in the States are quickly evolving and many of my colleagues are currently using or thinking about relying on Alternative Finance portals to provide them with adequate capital to take student innovation to launch new businesses to market. Innovation is what drives millennial students at American Universities. Fortunately, the concept of crowdfunding in the States is welcomed, and my fellow peers are benefiting from its rewards while investors are simultaneously gaining access to great new investment opportunities.  I can envision Canada eventually adopting some regulatory changes to encourage market development to ensure Canadian companies have equal access to new financing models. This would be exceptional for business of all kinds, due to simpler Alternative Finance access. Canada deserves to be among the top leaders in Alternative Finance-Crowdfunding and I am confident over time they will.

While the United States and Canada remain strong economic partners, when it comes to crowdfunding there currently remains a massive void for the Canadians. Ultimately, can Canada adopt enough change for alternative finance – crowdfunding to allow it to contend in 2017?  Get our your crystal ball and let me know what you think the results will be??  email:  john@ncfacanada.org

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John Neal, a NCFA Canada Marketing Intern from Michigan State University. John focuses on business/marketing development for NCFA Canada. Increasing awareness for Canadian Crowdfunding Industry by way of online and offline outreach.

 

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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