Calgary companies breaking ground in hot fintech sector

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Calgary Herald | Amanda Stephenson | March 7, 2017

Calgary economic development

Could Calgary become a Canadian hub for fintech, the latest hot sector to capture the imaginations of investors and entrepreneurs alike?

A small cluster of local companies are already breaking ground in the up-and-coming space, and — with the sector appearing poised to permanently shake up the global banking industry — some people believe Calgary could see more capital investment and startups launched in the near future.

Calgary Economic Development, eager to help diversify the local economy beyond its reliance on oil and gas, has already identified fintech as a sector of interest as it seeks to attract new and established companies to the city.

Download:  2016 Alternative Finance Crowdfunding in Canada Industry report

“I would say that we view it as an opportunity,” said Mary Moran, president and CEO of Calgary Economic Development. “I think it’s even easier for people in Alberta to make investments in fintech than in high-tech, because it’s closer to their main industry of oil and gas. Financial services is quite closely related to the energy industry.”

Fintech — an all-encompassing term that covers a host of financial technologies, from mobile banking apps to international money transfer services to crowdfunding platforms — is taking off worldwide. According to a 2016 report by the Digital Finance Institute and McCarthy Tetrault LLP, investment from private capital in fintech companies was US$12.21 billion in 2014, an increase of 200 per cent from the year before. In 2015, fintech investment grew again to US$22.3 billion, an increase of 75 per cent.

Some observers believe fintech has the capacity to disrupt all aspects of financial services — from banking to payments to wealth management — the way online shopping and video streaming disrupted the retail and entertainment sectors, respectively. The change is just coming later than it did in some other industries, in part because of the inherent conservatism of the banking and finance worlds.

“It’s a very off-line industry — you know, meet in person, use Excel spreadsheets, make phone calls — it’s very inefficient,” says Brock Murray, CEO of Katipult, a Calgary-based fintech company whose cloud-based software gives firms in private markets the ability to design, set up and manage an investment crowdfunding platform. “You can walk into these billion dollar funds and when you actually look at how they do things, it could be paper applications. The way they do things internally could be the way people were doing things six years ago in other industries.”

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That’s starting to change as customers become more comfortable with dealing with money online, and as the major financial institutions realize they have to adapt or get left behind. Murray says Katipult — which just secured a substantial new capital investment in its latest funding round — has been fortunate to be in the right place at the right time, as excitement around fintech takes off.

“The sheer dollar volume that lies in these different types of firms — from banks to credit unions to hedge funds — there’s a significant amount of money there,” Murray said. “And it’s one of those industries that is disproportionately behind in terms of how they use technology, so I think investors are recognizing the huge potential there.”

Katipult began building out its software two and a half years ago and now has 20 employees — a number it expects to double over the next six months as a result of the recent capital investment. (Murray declines to disclose a dollar value, other than to say it was a “multi-million dollar” investment). The company also plans to explore opportunities for partnerships and acquisitions.

But while there’s no denying fintech is a hot space right now, Marcos Lopez — CEO of Calgary company Solium — says the term is more than a passing trend. Solium, whose software platform allows public and private companies to manage their employee stock option plans and share purchase programs, has been in business since 1999, when “fintech” wasn’t even a word.

“I think it’s an invented term. It’s really just about using technology to increase automation and service, which we do in all aspects of our lives,” Lopez says. “So instead of calling it a buzzword, I would say instead it’s an investment theme right now that people are starting to learn about and put energy behind — much like self-driving cars and virtual reality.”

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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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