Category Archives: Voices

Real estate crowdfunding in Canada: portal insights for 2017/18

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IT Business | Bret Conkin | June 12, 2018

Real estate and fintech have been integrating in exciting new ways in recent years.

Real estate online investment or crowdfunding has been a sector that has attracted significant interest in the U.S. over the last several years, with more than 100 portals launched to serve rapidly growing developer and investor interest. In fact, industry research hub crowdsourcing.org estimates that the industry will be worth more than $300 billion USD by 2025.

Why would developers consider an online and alternative financing route? A big reason, beyond the capital, is the significant marketing benefits that campaigns can generate, including community building.

Check out:  GAME-CHANGERS: Crowdfunding real estate projects in the GTA

To investigate where the Canadian market for real estate crowdfunding is going in the next 12 months, we interviewed the two leading portals in Canada, online investment platform NexusCrowd and private equity firm R2 (though R2 notes that they position themselves as an online marketplace or fintech in commercial real estate, not as “crowdfunders”).

Learn more below.

Bret Conkin: How many projects and capital were raised via your portal in 2017? To date in 2018?

Amar Nijar, CEO of R2 Capital & Investments: Since our launch two years ago, R2 has funded 12 projects with $25 million of equity and more than $200 million of debt.

Hitesh Rathod, CEO of NexusCrowd Inc.: In 2017 – three deals worth $2 million. For 2018 to date – one deal worth $1 million, but we’re expecting at least two more deals near term for $3 million in additional capital raised. Keep in mind that we are very selective about the deals we put on the platform and that all deals have been fully subscribed. Of note, two deals closed within four weeks and two deals closed within 2 weeks.

ITB: What are your overall metrics now since the launch of your portal?

R2: We have 2,500-plus investors on our platform, with thousands more on our emails, newsletters, and social media platforms.

NexusCrowd: Eight deals completed, with more than $5 million raised, and more than $240 million in project value.

ITB: What (ballpark) portion of the capital stack has the “online marketplace” contributed to your recent projects?

R2: 75 per cent of the equity we funded has come via online as lead generation or execution.

NexusCrowd: We’ve contributed anywhere between 15 and 100 per cent of the total capital raise (debt or equity) for specific projects. As a percentage of total capital stack (debt and equity required for a project), between five and 20 per cent.

ITB: What was your biggest online raise to date for a project?

R2: Close to $5 million on our $90 million mixed-use project across from Bayview village Mall, located on Sheppard Avenue between Bayview Avenue and Leslie Street in Toronto’s high-end housing area.

See:  Blockchain in Real Estate: You Can Now Buy Fraction of House

NexusCrowd: Two projects each raised $1 million. Deal 1 – Debt financing for a town home development in Markham, Ontario. Deal 2 – Preferred equity financing for the development of 10 luxury homes in Richmond Hill, Ontario.

ITB: Has the market for alternative finance unfolded at the pace you expected? Faster? Slower? Why?

R2: Very slow, due to the regulatory burdens of compliance. Currently Canada is not the right country for such innovation, despite the talk by politicians, as it’s not meeting the policy objectives in reality.

NexusCrowd: Slower than expected. It’s a combination of a couple of factors in my opinion – 1) Canadians are generally risk-averse and slower adopters of new products, and 2) Individuals aren’t aware of these alternative methods of investing.

ITB: What do you foresee for real estate “online marketplaces” in Canada over the next 12 months?

R2: Everybody is trying to carve his or her niche. Many think that having an online ID and password-based website with a docusign feature is an “online marketplace.” However, the players who truly engage the digital footprint with their good underlying investments, along with blockchain and security tokens, will be the clear winners over the next four years. Our current model is to provide a balanced risk-return portfolio via our online portal so investors have a dashboard to track their investments in real time. We are aiming to be the first ones in Canada to incorporate blockchain and security tokens into our platform by end of this year.

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IT Business | Bret Conkin | June 12, 2018 Real estate and fintech have been integrating in exciting new ways in recent years. Real estate online investment or crowdfunding has been a sector that has attracted significant interest in the U.S. over the last several years, with more than 100 portals launched to serve rapidly growing developer and investor interest. In fact, industry research hub crowdsourcing.org estimates that the industry will be worth more than $300 billion USD by 2025. Why would developers consider an online and alternative financing route? A big reason, beyond the capital, is the significant marketing benefits that campaigns can generate, including community building. Check out:  GAME-CHANGERS: Crowdfunding real estate projects in the GTA To investigate where the Canadian market for real estate crowdfunding is going in the next 12 months, we interviewed the two leading portals in Canada, online investment platform NexusCrowd and private equity firm R2 (though R2 notes that they position themselves as an online marketplace or fintech in commercial real estate, not as “crowdfunders”). Learn more below. Bret Conkin: How many projects and capital were raised via your portal in 2017? To date in 2018? Amar Nijar, CEO of R2 Capital & ...
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Real estate crowdfunding in Canada: portal insights for 2017/18
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Grow VC Group | Jouko Ahvenainen | Jun 2018 Data and AI started to come fundamental components for FinTech in 2017. There are several reasons for this development, for example, the development of machine learning and data analytics solutions, growth of FinTech services to have enough data, and new cloud based infrastructures that make it easier to use data. We can expect this development continues and accelerates in 2018. At the same time, blockchain, distributed finance models and increasing privacy concerns will change data requirements and models. Data is coming a fundamental enabling component in the finance services, and it will give also more power to customers. Data to enable customers Everyone today knows data has a lot of value. “We try to collect all possible data, and then we find a model to monetize it, maybe sell to advertisers,” is a common sentence in many business plans. “We help companies monetize their data,” is another typical value promise. “Let’s offer our solutions for free, if we can get the data,” is a ‘sales strategy’. Is it so simple that you offer software, apps, and services to consumers and companies, utilize their data and create a big business? It really ...
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The world's new oil and AI's imminent impact on the future of Fintech
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The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to thousands of members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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The world’s new oil and AI’s imminent impact on the future of Fintech

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Grow VC Group | Jouko Ahvenainen | Jun 2018

Data and AI started to come fundamental components for FinTech in 2017. There are several reasons for this development, for example, the development of machine learning and data analytics solutions, growth of FinTech services to have enough data, and new cloud based infrastructures that make it easier to use data. We can expect this development continues and accelerates in 2018.

At the same time, blockchain, distributed finance models and increasing privacy concerns will change data requirements and models. Data is coming a fundamental enabling component in the finance services, and it will give also more power to customers.

Data to enable customers

Everyone today knows data has a lot of value. “We try to collect all possible data, and then we find a model to monetize it, maybe sell to advertisers,” is a common sentence in many business plans. “We help companies monetize their data,” is another typical value promise. “Let’s offer our solutions for free, if we can get the data,” is a ‘sales strategy’.

Is it so simple that you offer software, apps, and services to consumers and companies, utilize their data and create a big business? It really isn’t that simple anymore, because

  • so many parties want that data,
  • most users are becoming smarter with their data and asking more questions about their data,
  • data doesn’t have uniform value,
  • authorities create rules about the use of data, and especially
  • most data utilization is marginal optimization, not real value to customers.

Finance institutions and credit scoring companies collect data specifically to manage risks, for example, to decide, if a customer is allowed to get a loan. There are several new credit scoring companies, especially in the emerging market, but also in developed countries, that collect much richer data, e.g. social media, mobile and finance apps data. Typically, consumers don’t even exactly know what data is collected and how it is used. Or the consumer learns about the data when hackers steal it, like from credit rating agency Equifax. One could also say that the use of this data is very one-sided. Finance institutions use this to make decisions about customers and product offering for them, but it doesn’t really help customers to find the best deals.

See:  Convenience vs Privacy: Here are 4 tips to protect your data from being shared on Facebook

These above examples are about cases involving companies collecting customer data and wanting to utilize it make better business by optimizing some of their operations like marketing, risk management or product offerings. But the real value for those customers is often very limited. This means those companies can improve their business a few percent, but it is not disruptive or game changing. Google changed the game, it collects a lot of data, but its services have been also much more direct value to users than analytics from many other companies.

Many companies still see that the way to utilize data is to optimize their own operations to generate more revenue or cut costs. They don’t want to empower customers properly to utilize that data in the services that customers could get direct value. For example, finance data should not be used only by a lender to make a loan decision and adjust interest rates, but it should enable a customer to have a better user experience and find the best loan and interest rate.

Data is the black gold, but to get the full value, it cannot only be a one-sided marginal optimization. All parties must be able to utilize it and build totally fresh solutions. If oil companies had used oil only internally to offer transportation services, it wouldn’t have changed the world, created free mobility and huge businesses. Oil became the black gold when people got cars and other vehicles and got freedom to move based on their own needs. The data business must learn to be an enabler, not just a one-sided optimization tool.

Customer control and distributed models

Regulators, authorities and law makers have become more interested in the use of data. One example is EU’s General Data Protection Regulation, GDPR, that gives more power to consumers to know his/her data and control the use of them. Generally, authorities and consumers see it as more acceptable to collect and use data if the consumer can see and control the data, and if consumers also get real value from it.

The question about ownership of certain data is not simple. One can argue that an individual should own all the data that is from her or him. Someone else can argue that if you use a bank account or credit card, the bank or credit card company in question owns the data linked to those accounts. It is a little bit like, if two parties have a phone call, is it both of them or neither of them that own the rights to the call and can for example publish it?

Probably the fundamental question isn’t who owns the data. The question is, who can use it and for which purposes. Now the situation is not in balance. Companies collect all kinds of data from individuals, sell it to other companies, combine it with other data sources, and utilize it for their own business. At the same time, consumers often cannot even have their own copies of this data, don’t know to whom their data is sold, and how it is combined with other data sources. When all the data was in paper form, the situation was probably better for consumers, they at least had their own papers at home.

Finance services and health care are two areas where companies have a lot of data from people. It is often also very sensitive information in nature. There are many companies in those industries, and people often use services from several companies. It is often valuable too for the consumer that companies can share information between them. For example, when you go to a doctor or hospital, it can help in your treatment that they know your medical history, and when you apply for a loan or use wealth management services, your finance history helps to find the right products and make decisions. But it must be consumer’s decision to share this data.

More:  Europe’s banks brace for a huge overhaul that throws open the doors to their data

Consumers should also have their own copy of their data and the ability to use it when it offers value for them. For example, they could go to a new hospital and insurance company with their personal medical history, or apply for a loan or make personal finance planning with their own data.

We have had two parallel, but slightly opposite, developments with the internet. While each individual can generate more activity - for example publish his or her photos, articles and have their own e-commerce site - the data is concentrating more to some central places, such as to big companies, data aggregators, and data processors (for example Equifax or online marketing platforms). Now we can see developments that we could move to more distributed models with data too and individuals could get better control over their data.

This technically is also linked to blockchain development that particularly has an impact on the finance industry. Blockchain basically distributes finance data, transactions and authority around the Internet, to individuals and their nodes. A person can have her or his own bitcoin and cryptocurrency wallet, which is not the account of a bank or finance institution. Now we will see solutions where people can have their own safebox for their finance, health care, and other data.

Lawmakers will probably try to give further rights to consumers to control their own data; in some countries sooner, some later. But new distributed ledger and data models can empower consumers sooner to take control and impact the balance. In finance and data services we can see development that the control and databases will be distributed. It is not anymore a hierarchical centralized model to manage data, but it will be a distributed model with the consumers in control.

Case: Real time data in SME lending

SME lending can be profitable but at the same time a bad business for banks. The reason is that SME loans are seen as a high-risk liability, and have an impact on capital ratios and the price of capital. The 2007 finance crisis also demonstrated, how the packaging of loans contains significant risks and removes transparency from the debt market. Fintech and data analytics can change this.

Decades ago banks and other lenders typically knew their customers better. Now data analytics makes it again possible. For example, the accounting data with other data sources can be used directly for lending decisions, and the data can be also be used to price loans on the secondary market.

The main data sources are 1) 3rd party data providers, and 2) borrowers, especially their online accounting systems. Data makes loans more transparent in the secondary market and helps price them and also attract investors in the loans. It is possible to develop solutions, with true real-time pricing for each loan in the secondary market. It is also decreases risks of the traditional securizitation.

Data oriented SME loans will change the market. SME lending is a significant business opportunity for banks, but also for alternative finance lenders and p2p lending services. Data oriented SME lending framework offers the leading solution to implement lending services that fully utilize available data, offer better value for SME companies, lenders and loan investors. It also improves bank’s opportunities to operate in this market due to capital ratio requirements.

Also:  Element AI: The market is still figuring out how to share data with enterprise AI startups

Summary

Data analytics and AI will change many finance services. They will replace work as they have done already to analyze agreements, make trading and analyze investment opportunities. The significant change is that data and AI enable customers in a new way in the finance services. Data analytics and AI come also to all daily services, especially for the lending business, and daily customer services. Cryptocurrencies, distributed ledger ecosystems and cloud based services will changes implementation, architecture and business models of many finance services, and they will have impact on models to use and utilize data too. As a whole data and AI service development is one of the most important FinTech components in 2018.

 

Jouko Ahvenainen is a serial-entrepreneur, e.g. co-founder of Grow VC Group, a pioneer in new funding solutions, including equity p2p investments. He participated in changing US finance regulation, getting the Senate and President to allow crowdfunding and has worked with EU finance regulation. Jouko started his work with crowdfunding models in 2008.  Jouko is a founder, partner and board member in several innovative digital finance companies. Jouko is also an advisor for US, European and Asian investing and finance programs. He has especially worked to plan and implement models to get crowd investing and institutional investor models to work together.


The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to thousands of members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Peer-to-peer lending will help small businesses stay afloat

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The Globe and Mail | Michael King and Craig Asano | May 30, 2018

With interest rates on the rise and the Canadian banks moving up lending rates, the higher cost and reduced availability of credit will affect all Canadian businesses, like a rising tide lifting all boats. Inevitably some boats will be swamped and sink, particularly if they are smaller and more vulnerable.

One set of borrowers at greater risk are Canada’s 1.14 million small businesses, defined as companies that employ up to 99 workers. Statistics Canada reports that small businesses represented 98 per cent of all businesses, employed 70 per cent of workers, and generated 30 per cent of each province’s GDP on average. This category includes startups and high-growth firms, which represent Canada’s best hope for job creation and economic growth.

As credit becomes less available, small businesses face a difficult choice of cutting back on investment or turning to more expensive borrowing, such as credit cards or payday loans. Either option is bad.

Fortunately, small businesses now have an alternative source for loans called peer-to-peer (P2P) lending. These online platforms match borrowers and investors directly and can provide loans cheaper and faster than traditional sources. How can that be? The answer is technology.

Taking a step back, small businesses are financed differently than big ones. Most Canadian startups have neither the credit history nor the collateral to secure a bank loan. Statscan reports that more than 80 per cent of startups rely on alternative funding sources such as the entrepreneurs’ savings and personal loans taken out by owners. Only 45 per cent can access credit from financial institutions and 19 per cent receive trade credit from suppliers.

Technology is disrupting this paradigm. P2P lending platforms allow businesses (and individuals) to take out a loan online with the funds crowdsourced by investors who pool their savings to fund loans. Traditionally only financial institutions were set up to screen borrowers and allocate credit. But technologies such as the internet, cloud computing, data analytics and artificial intelligence have opened this asset class to new lenders such as your neighbour or a fellow business owner.

Canada’s first P2P platform, Lending Loop, was launched in late 2015 – a decade after this model was pioneered in Britain by Zopa. Last month, Lending Loop passed $20-million in loans funded on its platform by more than 20,000 Canadian investors. While $20-million is impressive, it is still only a sliver of the $95-billion of credit outstanding to Canadian small businesses as reported by Statscan.

The average small business borrower on Lending Loop’s platform is borrowing $75,000 to $100,000 for three to five years. While interest rates vary substantially, P2P loans typically start at around 6 per cent with an average interest rate of 12 per cent, significantly lower than a credit card. These loans are used to finance inventory and equipment, or to hire new employees.

The Canadian P2P lending market got a boost this month when the Ontario government announced it would contribute $3-million over the next two years to loans funded on Lending Loop’s platform. The Ontario government will fund up to 10 per cent of small business loans, supporting funding of $30-million.

See:

Besides the obvious benefit to small businesses, Ontario’s announcement was important for two reasons. First, Ontario has drawn attention to P2P lending as an alternative funding source and raised awareness among businesses to accelerate adoption. And second, by partnering with a fintech startup, Ontario is leading by example and giving a boost to entrepreneurs working to democratize finance.

Here are four more steps that Canadian policy makers can take to promote P2P lending:

First, Canada should follow Britain and adopt new P2P lending regulations, as opposed to shoehorning this sector under existing equity regulations. New regulations should ensure the cost of due diligence borne by lenders is proportionate to the investment risk.

Second, retail investor caps for P2P lending should be raised over time if this asset class is proven to be low risk, increasing the pool of funds available to meet the needs of small businesses.

Third, the federal government should partner with industry to provide more education for investors and small businesses. This effort should include data collection and benchmarking to allow researchers to establish what is working and what is not.

Fourth, Canada should adopt Britain’s mandatory referral program. Banks that reject a small-business loan must refer unsuccessful applicants to a government portal that connects them with alternative lenders who may be able to assist them.

Our hope is that Canadian politicians recognize that promoting innovation means more than cutting ribbons and offering tax credits. It is about plugging holes in a leaky financial system and adding wind to the sails of small businesses to move them forward.

 

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The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to thousands of members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry.  Join Canada's Fintech & Funding Community today FREE!  Or become a contributing member and get perks. For more information, please visit:  www.ncfacanada.org

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Re: OSC Notice 11-780 Statement of Priorities – Request for Comment Regarding Statement of Priorities (the “SofP”) for Financial Year to End March 31, 2019

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NCFA Canada | May 28, 2018

VIA EMAIL

May 28, 2018
Robert Day
Senior Specialist Business Planning
Ontario Securities Commission
20 Queen Street West
22nd Floor
Toronto, Ontario M5H 3S8
Email: rday@osc.gov.on.ca

Re: OSC Notice 11-780 Statement of Priorities – Request for Comment Regarding Statement of Priorities (the “SofP”) for Financial Year to End March 31, 2019

 

Dear Sirs/Mesdames:

The NCFA thanks the OSC for the opportunity to comment on its draft 2018-9 Statement of Priorities (“SofP”).

Summary

We are concerned that the OSC’s laudable commitment to investor protection (“Investor protection is always a top priority for the OSC”) has come to overwhelm the organization’s role, and effectiveness, in fostering fair and efficient capital markets and confidence in capital markets, at least with respect to financial services models and other innovations that are emerging to meet investor and market needs.

As a result, and despite some successes to-date, Ontario is not at the forefront of financial sector innovation. Other jurisdictions, from the United Kingdom to Singapore, have taken a risk-based approach and have focussed equally on the objectives of consumer protection and fair and efficient capital markets. They are now leading both on financial innovation and regulatory innovation, with impressive economic gains to show for it. Sadly, that is not the case in Ontario.

 

Detail

In its Strategic Outlook 2015 - 2017, the OSC states that “Capital raising will be transformed in Ontario through the expansion of the ‘exempt’ market. The OSC will improve access to capital by introducing a suite of changes to the securities regulatory framework that will offer greater opportunity for companies to raise capital without a prospectus and for investors to make investments in those companies (for example, through offering memorandum and crowdfunding exemptions). The OSC will support the transformation of the exempt market in several ways including, for example, by facilitating the registration of crowdfunding portals and the filing of offering memoranda and reports of exempt distributions by issuers who have raised capital in reliance on those exemptions.

“Through its ongoing analysis of exempt market data and supervision of the conduct of dealers, the OSC will assess whether the changes introduced are having the desired impact of giving businesses more options through which to raise capital and giving investors for whom they might be suitable greater access to more diverse investment opportunities.”

Reading between the lines, if this strategic priority was intended to mitigate the threat of overly burdensome regulation which would threaten “fair and efficient capital markets and confidence in capital markets” then the NCFA strongly agrees with this priority. The threat is a serious one.

However, as the NCFA has noted publicly, so far as we are aware, the OSC initiatives within this priority have largely fallen short or failed compared with other jurisdictions and Ontario continues to fall further behind more progressive economies.  (We were unable to locate  the OSC’s assessment of “whether the changes introduced are having the desired impact of giving businesses more options through which to raise capital and giving investors for whom they might be suitable greater access to more diverse investment opportunities”.)

 

Suggestions

The NCFA has argued strongly that overly prescriptive and non-harmonized regulation of start-ups, crowdfunding, and fintech is stifling innovation and sending our entrepreneurs to the US and elsewhere. It seems clear to us that poor regulation of this sector remains a key risk to the OSC’s mandate of fostering fair and efficient capital markets and confidence in capital markets and so requires much stronger action (as we have already advocated in submissions to the OSC).

In the NCFA’s view, the OSC should be urgently prioritizing revamping the regulatory regime together with other CSA regulators in line with (and cooperating with) progressive international regulators. It is also crucial that more and better data be collected, analyzed, and published so that we can see exactly where we are compared to other jurisdictions and year on year.

The collection of better data and analysis would allow the OSC to set performance measures that would help to show, over time, that more start-ups are enabled and supported to the next stage (or not), that capital raising has increased (or reduced) among this cohort, that more (or fewer) entities are being driven out of the jurisdiction, that unjustified compliance costs have been reduced, and so on, compared to other jurisdictions. Simply measuring (how?) perceptions of Ontario as an innovative fintech hub is not enough. And we already know that sandboxes alone will not fix Ontario’s problems in this sector.

Metrics for measuring regulatory and economic outcomes (or at least the development of metrics) should be incorporated into the SofP. These could include:

  • Capital flowing into fintechs
  • Number of listed debt and equity portals and capital raised
  • Company financings via these new mechanisms and successes/failures
  • Loan volumes via these alternative channels, especially to small businesses
  • Time spent to comply with regulatory exemptions
  • Cost($) of compliance.

 

Simply continuing existing work without a proper analysis of what is working and what is not, with proposed next steps to fix the problem, is not good enough.

The NCFA firmly believes that effective strategic planning, a risk-based approach, fact-based decision-making and a defined measurement program (with accountability) is the only workable path towards cost-effective regulatory policy that achieves a balance between multiple objectives. We would be pleased to work with the OSC in the development of robust data collection and metrics for 2018-9.

Thank you for your time.

On behalf of NCFA Canada

Download the submission -->here

Links:

http://www.osc.gov.on.ca/en/Publications_pub_20150618_osc-2015-2017-strategic-outlook.htm

https://www.fca.org.uk/publications/corporate-documents/our-business-plan-2018-19

http://www.conferenceboard.ca/hcp/provincial/innovation.aspx


About NCFA:

The NCFA was established in 2012. Its members are the leading-edge firms and portals dedicated to offering Canadians alternatives to the established financial industry players and supporting innovation and competition in fintech. These alternatives range from debt and equity crowdfunding platforms to companies in the blockchain and cryptocurrency spaces.

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The forces of change are trumping banks and regulators

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The Globe and Mail | and | May 15, 2018

Patricia Meredith and James L. Darroch are the authors of Stumbling Giants: Transforming Canada’s Banks for the Information Age, the winner of the 2017/18 Donner Prize.

Most businesses fail to respond to the challenge of disruptive technology. But disruptive technologies, including mobile devices, cloud computing, artificial intelligence, blockchain and social networking, are transforming financial services.

So it is perhaps not surprising that, far from embracing creative destruction, the protected oligopoly of Canadian banks and their counterparts in many other parts of the world have chosen to lobby in favour of the status quo. The response of global financial regulators, in the form of Basel II and III, has reinforced the old business model, making it more difficult for banks to adapt. Unfortunately, as we describe in our book, Stumbling Giants: Transforming Canada’s Banks for the Information Age, the forces of change are far more powerful than the bankers and regulators are.

As Bill Gates said more than 20 years ago: “We will always need banking, we won’t always need banks.”

The functions of banking – lending, investing and paying – are necessary in the information age. But how these functions are performed looks very different. Financial-technology companies (fintechs) – such as Amazon, PayPal, Alibaba, Apple, Google and myriad small players including robo-advisers, lenders and payments providers – are using technology to create new and better financial services for both consumers and businesses. They operate in all parts of financial management, whether that is tracking overall spending, applying for a loan or optimizing investment strategies. These technology companies compete directly with traditional banks and, in many respects, have taken them by surprise.

Ant Financial Services (part of the Alibaba Group) uses information from its payment-processing platform to develop cash flow forecasts and assess the riskiness of micro, small and medium-sized businesses. It tracks performance in real time and increases credit lines if the business is increasing faster than expected and accelerates collections if it is not. Ant’s loan losses are significantly lower than those of traditional banks. It’s “Just Spend” securitized consumer loan product helps consumers take that vacation they have been dreaming about. Amazon One Click let’s me buy that item I have been eyeing up online without having to perform a payment transaction. PayPal for Business offers web payments, online invoicing and other services to help me run my online business better.

To support the growth of fintech companies in Canada, the federal government must encourage innovation and increase competition. As Payments Canada rolls out our new real-time payments system, the government should accept the Competition Bureau’s recommendation and enact legislation to open access to qualified non-bank participants. It must implement legislation similar to laws already in place in Britain, the European Union and Australia, making it clear who owns the data stored in warehouses (the customer) and who has access to it (all competitors with the owners’ permission). This would make information – the raw materials for modern financial services – available to all competitors.

Check out:  NCFA: Canada Needs a Harmonized Securities Environment as Current Provincial Approach is a Fintech Innovation Killer

To support the growth of micro, small and medium-sized enterprises (SMEs) the government should consider giving the Business Development Bank of Canada the mandate to develop securitized lending. Using artificial intelligence and sophisticated risk-pricing algorithms to adjudicate loans based on real-time transaction data and future cash flow forecasting has proven much more reliable than traditional bank lending, based on historical returns and secured assets.

Innovation in financial services is urgent. Canada is falling further and further behind. Countries such as China, India and the United States are moving rapidly to establish e-commerce platforms with integrated financial technology companies. Fintechs are key drivers of the financial ecosystem of the future. Instead of wasting time revising the Bank Act to preserve the status quo, our policy makers should focus on legislation to ensure access to infrastructure and data for innovative new entrants and access to financing for the SMEs that represent Canada’s entry into the 21st century information economy.

Continue to the full article --> here


The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to over 1700+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry.  Join Canada's Fintech & Funding Community today FREE!  Or become a contributing member and get perks. For more information, please visit:  www.ncfacanada.org

 

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Here’s what motivates a crowdfunding investor to back a campaign

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Insider.co.uk | By Philip Gates | Apr 23, 2018

Crowdfunding is a rapidly growing way to raise much-needed capital for businesses. But how can you make one eye-catching enough to attract investors? John Auckland of crowdfunding communications agency TribeFirst outlines the dos and don'ts

Equity crowdfunding campaigns - such as Drink Baotic - are all about attracting and engaging investors. So what exactly are investors looking for? What makes the difference in their decision to invest or not?

Retail investors versus sophisticated investors

You can categorise investors into two types: retail and sophisticated.

Retail investors are investing more emotionally. Sophisticated investors typically invest more than retail investors, but the amount they invest doesn’t necessarily reflect their level of sophistication.

Check out:  How to Think About Your Business Model and Pitch It to Investors

While it’s definitely more a spectrum than two clear camps, there are some common identifying features:

● Retail investor goes with gut decision/Sophisticated investors have an appraisal process.

● Retail investors make their decisions based on emotional attachment/Sophisticated investors made decisions based on rational attachment.

● Retail investors will typically look for pros/Sophisticated investors are looking for cons.

● Retail investors = heart first/Sophisticated investors = head first

● Retail investors are gambling with disposable income/Sophisticated investors view crowdfunding as one of the riskier assets in their portfolio.

● Retail investors want to be part of a journey/Sophisticated investors are investing to make a return.

Some critics of crowdfunding have claimed that retail investors shouldn’t exist at all. I find this view patronising.

Firstly, as long as you are aware of the risks, then it’s your money to do with as you will. Secondly, I have seen many well-managed and institutionally-funded companies still go on to fail.

See:  Fintech lures millennial investors away from asset managers

Risk exists everywhere. But is it any less noble to invest in something because you believe in the idea, rather than investing simply to make a profit?

And the crowd has proven it has greater foresight than you’d think. The data suggests the crowd is often as good at predicting the future success of a company as professional analysts.

It’s not surprising, really. The crowd is representative of the market.

What can you do to stand out to both retail AND sophisticated?

So what can you do to appeal to both kinds of investors.

Assuming your company is in a healthy state, organise a consumer marketing and PR campaign to hit at the same time as your crowdfunding campaign.

You’ll be able to update investors with your progress in real time. Having a buzz about your company during your raise will drive retail investors to your campaign and give sophisticated investors confidence.

Also:  Venture funding best practices

What will turn investors off?

There are some things that you need to avoid entirely, including:

● Not answering questions openly on the public forum.

● Not including a financial model.

● Not making yourself available during the campaign.

● Not doing your homework.

Continue to the full article --> here


The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry in Canada.  For more information, please visit:  www.ncfacanada.org

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How to Create Your Own Cryptocurrency

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LifeHacker | Emily Long | Apr 23, 2018

If you aren’t an expert coder but have been a keen armchair observer of Bitcoin, Dogecoin, and every other increasingly niche cryptocurrency, you might be wondering if it’s feasible to create your own.

In short: yes. But there are quite a few different options to consider—and caveats to keep in mind—before you dive in.

Know the Difference Between a Coin and a Token

First, it’s important to understand the difference between coins and tokens. Both are cryptocurrencies, but while a coin—Bitcoin, Litecoin, Dogecoin—operates on its own blockchain, a token lives on top of an existing blockchain infrastructure like Ethereum. A blockchain is, at its simplest, a record of transactions made on and secured by a network. So while coins have their own independent transaction ledgers, tokens rely on the underlying network’s technology to verify and secure transactions and ownership. In general, coins are used to transfer wealth, while tokens can represent a “contract” for almost anything, from physical objects to event tickets to loyalty points.

See:  Your guide to cryptocurrency regulations around the world and where they are headed

Tokens are often released through a crowdsale known as an initial coin offering (ICO) in exchange for existing coins, which in turn fund projects like gaming platforms or digital wallets. You can still get publicly available tokens after an ICO has ended—similar to buying coins—using the underlying currency to make the purchase.

Anyone can create a token and run a crowdsale, but ICOs have become increasingly murky as creators take investors’ money and run. The Securities and Exchange Commission is cracking down on ICOs and moving to treat tokens as securities that, like stocks, must be regulated. The SEC cautions investors to do their research before buying tokens launched in an ICO.

At the time of writing, CoinMarketCap lists 895 coins and 679 tokens available on public exchanges. Not all tokens made it to exchanges, however — Etherscan, which provides Ethereum analytics, has more than 71,000 token contracts in its archive. While the crypto market is volatile, experts believe that it will continue to mature as more people adopt the idea.

The very idea behind cryptocurrency is that the underlying code is accessible to everyone—but that doesn’t mean it’s easy to understand. Here are the paths to creating your very own coins and tokens.

Build Your Own Blockchain—or Fork an Existing One

Both of these methods require quite a bit of technical knowledge—or the help of a savvy developer. Because coins are on their own blockchains, you’ll have to either build a blockchain or take an existing one and modify it for your new coin. The former takes serious coding skills and even though tutorials exist to walk you through the process, they assume a certain knowledge level, and you don’t finish with a fully functioning coin.

Alternatively, you can fork an existing blockchain by taking the open-source code found on Github—Litecoin, for example—making a few changes, and launching a new blockchain with a new name (like Garlicoin). Again, this requires you to understand the code so you know what to modify and why.

Launch a Coin or Token Using a Cryptocurrency Creation Platform

This option is the most feasible for the average person—a creation service will do the technical work and deliver your finished coin or token back to you. For example, CryptoLife will actually build a custom coin, and all you have to do is enter the parameters, from the logo to the number of coins awarded for signing a block. (That is, when they’re open for business—as of press time, orders are currently closed.) They even have pre-built templates that only require you to provide a name and a symbol. The base price for this service is 0.25 BTC ($2002.00 as of this writing), and you’ll receive your coin’s source code in a few days. WalletBuilders has a similar service starting at 0.01 BTC as well as a free test version.

You can also create a token—what is essentially a smart contract—with or without a public ICO. Because tokens can represent any asset, from a concert ticket or voting right to funding via a crowdsale or a physical currency, you can even create a token with no real value or serious purpose other than to exchange among friends. This is faster, simpler, and cheaper than creating a coin because it doesn’t require the time and effort to build and maintain a new or forked blockchain and instead relies on the technology already in use for Bitcoin or Ethereum.

A common product is an ERC-20 token, the standard for those built on the Ethereum blockchain. The code for these token contracts and crowdsales is also available for the very ambitious, but there are user-friendly platforms that will walk you through the process.

With CoinLaunch’s CoinCreator, for example, you’ll need to add the MetaMask extension—which connects you to the Ethereum network—to your browser and then follow their walk-through video to build your token and launch your ICO. The platform offers the option to create bonuses and vesting schedules for investors or even launch a token contract without a crowdsale. The token contract process is free, but CoinLaunch takes a commission from each ICO (4-10% depending on much money is raised).

Continue to the full article --> Here


The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry in Canada.  For more information, please visit:  www.ncfacanada.org

 

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