Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Voices
Join Open Banking Advocates to Demand Canada Unlock Financial Stagnation
Open Banking in Canada | Oct 3, 2023
Coalition of advocates for open banking in Canada Launch 'Choose More' Campaign to Ignite
In a bold stride towards financial liberation and innovation, the "Choose More" campaign has been launched, spearheaded by a coalition of pioneering Canadian FinTech companies. This initiative emerges amidst the palpable delays and challenges that have entwined the open banking initiative in Canada, casting a spotlight on the urgent need for a robust, user-centric financial system.
Open banking, a system that provides a user-friendly and secure way for consumers to share their financial data with third-party developers, has been embraced by numerous countries to foster innovation and competition among financial service providers. However, Canada lags behind in implementing a formal open banking system, despite its potential to revolutionize the financial landscape.
Open Banking in Canada is At Risk
A recent article highlights the ongoing delays and challenges faced by the open banking initiative in Canada. A coalition of prominent Canadian FinTech companies, including Wealthsimple, EQ Bank, and Wise, launched the "Choose More" campaign to expedite the federal government's progress on open banking and payment modernization. This campaign underscores the potential benefits of open banking, such as reducing banking fees, enabling Canadians to utilize their rental history to build credit, and providing more choices and competitive pricing for consumers and small businesses.
See: NCFA Open Banking Current State in Canada with Senator Colin Deacon and Mahi Sall
Despite the apparent standstill, Abraham Tachjian, Canada’s open banking lead, has extended his tenure until the end of 2023, signaling a commitment to advancing this initiative but next steps for implementing a formal open banking system have not been announced. Canada remains the only G7 country without a formal open banking system or real-time payments.
Here's a break-down:
- 2018: Canada initiates exploration into the concept of open banking, marking the inception of discussions and considerations regarding the implementation of a new financial system.
- July 2021: A briefing note detailing the subsequent steps to advance open banking in Canada is delivered to the Minister of Finance, offering insights and recommendations for the journey ahead.
- August 2021: The federal government’s advisory committee releases a report, providing a blueprint for open banking in Canada, despite experiencing several delays.
- Early 2023: The federal government reneges on its election commitment to roll out an initial version of open banking, signaling a deviation from the proposed timeline.
- Mar 2023: The federal budget of 2023 omits updates or mentions of open banking, sparking concerns and dissatisfaction among FinTech executives and stakeholders.
- Summer 2023: Abraham Tachjian, the lead for open banking, has his timeline for delivering final recommendations to the finance ministry postponed until summer 2023, indicating further delays in the process.
- Oct 3, 2023: Abraham Tachjian announces the extension of his term as the leader of Canada’s open banking initiative until the end of 2023, ensuring continuity in leadership amidst the ongoing developments.
- Oct 3, 2023: A coalition of FinTech companies launches the "Choose More" campaign, advocating for the expedited implementation of open banking and payment modernization to address the ongoing delays and to promote a more efficient financial system in Canada.
Unproductive Canada Cannot Afford More Delays
The delay in implementing open banking and payment modernization has several implications for Canadians and the financial industry. Small and medium businesses, which are already grappling with stagnating sales and delayed payments from customers, could benefit significantly from reforms like open banking. Such reforms have been shown to lower fees, expedite money movement, and enhance access to capital in other global markets.
Moreover, the lack of a formal open banking system and real-time payments infrastructure puts Canada at a competitive disadvantage on the global stage, potentially stifling innovation and limiting options for consumers and businesses alike.
Choose More For Your Future! A Call to Action
The "Choose More For Your Future" campaign, accessible at choosemoreforyourfuture.com, advocates for an upgrade in Canada’s financial system, emphasizing that Canadians deserve banking that allows them to retain more of their money. The campaign highlights several issues with the current financial system, such as costly fees, slow payments, lack of choice, and a failure to innovate, pointing out that while Canadians grapple with high inflation and soaring costs, banks continue to reap substantial profits from fees.
Key Points from the Campaign:
- Sky-High Fees: Canadians pay substantial amounts in fees throughout their lifetimes, and Canadian businesses lose between $3-6.5 billion annually due to fees.
- Home Ownership: 63% of Canadians have relinquished their dream of home ownership due to financial constraints.
- Broken Promises: The campaign underscores that Ottawa is lagging in fulfilling its promise to reduce banking fees by providing Canadians with more options. While global counterparts are innovating and modernizing banking, Canadians continue to await a financial system that ensures they control their data.
- The Solution: The campaign advocates for Open Banking, which allows individuals to control their data, and payments modernization, which offers quicker and more cost-effective options for transferring money. However, Canada is trailing behind the global community in these aspects.
- Benefits of Open Banking: The campaign outlines several benefits of open banking, such as utilizing rental history to enhance credit scores, reducing fees for small businesses, economic growth, managing multiple accounts in one place, and providing more choices and lower fees for consumers.
Catalyze Change - Demand More From Your MPs and Government
The campaign calls for collective action, urging Canadians to join and demand more from their MPs and government, emphasizing that while one voice may not make a significant impact, thousands can. You can join the movement and make your voice heard by visiting Choose More For Your Future. Demand a more equitable, innovative, and consumer-friendly financial system that aligns with the digital age.
The journey towards open banking in Canada has been fraught with delays and challenges. However, the collective action of FinTech companies and the public can catalyze change and pave the way for a financial system that is in tune with the needs and demands of modern consumers and businesses. It is imperative for Canadians to advocate for a future where they have more control, options, and benefits from their financial data.
Choose More --> Now
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
 |  |  |
|---|---|---|
 |  |  |
OSFI’s Evolving Focus on Integrity & Security
Regulatory Insights | Sep 26, 2023
Image: Unsplash/Brett Jordan
OSFI Superintendent Peter Routledge recently delivered a keynote speech at the Global Risk Institute Annual Summit, highlighting the organization's evolving approach to risk management, particularly in the areas of integrity and security.
Evolving Mandate
- Historically, OSFI's primary focus has been on prudential, financial risks, especially post the 2008 global financial crisis. This included aspects like leverage ratios, reserve capital, and liquidity.
- However, the growing prevalence of non-financial risks, such as those arising from climate change, digitalization, institutional culture, and geopolitical risks, has necessitated a broader approach.
See: OSFI and GRI report: AI in Finance Needs Safeguards, Explainability Key For Trust
- OSFI's mandate has recently undergone changes, emphasizing the importance of integrity and security in promoting confidence in Canada's financial system.
Non-Financial Risks A Growing Concern
- While financial risks remain a significant concern, non-financial risks, if unaddressed, can manifest as prudential risks.
- Risks like climate change, digitalization, and institutional culture, although primarily non-financial, can have substantial prudential impacts.
- Geopolitical risks are becoming more prominent and can expose Canadian financial institutions to vulnerabilities.
Addressing Threats to Integrity and Security
- The Government of Canada modified OSFI's mandate in June, emphasizing the supervision of federally regulated financial institutions (FRFIs) to ensure they have adequate policies against threats to their integrity or security, including foreign interference.
- Failures in integrity can lead to financial risks. Integrity is demonstrated through actions consistent with ethical standards, regulations, and the law.
- Security, defined as protection from threats to physical premises, technology assets, data, and information, is crucial for operational resilience.
Implications of Foreign Interference
- While Canadian banks are generally resilient, they are not immune to threats from potential hostile actors.
- Foreign interference can manifest in various ways, including cybersecurity threats, illicit financial activities, and vulnerabilities in ownership and control of financial institutions.
- OSFI emphasizes early action to address risks and expects financial institutions to respond immediately to suspicions of undue influence or malicious activity.
Future Directions
- OSFI plans to release draft guidelines on its approach to integrity and security by mid-October, with final guidance expected in the new year.
See: Guide: How to spot potential money laundering
- The organization is also building its capability to measure foreign interference risk in collaboration with federal government partners.
- OSFI's updated Supervisory Framework will consider how to supervise these new risks.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
Luge Capital Secures $71M in Second Fund’s First Close
Capital | Sep 26, 2023
Image: Luge Capital GPs, Karim Gillani and David Nault
Luge Capital, a trailblazer in fintech-focused venture capital, has unveiled a significant milestone: the first close of its second fund, Luge Capital Fund II, amassing CA$71 million.
MONTRÉAL – September 26, 2023 – With an ambitious target of $100 million for the fund, this announcement is set to reverberate across the fintech investment landscape.
Since its launch in 2018, Luge Capital has been synonymous with innovation, backing early-stage startups in Canada and the U.S. that are led by transformative founders. Their inaugural fund of roughly $85 million saw investments in 21 pioneering companies, including standout names like Flinks, Plooto, and Owl.
The second fund promises to be even more impactful. Not only will it continue the legacy of its predecessor, but it's also broadening its investment horizons. Luge is setting its sights on verticalized fintech startups that intersect with major industries and is also venturing into the realm of ESG-focused fintech startups.
See: Browse AI Secures US$2.8M Seed Funding: Vancouver Tech Startup’s Success
Several prominent investors have returned, such as CDPQ, Desjardins, BDC Capital, and Sun Life, showing their continued trust in Luge's vision, while simultaneously attracting new investors such as Inovia Discovery Fund I, further solidifying the fund's promising trajectory.
Karim Gillani, General Partner at Luge Capital:
“Financial services impact the lives of every person, from opening a bank account and making payments to buying insurance and making investments. Yet large institutions are finding it challenging to modernize their legacy technology. By investing in high-calibre fintech founders who are solving the industry’s biggest problems, Luge is helping to drive innovation across the financial services that are the lifeblood of the economy and account for 20 percent of the GDP in the U.S. and in Canada.”
Luge Capital's team (2023)
To delve deeper into Luge's vision and strategy, NCFA Canada sat down with David Nault, General Partner at Luge Capital, for an interview.
Expanding the Investment Horizon
NCFA: With the expansion of the investment scope to include verticalized fintech startups and ESG startups, what specific areas or challenges within these sectors are you most excited about?
David: "In terms of vertical fintech, we're keen on industries like construction, agriculture, healthcare, and transportation that intersect with fintech. Traditional industries often lag in innovation. Embedding fintech solutions, such as financing and payments, can unlock new opportunities. For instance, fintech can assist farmers in accessing new markets or using AI to decide on selling their harvests. As for ESG, we're looking at efficient data gathering and reporting to help companies fulfill their ESG commitments."
Investment Strategy and Criteria
NCFA: Are there specific criteria or milestones that startups need to meet to qualify for larger initial investments?
David: "The size of our initial investment hinges on the business's unique attributes. For larger commitments, we typically seek early signs of traction and a clear demonstration of product-market fit."
NCFA: How do you decide on the size of the initial investments for startups from Fund II, especially since they're expected to be larger than those from the first fund?
David: "The hardest question you can ask a VC is how they decide when to invest. The second hardest question is “how much?” It all starts with the founders and whether we have conviction on their ability to execute. Once we are convinced of that, we analyze a 2-year financial model of the business to understand how much capital is required to deliver on the key growth milestones that we believe will deliver strong value to the company. In short, how much do they need and will it bring them to the right milestones?"
Partnerships with Large Financial Institutions and Future Vision
NCFA: From the investments made from Luge Fund I, what have been some key learnings influencing Fund II?
David: "Our top results come from our strongest founders. We're now more focused on partnering with ambitious founders. For Fund II, we're planning to onboard team members earlier, and we've already begun recruiting for both investment and operations roles."
NCFA: How do partnerships with large financial institutions, especially LPs, enhance the value proposition for the startups you invest in?
David: "Our strategic LPs, being large financial institutions, offer brand reputation, vast distribution, and strong financial backing. We bridge our portfolio companies with these LPs for potential partnerships. While partnering isn't a strict criterion, we aim for win-win scenarios. Our LPs often view our portfolio companies as potential investment opportunities."
Final Thoughts and Recommendations
NCFA: What advice would you offer to fintech founders?
David: "Raising VC money isn't a business model. Focus on product and revenue. When raising capital, prioritize investor value over valuation. And never run out of money!"
NCFA: What’s your favourite book that you suggest all founders/investors should read?
David Nault: The Power Law by Sebastian Mallaby, which really puts into perspective what it takes to make a venture fund successful.
Obviously Awesome! by Canadian author April Dunford
Zero to One by Peter Thiel
* * *
Fintech's Bright Future
With the announcement of Luge Capital Fund II and the insights from David Nault, it's evident that Luge Capital is poised to make significant waves in the fintech sector. Their commitment to innovation, combined with the support of their esteemed investors, promises a bright future for fintech startups in North America, and here at NCFA we wish everyone at Luge Capital continued success.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
Hear, Speak See No Evil: ChatGPT’s Latest Features!
AI | Sep 25, 2023
Image: Unsplash/Keren Fedida
OpenAI Announces that ChatGPT Can Now Speak and Listen & Process Images. New Features to Rollout to 'Pro Customers' Within 2 Weeks
1. The Power of Voice in Fintech
Gone are the days when interactions with financial platforms were limited to typed commands. With the advent of sophisticated voice technology, businesses can now offer a more intuitive and personalized user experience. Imagine querying your financial dashboard using voice commands or authorizing transactions with a simple spoken phrase. The possibilities are endless.
See: FCA’s Emerging Regulatory Strategy for Big Tech and Artificial Intelligence
To name but a few checkout below and unlock your imagination:
- Voice-Activated Financial Assistants: From checking account balances to setting up payments, voice commands streamline operations, especially for those who prefer hands-free interactions or have accessibility needs.
- Interactive Financial Education: Voice interactions can make financial literacy sessions more engaging, allowing users to ask questions and receive real-time responses.
- Voice-Powered Transactions: With advancements in voice recognition security, the future might see us authorizing payments or transfers using just our voices.
- Financial Planning and Advisory: Consumers can discuss their financial goals and plans with ChatGPT, which can then provide insights, suggestions, or even generate financial projections based on the input.
- Customer Support: With voice capabilities, ChatGPT can serve as a 24/7 customer support assistant for financial services, answering queries, guiding users through processes, or even troubleshooting issues.
- Financial Product Recommendations: Based on voice interactions and understanding of user needs, ChatGPT can recommend suitable financial products, such as loans, insurance, or investment opportunities.
2. Interact with Visuals Intelligently
See: Morgan Stanley is Launching a Wealth Management AI Chatbot
The integration of image capabilities in fintech platforms is not just about viewing pictures. It's about understanding and analyzing them. This feature can revolutionize several financial processes:
- Invoice Processing: Small businesses can simply snap a picture of an invoice, and advanced AI systems can extract, categorize, and process the data, reducing manual entry errors and saving time.
- Visual Data Analysis: Financial charts or graphs can be shown to AI systems for instant analysis, making it easier for businesses to spot trends or anomalies.
- Document Verification: With image recognition, businesses can quickly verify the authenticity of financial documents, contracts, or identification, enhancing security and reducing fraud.
- Expense Tracking: Consumers can take pictures of their receipts, and ChatGPT can extract the data, categorize expenses, and update their budget or financial tracking apps.
- Visual Data Analysis: Businesses can show ChatGPT financial charts or graphs, and the assistant can provide a summary or analysis, highlighting trends or anomalies.
3. Implications for Small Businesses and Consumers
For small businesses, these advancements can lead to more efficient operations, reduced costs, and improved customer interactions. Automated invoice processing, instant data analysis, and voice-activated customer support can give small businesses an edge in a competitive market.
See: CEO Views on AI in Deals Amid Economic Shifts
Consumers stand to benefit from a more personalized and interactive financial experience. Whether it's voice-powered transactions, visual expense tracking, or interactive financial advisory sessions, the modern consumer is set to experience fintech like never before.
The (Exciting) Road Ahead: Buckle Your Seat Belt (and Expect Regulatory post-signs)!
While the potential of voice and image capabilities in fintech is immense, it's crucial for businesses to approach their integration with caution. Ensuring data privacy, maintaining the security of voice and image data, and continuously refining AI models for accuracy will be paramount.
In conclusion, as fintech continues to break barriers and redefine financial interactions, the integration of voice and image capabilities heralds a new era of innovation. For businesses ready to embrace these changes, the future promises unparalleled growth and opportunities.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
CEO Views on AI in Deals Amid Economic Shifts
AI | Sep 22, 2023
Image: Unsplash/Hunters Race
The world of deal-making is undergoing a significant transformation, driven by technological advancements and shifting economic landscapes.
A CEO's Perspective on the Economy
- The July 2023 EY CEO Outlook survey reveals that US CEOs are gearing up for what might be termed a "new normal" characterized by expensive capital and heightened volatility.
- A striking 97% of US CEOs are preparing for a potential economic downturn in their primary market.
- This cautious approach is not unfounded. The US, while showing signs of a possible "soft landing" due to factors like labor market resilience and moderating inflation, still presents uncertainties. CEOs are not banking on best-case scenarios but are instead fortifying their organizations for sustainable growth.
AI in Deal-Making - A Game Changer
- AI's role in this evolving landscape is undeniable. A significant 80% of US CEOs have either already integrated AI into their products and services or plan to do so within the next year. However, the application and benefits of AI vary.
See: Birth of the First AI-Generated Memecoin, AstroPepeX (APX)
- AI and ML have the potential to revolutionize the merger and acquisition process. They can make the due diligence process more efficient by analyzing vast amounts of data quickly. Tools like Robotic Process Automation (RPA) can automate data analysis, and AI tools offer predictive modelling capabilities.
- Interestingly, when asked about the use of AI in the transaction diligence process, 30% of US CEOs confirmed its application. However, a larger percentage (37%) are still in the initial stages. The emphasis seems to be on traditional business strategy principles, with a focus on value, capital structure, and corporate strategy.
- A recent Business Insider article shed light on the evolving role of junior bankers. Gone are the days of mundane tasks and grueling hours. With AI's intervention, junior bankers can now focus on critical thinking and strategy, as repetitive tasks become automated. Financial giants like Deutsche Bank are already harnessing the power of generative AI, enabling junior bankers to work more efficiently and focus on building analytical skills.
- But it's not just about automating tasks.
- Generative AI is revolutionizing strategic planning, financial reporting, and stakeholder engagement. It's fostering a more agile and responsive financial environment, allowing leaders to break free from traditional constraints.
- For fundraisers and deal-makers, this AI-driven transformation means:
- Faster decision-making, accurate market trend analysis, and enhanced stakeholder communication.
- The integration of AI tools can also lead to more personalized investor pitches, efficient document processing, and real-time risk assessment.
See: The AI Revolution in Wealth Management: Top 3 Innovations (and more)
- Concerns still need to be addressed properly:
- With AI processing large amounts of data, there are concerns about data breaches and privacy.
- While AI is valuable, it cannot replace human intuition and understanding.
- Heavy reliance on AI might lead to overlooking compliance requirements -> lack of governance.
- AI as an Investment: Implementing AI requires significant investment in technology and possibly personnel.
Into the Future
In an era marked by rapid technological evolution and economic unpredictability, CEOs are at the forefront of navigating uncharted waters.
While the tools of tomorrow promise efficiency and innovation, the human element remains irreplaceable. The fusion of AI's capabilities with human insight will undoubtedly chart the future of deal-making, setting the stage for a more agile, informed, and strategic financial world.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
A Scaling Fintech’s Decision “To Bank or Not to Bank?”
Digital Banking | Sep 18, 2023
Image: Unsplash/Susan Q Yin
As the industry matures, the decision to become a bank or remain an independent fintech entity is becoming increasingly significant. The recent decision by Figure, led by its visionary CEO Mike Cagney, to withdraw its bank application has ignited a fresh debate on this topic.
Mike Cagney's leadership at Figure (and Co-founder of SoFi) has always been characterized by forward-thinking and innovation. His decision for Figure not to become a bank wasn't a reflection of the company's inability to do so, but rather a strategic choice rooted in a broader vision for the fintech industry. Cagney's perspective offers valuable insights for other fintech leaders grappling with similar decisions.
When my startup, Figure, recently withdrew our OCC bank application, many in the media took it as a sign that fintechs like us need to become a bank to survive—but that the process is simply too hard. They got it wrong.
- While becoming a bank can simplify licensing processes, it also brings with it a slew of regulatory hurdles and licensing challenges. For fintechs like Figure, which already hold numerous state licenses, the allure of a single banking license might be outweighed by the regulatory constraints that come with it.
- Traditional banking models come with stringent capital requirements, especially for specific loan types. These requirements can make certain financial products uneconomical for banks but lucrative for fintechs.
- Fintechs, unlike banks, trade on earnings, allowing for more dynamic growth opportunities. Banks, on the other hand, often trade on a multiple of book value, potentially limiting their market capitalization growth.
- One of Figure's standout achievements under Cagney's leadership has been its pioneering work with public blockchains. Regulatory views on such innovations can be restrictive for banks who are less flexible, potentially stifling the very innovation that fintechs thrive on.
See: The OCC is Facing Calls to Pull Guidance That Allows Banks to Do Some Crypto Business
Having said that, there are numerous pros of becoming a bank that we shouldn't overlook!
- Fintech companies often have to manage multiple state licenses for various financial services. Becoming a bank would simplify the licensing process, allowing them to operate under a single banking license across states.
- Having one regulator can lead to significant operational and compliance savings.
- Banks have the ability (and the requirement) to accept deposits insured by the FDIC. This can provide a more stable and predictable source of financing compared to wholesale capital markets.
- Banks can access funding backstops such as the FHLB and the Fed Window, which can offer lower costs.
Where Does the Rubber Hit the Road for Growing Fintechs?
For many fintechs, the decision to become a bank is not just about regulatory and capital considerations. It's about identity. Fintechs, at their core, are disruptors. They challenge traditional financial models, introduce innovations, and often operate at the cutting edge of technology.
See: When Big techs and fintechs own banks
The real question is: Can fintechs maintain their innovative edge within the confines of a traditional banking model? Or do they risk losing their unique value proposition by becoming too enmeshed in the very system they set out to disrupt?
As more fintechs reach the crossroads that Figure encountered, they would do well to consider not just the immediate benefits of becoming a bank, but the long-term implications for their brand, their innovation potential, and their role in reshaping the financial landscape.
While the allure of becoming a bank is undeniable, as Mike Cagney's leadership at Figure illustrates, sometimes the boldest move is to chart a course that aligns with the company's core values and vision for the future of finance.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
G20’s Vision for Financial Inclusion through Digital Public Infrastructure
Digital Public Infrastructure | Sep 11, 2023
In a recent report by the Global Partnership for Financial Inclusion (GPFI) under the G20 India Presidency, the world's major economies have set forth their vision for advancing financial inclusion and productivity through Digital Public Infrastructure (DPI).
The G20's philosophy, "Vasudhaiva Kutumbakam," which translates to "One Earth, One Family, One Future," underscores a commitment to equitable growth and a shared destiny for all.
Despite the growth of digital financial services (DFS), approximately 1.4 billion adults worldwide still lack financial inclusion. A significant portion of this number resides in seven emerging markets and developing economies. Furthermore, there exists a vast financing gap for micro, small, and medium-sized enterprises (MSMEs). This gap is especially prominent for women-owned MSMEs, which account for an estimated $1.9 trillion of the unmet financing needs.
What are DPIs?
DPIs are essentially technological infrastructures that offer interoperable, open, and accessible digital platforms for public and private services. Examples include digital identification systems, payment platforms, and data exchange systems.
See: The Trifecta of India’s Digital Transformation is Turning Heads Globally
These infrastructures play a critical role in enhancing financial inclusion, spurring private and public innovation, and driving productivity gains.
- Foundational and Cross-cutting: Unlike traditional financial infrastructures that cater only to the financial sector, DPIs serve multiple sectors, acting as a base layer for various transactions.
- Modular: DPIs promote interoperability, enabling rapid integration and deployment of customizable offerings. They provide the backbone for innovative solutions without the need for individual sectors to start from scratch.
- Public Benefit: DPIs are designed with a public-first approach. They ensure equal access, drive public policy objectives, and promote financial inclusion, competition, and innovation.
- Digital Services: DPIs are tailored for the digital age, promoting the adoption of digital services and aiding the digitization of the economy. Their services are usually accessed through digital channels, yet they can also enhance non-digitalized services, for instance, through agent networks.
G20 Push for Digital Public Infrastructure
These systems provide critical public and private services that can drive significant societal impact. From Brazil's Open Finance framework, which aids in data sharing and product offerings, to India's Account Aggregator Framework that strengthens data infrastructure through electronic consent, DPIs are redefining the way financial services operate. Other countries like the Philippines and the UAE have also initiated strategies to integrate open finance systems and collaborate on data-driven innovations.
See: Canada to Launch ‘Digital Ambition 2022’ Public Consultation For Digital ID Framework of Federal Public Services
DPIs can accelerate the DFS landscape, bridging existing financial inclusion gaps. By fostering innovation, lowering transaction costs, and enhancing user experiences, DPIs can catalyze rapid advancements in financial inclusion and productivity. The report highlights use cases in areas like account opening, government-to-person payments, international remittances, and MSME finance to demonstrate DPI's potential.
Challenges
However, while DPIs hold transformative power, they also introduce new challenges and risks, such as operational, regulatory, and financial consumer protection risks. Effective governance and management are vital to ensure that DPIs bring about the intended benefits without exacerbating these potential risks.
- Achieving an effective DPI system can be complex.
- Different country contexts mean DPI models are not one-size-fits-all.
- New risks emerge, including operational, legal, regulatory, and insolvency risks. There's also the challenge of data and privacy risks, risks to competition, and technological obsolescence.
Policy Recommendations
See: So what is financial exclusion in the era of Open Finance?
The G20's policy recommendations revolve around five key dimensions:
- Harnessing DPIs to expedite financial inclusion.
- Promoting well-designed DPIs and a conducive environment.
- Implementing effective regulation, supervision, and oversight.
- Establishing robust institutional and governance structures.
- Prioritizing customer protection and inclusivity.
These guidelines provide a roadmap for authorities worldwide, urging them to leverage DPIs to achieve broader financial inclusion tailored to their unique national contexts.
A Balancing Act
The transformative potential of DPIs in reshaping the financial sector is undeniable. They can bridge gaps, enhance efficiency, and pave the way for a more inclusive financial future. Yet, careful consideration and mitigation of associated risks are crucial to harness their full benefits.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
