Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Entrepreneurs, Start-ups, Small Businesses
Canada’s Rising Tax Burden and Fintech Opportunities
Tax Burden | Aug 13, 2024
Image: Freepik
Canada's Growing Tax Burden on Consumer Spending and Opportunities for Fintechs
According to the Fraser Institute's 2024 Canadian Consumer Tax Index report, the average Canadian household now pays 43% of their income in taxes, which is more than the 35.6% that they spend on necessities. This is a worrying trend, and as a result disposable income (discretionary spending purchasing power) for most Canadian families is shrinking. While Kim Moody, founder of Moodys Private Client, highlights concerning stats from the report, about value for tax dollars, this article is aimed at encouraging fintechs and financial institutions to consider offering genuine value to assist consumers during these trying times.
See: Do employees pay less taxes by exercising stock options pre-IPO?
But first, here are 3 alarming stats from the report to chew on:
- “In 2023, the average Canadian family earned an income of $109,235 and paid in total taxes equalling $46,988”
- “This is a dramatic shift since 1961 when the average Canadian family spent much less of its income on taxes (33.5 per cent) than the basic necessities (56.5 per cent). Taxes have grown much more rapidly than any other single expenditure for the average Canadian family.”
- “Since 1961, the average Canadian family’s total tax bill has increased nominally by 2,705 per cent, dwarfing increases in annual housing costs (2,006 per cent), clothing (478 per cent) and food (901 per cent).”
Opportunities for Fintechs
1. Tax Optimization Solutions
Tax-efficient financial solutions are in higher demand as taxes take up a growing share of household income.
See: Tax-Free Bitcoin Zone Proposed by the USABTC
Financial institutions and fintechs can take advantage of this by creating products that reduce tax obligations, such as retirement planning resources, or software that makes it easier for individuals, families, and corporations to manage their tax obligations, and tax optimized investment portfolios.
2. Financial Literacy Education
As Canada's tax system has an increasing influence on household finances, it's more important than ever for the average Canadian to achieve a certain level of financial literacy. Fintech businesses are in a unique position to offer tools and educational materials to help customers manage and comprehend their tax obligations. Personalized financial advice, interactive calculators, and webinars can increase brand loyalty while also improving client engagement.
3. Cost Effective Financial Services
As discretionary income declines, its natural for customers to look for less expensive alternatives to traditional financial services. Fintech companies can help innovate by providing high-value, reasonably priced financial products to mass markets, bridging any gaps left by traditional institutions that typically find it difficult to provide competitive pricing. Consider solutions such as peer-to-peer lending platforms, digital banks with cheaper costs, or robo-advisory services.
Conclusion
The rising tax burden on Canadian families creates both obstacles and possibilities for fintech companies and financial institutions. By emphasizing tax-efficient products, improving financial literacy, and developing innovative services that are affordable (and not to forgot mentioning the need to push for policy changes).
See: Who Will Canada’s New 3% Digital Services Tax Impact?
It is imperative that industry participants continue to be flexible and attentive to the demands of their clientele.
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
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KPMG H1’24: Canadian Fintech Shines Amid Global Consolidation
KPMG H1'24 Global Fintech Funding Report | Aug 8, 2024
Image: Pulse of Fintech H1'24 KPMG
H1 2024 Global Fintech Declines as Canadian Fintech Shines With Two Massive Deals: Nuvei and Plusgrade
Global fintech investment declined across all regions due to high interest rates and continued geopolitical uncertainty, falling to $51.9 billion in H1 2024 from $62.3 billion in H2 2023. This decrease is the lowest fintech investment six-month period since H1 2020. Yet, Canada is in the spotlight with two record setting private equity fintech deals based in Montreal, specifically Nuvei Corp. and Plusgrade Inc.
Highlights
- Markets are consolidating, with mature, stable markets accounting for the majority of the largest acquisitions in H1 2024. There were just five $1 billion+ deals recorded globally, all of which were buyouts, indicating that investors preferred buyouts over new initiatives.
- The payments sector remained dominant across fintech, attracting $21.4 billion in H1 2024. However if we back out two standout deals, Worldpay in the US ($12.5 billion) and Nuvei in Canada ($6.3 billion), investment volume was modest.
See: CSA’s 2024 Investor Index. What Fintechs Need to Know
- AI remains hotly in demand, especially in the US where the tech is used to reduce fraud and increase productivity and operational efficiencies.
- Investment in regtech increased reaching $5.3 billion, which is more than all of 2023's investment. Driving the need is an uptick in compliance automation and the continued complexities of regulatory requirements.
- Insurtech didn't fare so well with investment dollars dropping globally to just $1.6 billion, the lowest on record in a decade, with the report attributing the decline to the high cost of capital and challenging fundraising climate. That hasn't deterred two recent deals in Canada worth noting including Inscora's cyber insurance ($2M CAD) and Walnut's embedded tech partnership model closing $4.6M CAD.
- Wealthtech saw limited major deals but increasing interest in AI tech to improve wealth management services such as robo-advisory and data-driven analytics.
- Crypto and Blockchain stabilized after a rough 2023, reaching $3.2 billion in H1 2024 and a steady volume of deals as VCs are in for the long haul.
Canadian Fintech Record Breaking Deals
Despite global fintech funding challenges, Canadian fintech made headlines in H1 2024 reaching a record $7.8 billion in fintech investments with these two deals:
- Nuvei's $6.3 billion buyout: Advent International purchased the payments processing business located in Montreal, Nuvei. This transaction highlights Canada's growing role in the global payments industry, which is still drawing large amounts of capital.
- $1 billion buyout of Plusgrade: General Atlantic acquired Plusgrade, another Montreal-based company that specializes in revenue solutions for the travel sector, highlighting Canadian fintech firms ability to draw significant foreign investment capital.
Comparing East vs. West
Western Markets (North America and Europe)
- Dominated by huge investments in regtech, AI, and payments as well as large-scale acquisitions.
- The majority of global fintech investment is attracted to more developed regions with well-established infrastructure.
- Focused on innovation powered by AI, especially in terms of improving compliance and operational efficiency.
See: Global Fintech Funding Sees a Boost in Q2 2024
Eastern Markets (Asia-Pacific and EMEA)
- Smaller deal sizes but an increasing emphasis on digital transformation, especially in wealth and payments.
- Considerable interest in asset tokenization and digital currencies, with the EU and Hong Kong at the forefront of innovation.
- Compared to the West, insurtech and regtech are being adopted more slowly, although interest in AI applications is rising.
By Sector
1. Payments
- With significant transactions such as the buyouts of Worldpay and Nuvei, North America and Europe remained dominant. The top 16 largest payments deals came from the Americas and Europe, indicating a strong emphasis on developed markets.
- In comparison, far smaller payments deals were made in Asia-Pacific (ASPAC), with the largest being a $50 million venture capital raise by Singapore-based Nium. The area is still concentrated on digitizing and building out the payment infrastructure, especially in Southeast Asia.
2. AI and Regtech
- With sizeable investments in platforms like Corvus and Spiff, the US lead the world in fintech deals powered by AI. The EU's Digital Operational Resilience Act (DORA) and other regulatory requirements contributed to the robust growth of regtech, especially in Europe.
- In contrast, ASPAC's regtech market was smaller, with Constantinople, an Australian company, closing the largest round with a $32.8 million financing. Nonetheless, the area is concentrating more on implementing AI to deal with local regulatory issues.
See: 12 Market Entry Approaches for Fintech Startups
3. Insurtech
- Despite the industry-wide decline, insurtech investments were concentrated in North America, especially the US. Cyber-insurance and embedded insurance solutions were the market's main focus.
- Insurtech activity in ASPAC was quite low, with the biggest deal being a $80 million venture capital raise by India-based Perfios. Compared to the West, the insurtech market in the region is still in its infancy.
4. Wealthtech
- Edward Jones raised $63.8 million in the US wealthtech market with an emphasis on AI enablement. More B2B solutions are becoming available in the industry.
- Growing interest in self-directed wealth management systems that democratize asset management for smaller investors has been observed across ASPAC, especially in Asia.
See: Brazil Approves the First Ever Spot Solana ETF
5. Crypto and Blockchain
- The US continued to concentrate on regulating cryptocurrencies, and a major turning point was the SEC's approval of Bitcoin ETFs. Significant institutional investment entered the cryptocurrency market as a result of this action.
- The leading regions in asset tokenization and digital currencies were ASPAC and EMEA. Progression toward a digital euro was made by the European Central Bank, while the Hong Kong Monetary Authority advanced its e-HKD pilot project. Traditional finance and decentralized finance (DeFi) are becoming more and more integrated in these areas.
Outlook
Global fintech investments fell in the first half of 2024 as a result of cautious investors, high interest rates, and geopolitical concerns. Despite these obstacles, record-breaking mergers, particularly in the payments space, made Canada's fintech sector stand out with two record breaking deals. Future investments will be driven by emerging technologies such as digital currency, blockchain, and artificial intelligence. It's expected that regulatory compliance, sustainable growth, and combining traditional and decentralized finance will take centre stage.
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
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Join the Canadian FinTech Mission to Hong Kong (Oct 28-29)
Fintech Mission | Aug 8, 2024
Image: Canadian Fintech Mission to Hong Kong (Oct 28-29, 2024)
Unlock Your Company's Asian Market Potential - Opportunity for Canadian Fintech Startups!
A Canadian Fintech Mission is being planned by the Canadian Consulate General in Hong Kong for October 28–29, 2024, which is during Hong Kong Fintech Week (HKFTW). For Canadian Fintechs, this mission offers an amazing opportunity to connect and uncover the enormous potential in Hong Kong and other Asian markets in the region.
Why Should You Participate?
1. As a Gateway to Asia
Hong Kong is an ideal entry point to Mainland China and the ASEAN markets in addition to being a preeminent worldwide financial hub. Take advantage of this opportunistic mission for Canadian fintechs to establish influential connections in the area and unlock deep potential in these expanding markets.
See: Ant Group’s Restructuring and Rebooting of Its Hong Kong IPO
2. Strong Financial Ecosystem
Hong Kong is a great base to develop and expand fintech developments with a strong banking system, leading payment networks, and global stock exchange. The regulatory environment nurtures innovation while protecting consumers, a great combination for investment and to distribute Canadian fintech products/services. For more information on the Hong Kong FinTech Ecosystem and market trends and landscape.
3. Strategic Opportunities
Canadian fintech mission participants receive complimentary access to the HKFTW Conference, and ample networking opportunities with IT partners, prospective clients, and industry leaders. The mission will also have a central location to showcase at the Canadian Pavilion at HKFTW.
Hong Kong Fintech Week 2024
Who Should Apply?
All Trade Commissioner Service clients who are registered Canadian businesses engaged in the Fintech industry are welcome to apply for the mission. Innovative companies in WealthTech, InsurTech, RegTech, and Green Fintech that have creative solutions will receive special attention, especially in fields like blockchain, cybersecurity, and artificial intelligence and data analytics.
What’s Included?
Successful applicants will receive a complimentary participation package, which includes:
- Admission to the HKFTW Conference with access to a searchable attendee list.
- A presence at the HKFTW Canadian Pavilion.
- A personalized meeting program with potential partners and customers in Hong Kong.
See: Hong Kong to Start Trading Bitcoin and Ether ETFs April 30
Please note that participants are responsible for their own travel and accommodation expenses.
Application Process
Don’t miss out on this opportunity to expand your reach into one of the most lucrative markets in the world. To apply, complete the application form and notify Eunice Wong, Trade Commissioner, at Eunice.wong@international.gc.ca by 11:59 PM EST on August 30, 2024. Selected applicants will be contacted within seven working days after the deadline.
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
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Inscora Secures $2M to Revolutionize Cyber Insurance
Funding | Release | Aug 6, 2024
Inscora's Founders (Image provided by Luge Capital)
Montreal Fintech Inscora Announces $2M in Funding Led by Luge Capital
Montreal, QC – Aug 6, 2024 – Inscora, a Montreal-based fintech that provides automated cyber risk assessment and sales enablement tools to cyber insurance brokers, has secured $2 million in funding. The financing round was led by Luge Capital and also included Desjardins Capital, Accelia Capital, Inovia Capital, and cybersecurity angel investors.
Highlights
Inscora was co-founded by:
- Gabriel Tremblay, a repeat cybersecurity entrepreneur who previously co-founded Delve Labs (acquired by Secureworks);
- Pierre-David Oriol, former VP of Product at Delve Labs; and
- Guillaume Raymond, former Director of Engineering at digital health company Dialogue (acquired by Sunlife).
See: Blakes: Cybersecurity Trends in Canada: A 2023 Perspective
Inscora's platform empowers insurance brokers with a innovative cyber brokerage approach that increases customer value, calculates better risk-adjusted premiums, and leads to higher sales conversions. The company is already collaborating with a select group of insurance industry players as part of an early trial program. Core benefits and platform capabilities include:
- Accurately and effortlessly assess a company's cyber risk profile
- Assist customers in incorporating the latest cybersecurity best practices
- Drastically speed up the cyber insurance application process
The use of proceeds will fund team expansion, continuous platform improvements, and product launch in both Canada and the U.S.
Gabriel Tremblay, CEO and Co-Founder of Inscora:
"We have spent our careers developing products that help organizations protect themselves against cyber attacks. Inscora represents a unique opportunity to apply this expertise to the ever-evolving field of cyber insurance and improve the efficiency of insurance brokers as well as the security posture of the insured clients. We are thrilled to have the support of such esteemed investors to help us now go to market."
See: Luge Capital Secures $71M in Second Fund’s First Close
David Nault, General Partner at Luge Capital:
"We have seen, first hand, how complex purchasing cyber insurance can be and the lack of tools available to the insurance industry to guide clients to implement stronger security measures within their organizations. Inscora is solving both of these important issues to support the ever-evolving cyber insurance industry."
Contact Information
For more details, please contact:
Gabriel Tremblay
CEO Inscora inc.
Email: contact-media@inscora.com
Website: https://inscora.com
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
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Chainlink Unveils Collaborative Digital Asset Sandbox
Digital Asset Innovation | Aug 2, 2024
Image: Chainlink Digital Asset Sandbox, Tokenized Bonds
Chainlink Launches Future-ready Digital Assets Sandbox (DAS) Environment
Last month Chainlink launched the Chainlink Digital Assets Sandbox (DAS), a pioneering platform that provides a controlled and configurable environment for generating and deploying digital assets. It's a turnkey solution for financial institutions and fintechs looking to implement digital asset solutions quickly and efficiently.
What is DAS and How Does it Work?
- DAS offers a preconfigured environment that's setup with all the tools and configurations needed, which drastically cuts down on the amount of time and effort needed to begin creating digital assets. Using Chainlink's Cross-Chain Interoperability Protocol (CCIP), this configuration interfaces with the most popular private and public blockchains, enabling secure interoperability between chains.
- DAS incorporates preset tokenized asset workflows for a variety of digital assets, such as tokenized bonds. These workflows encompass the whole asset lifecycle, from issuance to auction, primary market allocation, secondary markets, over-the-counter (OTC) trading, settlement, and custody. Institutions can deploy proof of concepts (PoCs) individually or jointly, allowing for full testing and reviews.
See: Chainlink Transporter Launches: Secure Cross-Chain Crypto Bridging
- Users are also able to modify the sandbox environment to meet their own business requirements, offering flexibility and customization.
- DAS supports both individual and collaborative trials where multiple institutions can work together in a shared environment enabling rapid prototyping. This collaborative approach fosters shared learning, resource optimization, and the creation of industry standards and best practices.
- To assist users in defining and implementing their digital asset strategy, optimizing deployments, and troubleshooting any challenges, Chainlink Labs offers continuous support and advisory services.
Who Uses DAS?
Traditional financial institutions and fintech companies are the primary users of DAS who want to experiment with digital assets, run on-chain trials, and hone their business strategy. Notable customers include large financial institutions that have experimented with tokenization and cross-chain transactions using DAS, including ANZ Bank, Swift, and the U.S. Depository Trust & Clearing Corporation (DTCC).
Future Opportunities for DAS Innovation
- It is anticipated that DAS will expand to support more financial instruments in the future, such as cross-border payments and fund tokenization. Each iteration will generate more innovation and a wider application of use cases will arise.
See: The Complexities of Auditing Digital Assets
- DAS will become even safer and more versatile as a result of continuous developments in multi-chain integration and security features.
- Integrating DAS with DeFi platforms can enable new financial products and services, such as decentralized lending, borrowing, and liquidity provision via automated market makers (AMMs).
- DAS' collaborative atmosphere encourages consortium-based projects and public-private collaborations, which result in a more connected and innovative digital asset ecosystem.
Conclusion
Chainlink's Digital Assets Sandbox (DAS) a robust, interoperable and customizable environment for financial institutions and fintechs who want to to rapidly develop and implement digital asset solutions with exceptional speed and efficiency.
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
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[TMG Announcement] Tokyo Metropolitan Government now accepting applications from participating companies for Tokyo Financial Award 2024!
Jul 31, 2024
Image courtesy of Tokyo Financial Award
We are excited to announce that the applications for the “Tokyo Financial Award 2024” are now open. To apply, please visit our website and submit the application form.
<About the Tokyo Financial Award>
In Tokyo, with the aim of becoming "Asia's Innovation and Financial Hub for Realizing a Sustainable Society," efforts are being made to effectively utilize the "Financial and Asset Management Special Zone" certified in June 2024, and to become a leading city in sustainable finance and a city where globally active startups are born. As part of these efforts, we are seeking participants for the "Tokyo Financial Award 2024," which recognizes initiatives that create innovation in the financial sector and contribute to the realization of a sustainable society through the power of finance.
The Tokyo Financial Award are divided into two categories: the Financial Innovation Category and the Sustainability Category.
1. Financial Innovation Category
The Financial Innovation Category invites financial companies (including fintech companies) that address the needs of Tokyo’s residents and businesses utilizing the latest financial technology. Support programs for business expansion in Tokyo will be provided to companies that passed the preliminary round (Around 15 companies). The top 3 winners will receive a prize money of 10million JPY, 5million JPY, and 3million JPY respectively.
- Mentoring Program: The secretariat office will introduce various mentors that are experienced and knowledgeable about certain business areas in the Japanese market which could be unique compared the rest of the world in some cases.
- Business Matching/Networking opportunities: On top of introducing potential business partners/clients in Tokyo, the secretariat office will host several networking events where participants of the program will get an opportunity to present and network with members of the financial industry including investors potentially.
- Japanese communication support: For foreign companies, the secretariat office will provide translation support for various communication materials.
2. Sustainability Category
The Sustainability Category invites companies on both the investment side and the business side that are engaged in initiatives contributing to the promotion of sustainable finance. The Sustainability Category is comprised of the following two subcategories:
- Investment subcategory: Targets financial businesses (including fintech companies) that contribute to the realization of a sustainable society through engaging in a wide range of financial activities including, but not limited to investments, lending, etc.
- Business subcategory: Targets businesses (including financial businesses) that contribute to the realization of a sustainable society through the use of sustainable finance (including, but not limited to sustainability-linked loan, sustainable fund, and a wide range of financing methods such as VC investments)
Around 3 outstanding companies will be awarded from the Sustainability Category, in which the “Governor’s Special Prize for Green Finance” will be awarded to one business that is particularly outstanding in its green finance initiatives.
<Benefits>
- Exposure: Winners will have the opportunity to gain exposure at networking events where past winners are invited to present and network with members of the financial industry. The secretariat office also produces interview video clips where past winners discuss about their success stories which are uploaded on YouTube, etc.
- Recognition: Winners will be invited to the Award ceremony in which the governor of Tokyo will be joining.
<Application>
- Submission deadlines:
- Financial Innovation Category: Friday, Aug 30 23:59 (JST)
- Sustainability Category: Monday, Sep 30 23:59 (JST)
- Application procedures:
- Please check the application guidelines on the top page of each category and fill in the application form.
- Website of Tokyo Financial Award 2024: https://www.finaward.metro.tokyo.lg.jp/en/
<Contact Us>
For updates and announcements, please follow us on social media. (Facebook, LinkedIn and X (Tokyo Government’s account))
We would be very grateful if you are interested in applying for this award. Good luck with your application.
If you have any question, feel free to contact the Tokyo Financial Award Secretariat: tfa@jp.ey.com.
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
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U.S. Regulators Revisiting Bank-Fintech Partnerships
Regulation | Jul 30, 2024
Image: Freepik/rawpixel.com
U.S. regulators launch initiative to address bank-fintech partnership risks
The Federal Reserve, FDIC, and OCC have announced a new regulatory initiative to address the complexities and risks associated with bank-fintech partnerships. The regulatory agencies released a request for information with a particular emphasis on lending, payment processing, and deposit-taking. The results will influence future rulemaking. The agencies also published a comprehensive joint statement about their concerns, which includes guidance and best practices for banks and fintechs entering these arrangements.
Fintech-bank Partnerships: What Keeps Regulators Up At Night?
It goes without saying, regulators are concerned about operational and compliance risks. Banks face challenges in managing outsourced operations like fintech partnerships across regulatory frameworks. A lot is at stake since problems can go beyond inefficiencies and result in potential legal challenges.
See: CFPB Warns: Billions of Dollars Stored on Payment Apps May Lack Federal Insurance
Data security is pretty much everything these days. With fintech's growing role and involvement in handling sensitive customer data, there are legitimate concerns when it comes to proactively preventing (and managing) data breaches and maintaining customer trust. Imagine a situation where sensitive customer data is exposed due to a data breach at a fintech partner that processes payments for a bank. This occurrence not only damages the bank's brand but also calls into question the bank's supervision and the fintech's data protection protocols. In order to stop these kinds of breaches, regulators want to make sure institutions perform extensive due diligence and have strong monitoring mechanisms in place.
Regulators are concerned about misrepresentation of services, especially if there's confusion among customers about the terms of deposit insurance coverage and the specific roles fintech firms hold in delivering financial services. For example, in collaboration with a regular bank, a fintech company offers savings accounts; however, the fact that the FDIC insures these accounts only up to a particular amount is not clear in the communication to customers who think that all of their money is secure (when in fact it's not). The possibility of consumer harm and legal consequences highlight the need for clear and transparent disclosures of insurance coverage and the responsibilities of all parties involved.
Implications for Canada
Although this is a U.S. initiative, the increased scrutiny and potential regulatory reforms may push the Office of the Superintendent of Financial Institutions (OSFI), to take similar actions.
See: Bank-Fintech Partnerships and Trends 2024
Put differently, if international norms are changing, Canadian banks and fintechs, especially with cross-border operations, may need to revise their compliance frameworks and risk management strategies to strengthen data protections and clear disclosures affecting how Canadian fintechs may engage with customers.
Outlook
The results of the RFI will probably influence additional regulations and guidelines, which will determine how these partnerships are structured going forward. Stay tuned...
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
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