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Fintech Fridays EP41: 40% pandemic growth, taking risks and innovating Insurtech in Canada

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NCFA Canada | Sep 18, 2020

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EP41:  40% pandemic growth, taking risks and innovating Insurtech in Canada

GUEST: DANISH YUSUF, Founder and CEO, Zensurance

BIO:  Danish Yusuf is the Founder and CEO of Zensurance, a Toronto-based technology company focused on building curated insurance solutions for business owners.  Danish is a former leader in McKinsey & Company's Digital Insurance practice, supporting insurance clients globally on defining their digital strategy. Prior to McKinsey, Danish was a software architect and developer at IBM Canada, covering everything from mainframe development to web development.  Danish earned a bachelor’s degree in Software Engineering from the University of Toronto and has an MBA from Harvard Business School. In 2018, he was named by Canadian Underwriter as one of the Top 10 Brokers Under 40 in the Canadian Property and Casualty industry.  Enjoy!

Links:

Danish Yusuf, Founder and CEO, Zensurance (LinkedIn)

Zensurance  (websitetwitter)

 

About this episode: 

Danish Yusuf, Founder and CEO of Zensurance joins Craig Asano, Founder and CEO NCFA Canada for the kickoff episode of Season 3 of Fintech Fridays. They discuss Danish's entrepreneurial journey, the story behind the creation of Zensurance and dive into what it's like adding 40% new staff during the pandemic to sustain growth, and innovating B2B insurance products for small businesses in Canada.Zensurance - Fintech Fridays EP41:  40% pandemic growth, taking risks and innovating Insurtech in Canada

 

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Transcription of Interview

Intro: Welcome to fintech Friday's a weekly podcast brought to you by the National Crowdfunding and Fintech Association of Canada and partners.  Covering all things fintech, blockchain, AI and alternative finance.

 

Craig Asano: [00:00:20] Hello, everyone, my name's Craig Asano, the founder and CEO of NCFA welcoming you to Episode 41 of FinTech Fridays, a weekly podcast brought to you by NCFA and Partners, where we sit down with the incredible people in the fintech and funding community and talk about trends, product innovations, developments and challenges. Fintech Fridays is an evolving and innovative educational platform focused on delivering authentic personalities, content and storytelling on the journey of mainstream adoption of new financial technologies and their impact on the future of finance. We're super excited to welcome our guest today, Danish Yusuf, the CEO and co-founder of Zensurance to the show.  Welcome!

 

Danish Yusuf: [00:01:02] Thank you. Thank you. Thank you very much for having me today.

 

Craig Asano: [00:01:05] Yeah. So let's get this interview started. We'd like to divide our podcast time up by, you know, getting into some background about you being an entrepreneur. Then we're going to flip over to all things insurance and Insurtech. And for the benefit of our our listening audience, we're going to let them know that we're going to wrap up with some rapid fire surprise questions. So how does that sound?

 

Danish Yusuf: [00:01:30] Sounds great. Happy to be here. And let's let's get to it.

 

Danish Yusuf: [00:01:33] Ok, so let's just start off with an easy one. Can you tell us a little bit about yourself and how has the entrepreneurial journey been for you?

 

Danish Yusuf: [00:01:44] Sure. So I was born in the Middle East. I spent about the first 15 years of my life moving around a fair bit. My my family was such that we moved around pretty much every year or two. And before I went to undergrad, I think I'd been to about 13 schools. So very used to change, used to getting used to new environments. And I never thought really I'd be an entrepreneur. For me, it was I went to the engineering, I did my MBA. It was very standard path for lots of people in undergrad. And I started working at a consulting firm. And for the first couple of years, I just loved what I was doing and never thought I would do anything else. I was at the time a lifer and after a couple of years I saw a number of my friends launching businesses in different parts of the world. Of course, 98 percent or so of these startups fail, but there was a lot of learning that they got from those failures. And there was a handful of wild successes that are now publicly traded companies and doing amazing things. And I was always intrigued by the ability to control my life. I have an idea and try and try and drive it to success. But I was just honestly quite risk averse. I thought my thought was I spent the last 15 years of my life getting to this job why would I give it up now? And one day I flip that, And I said, look, I just spent the last 15 years of my life getting me ready for the next phase, whatever that next phase is. And after a number of attempts and discussions, I finally said, look, if I if I don't quit my job now and try my luck, I don't think I ever will because I was about to get married and the responsibilities just grow after that. And so I finally, with a friend, spent three months while still at McKinsey, where I was doing consulting work on the weekend. We were piloting things. And finally I said, it's worth the risk. Let's quit, let's quit our jobs and give it a try. That was February twenty ninth. Twenty sixteen. And I don't know if I could ever go back to a traditional job again, given how much I've loved what I've done thus far. As hard as it is, it's it's very rewarding.

 

Craig Asano: [00:03:55] I love it. So you were an engineer. You're an MBA. I see on your bio that you were a Harvard alumni. Can tell us a little bit about that experience. It seems like out of reach for most and you've done that.  Did it better prepare you.  Do you think, for being an entrepreneur or making that key decision flipping from, you know, I'm a consultant at McKinsey and I have this great career path, but I'm feeling like I need more control. I need more more challenges like I was at Harvard or what was it? Was it all the change in 13 schools growing up?

 

Danish Yusuf: [00:04:31] It's probably a combination of everything. Who knows what eventually triggered me to do it?  I think having done my MBA, I was I understood business a lot more. I had a lot of friends that had done it before that actually you know what, thinking about it, that's probably the thing that did it most, having that network of people that have tried the entrepreneurial route and failed. And my conversations with them and what they learned and the people that have tried and succeeded, having hundreds and hundreds of friends and colleagues that have tried different things, that was probably it. That gave me the confidence to think maybe I can do it as well, because without that, I was a very it was very standard path that you do engineering. I worked at IBM, you go into consulting and it's a very insular life where a lot of your friends are very much like you. You need to have that network outside of people that have done different things and you can learn from them. So that probably was it.

 

Craig Asano: [00:05:33] Yeah, absolutely. You often hear the quote, you're only as sort of valuable or impactful as your network.  So, you know, that's great to hear that Echoed so early on in that stage where, you know, you hadn't become a major success yet. You're looking, assessing, you're feeling confident in capabilities. And the time was right. There's a lot of, you know, trends out there. It's never been a better time to start a startup. What was what else was going through your mind after you left your company? Did you think, oh, crap, I totally regret this lost our paychecks. And what like how do you go from there to now I want to start a company. Did you have that idea right before you made decisions?

 

Danish Yusuf: [00:06:21] Just one reflection on something you said. We're still not a big success. There's still so much more work to be done. It's an uphill battle for years to come. We're thankful for where we are, but there's a lot more work left to be done to your earlier question. For I think it was probably 2012 where with another friend, we actually hired a Waterloo co-op, a fantastic guy, we put them in an incubator and we had an idea round comparison shopping for services. There's a lot of competitors for products, but not as many for services. And we were both working full time jobs. We put five thousand dollars each into this and we said, let's give it a try and see if it gets somewhere. But after the summer, we realize it's just too hard to do it on the side. There's so much that has to be done. We ended up shutting the business. We had a couple of thousand dollars left from the ten thousand of seed money. And ever since then, a couple of times a year, we go for sushi and we're still trying to spend down that money, whatever is left, even though the business is done. And then late 2015, while I was still a consultant to large insurance companies, there was an idea that I was thinking about around business owners and insurance. You can see lots of examples in other countries about home and car insurance and how, for the most part, you can just buy it online and it's a kayak or Expedia like experience.  But in Canada, even home and auto insurance, you couldn't buy online at that time. But even now, in 2020, there's only one place where you can buy car insurance online, whereas in the UK no one buys in any channel other than onlinn today. There's a lot of differences, but that was my thought. Why isn't it that this has happened? And I spoke to a lot of my clients there and told them what I was thinking about people said it's a really, really hard problem. But if someone can solve it, that would be a huge thing. And so identifying that they the incumbents realize that there was a problem to be solved but weren't convinced that it was solvable. And then, on the other hand, speaking to friends of mine that were potential investors and a friend that was going to potentially join me, that made it real for me. And for the last second half of 2015, I had a lot more conversations convinced that friend of mine, friend of mine to quit his job. That gave me the confidence to say, OK, we're actually going to do it. And I still remember February, 29, 2016 was the first full time day on the job.  And I did feel what have I done. I quit my job. We don't have a product.  This has to succeed that I felt like one of those old generals where you land on shore and you burn your ships and you say the only way for success is to actually make this work. But I think that having quit and feeling like this has to work was really the only thing that made sure we felt like we we had to do everything in our power to make it work. And there were many nights where I thought I made a mistake, including the first version of the product that we launched. It was horrible. There's a saying in the startup world, if you've taken what is that? If you if you're not embarrassed by the first version of your product, you've taken too long to release. And I was so embarrassed. I didn't want to show my friends. I didn't want to show my family. We tested it with strangers so that we didn't have to feel embarrassed about it. But that's just the way we had to start.

 

Craig Asano: [00:09:54] Wow. Yeah, it's like having an Excel sheet with an old VBA macro button. Hey, guys, look what I built.

 

Danish Yusuf: [00:10:01] Yeah. And it spits out Hello World. And you're so excited about it, but it's just hello world.

 

Craig Asano: [00:10:06] Well, it kind of gives me goose bumps thinking to the you know, that key moment doesn't matter what an entrepreneur does, but they know they're doing it right if they feel that that pressure that, you know, question, because if it were easy, everybody would be doing it. And it's it's this this idea that now once you get out, let's say, in a boat and out to waters, you mentioned something interesting about you know, you might never be able to go back to say, McKinsey or, a large incumbent organization that has a lot of structure. There's this this dichotomy. This point in time where you start thinking more about iterations and MVP's and value and staking your claim as an entrepreneur, which has value to a large incumbent organization that sees that value can work with it within the parameters of large organization. But do you still feel with where you're sort of at or maybe at the at the time that you could never go back? Where were you so confident that you thought, you know, even if this fails, I have enough cash, I have some resources, just amazing Harvard network...just want to get more insight into the folks about how to go about making that decision and digging in and understanding really what those risks are, because I think it's case by case. But there's there's some some lessons here.

 

Danish Yusuf: [00:11:37] Yeah, I was fortunate in some ways that I took a long time to take the plunge. I was in my early thirties, so I'd been working for 10 or so years. I'd save some money and I could have gone 18 months or so without getting another paycheck and have been OK. That helped me. That gave me that courage that, you know, if it doesn't work over the 18 months, the only thing I would have really lost was that 18 months of cash that I spent. But I was pretty comfortable that I could go back and find another job, whatever that would be, and I probably would have been better equipped to do whatever I did next, given the experience I had. And I always tell myself I wish I had left my job a few years earlier because it's unlikely that the first attempt at entrepreneurship would succeed, such a high failure rate. I've been quite fortunate that so far it's been working out, but if this didn't work out, I don't know if I'd have the time or the energy to try again. But if you leave earlier in life, you might have the cycles to do two or three iterations and hopefully hit a home run in one of those. Also, when you're younger, you're you're more amenable to living in your parents basement, eating ramen noodles and and taking the bus. It's just so much easier to live like that. And that real scrappy feeling, if it translates to the way you do business, there's a lot of value to it. And people that have that grit, that tenacity to just go after it and get things done, they would be so valuable to any organization that I think someone can can do that and even fail there's a high likelihood that some large company would absolutely value it and they would do fantastic at something else, too.

 

[00:13:29]

 

Craig Asano: [00:13:31] Well, you know, at that point in your your journey, you know, you're in the boat, you must have come up across some pretty monstrous obstacles in your life because you were transforming that even though you might be willing to eat ramen noodles. You know what what were the the major obstacles and how did you overcome it or did you come up with another plan? Like what? How did that work?

 

Danish Yusuf: [00:13:56] Yeah. So a few big obstacles in our early days was around. I think the investor side was OK. We convinced them that if there was an opportunity, we would be the ones to figure it out to. The initial investment side was OK. The big challenge, which continues todayfour and a half years in, is convincing the insurance companies that we know what we're doing or that we know enough about what we're doing, that we can figure out the rest. And I always thought I read this in a couple of books. The big upside outcomes at the end are dependent on you being right. You're either right or you're wrong. And if you're right, if you're wrong, then maybe the outcome is not for you, but you have to be right. And then at the same time, most people have to think you're wrong, because if everyone thinks you're right, like you said earlier, things would have already been done and the alpha would have been arbitraged away. And so I had to keep telling myself the fact that people are saying they don't believe us, the fact that we're getting pushed back and resistance is a really good sign because it means that we may be on to something. We still have to prove that we're right, at least have gotten to the point where people think I'm wrong. And so as an insurance broker and we're technology enabled broker, we partner with the insurance companies so continuously trying to convince them to work with us that we're not out to get them, that we we are generally a genuine value add to the industry and customers want to buy online.  That was and continues to be our biggest pain point. Also, I'd say roughly every nine months where a brand new company, initially we were to and then we became five and 15 and then forty five and now we're about one hundred and five and 40 percent of our staff has joined during the covid lockdown. So there's a rapid growth just in the last six months. So every nine to 12 months we're a brand new company. Most of the staff is new, the processes are new, and it's a real balancing act between keeping that freewheeling spirit that got us here, but having the processes necessary that people know what they're accountable for and that they have enough guidance to do what's right. A really simple example. In the early days, if we had an expense, anyone could just go and buy the printer or buy the monitor that's needed or a keyboard. There's really no questions asked. You look around, you do what's right. Off you go. We can't do that. Now is one hundred person company. So now you have to ask your manager. Your manager has authority. They have to get approval from finance. We had to put that in place just to be proper about it. So keeping that balancing act of flexibility and process is, I'd say, probably the second biggest challenge that we were always trying to balance it and do what's right.

 

Craig Asano: [00:16:54] Do you still, as the CEO of that ship that, you know, were were instrumental, you were the story of the creation of zensurance, took the risks. Do you find that you make those decisions 50% / 50% for you thinking as a startup CEO/founder or more, I'm the head of this company, we're responsible for one hundred staff. And your company has a policy. It has an identity. It has an existence. How do you how do you approach those decisions?

 

Danish Yusuf: [00:17:28] Certain things will have a very strong view and will just do what I think that's one of the benefits of being the CEO, if I feel very strongly about it, will do it. But most of the time it will do is depending on where the decision lands. There's somebody else that would have the primary accountability for that thing, be it the finance department or sales. They'll they'll have that primary view. And if it's something small or mid-sized, they'll just do it. If it's something more meaningful, we'll debate it and we'll we'll see what what's the right outcome. I forget which book I was reading recently. This is a great analogy. The the Knights of the Round Table, it was a round table. There was no heads. So everyone had to sort of come to a decision together but behind the table, there was a throne. So if the table couldn't decide it, the one person would break the tie at the end. And it's sort of like that for us. It's rare that I'd like to break the tie. But if there is a logjam and I have a strong point of view, we'll just move forward for the sake of efficiency. Not to say I'll always be right, but it may be better to be wrong and fast than to be right and move slow.

 

Craig Asano: [00:18:37] Mhm. Absolutely. Yeah. No that's well said. What do you know. There's this story here in Canada. I'm sure it's all around many markets and countries around the world, you know, the lack of women leaders or women in, you know, women founders, also women leaders that are part of that key internal decision making round table. You know, if you're going to the executive team by decision. Do you see it as a problem in Canada and around, like, how can we overcome this? And there's obviously an incentive to do so. I mean, you roughly have 50 percent men in the world, 50 percent women, the world. What's going on?

 

Danish Yusuf: [00:19:17] Yeah, it's it's it is a problem, I'll tell you. Definitely is a problem. The gender balance is one thing and there's all other sorts of diversity and inclusion. You want have a good balance to represent holistically having a well balanced company essentially from from various metrics. It's it's a lot of debate, a lot of discussion. I'm not sure what the solution is ourselves. We're not great at the gender balance, at the at the senior level. That's something we are aware of and we're working on. I'd say when you go down to middle management, we are better. They'll still have more work to be done. One of the things we've recently done is tracked the applicants that we're getting in for all types of roles and looking at the diversity of the applicants and making sure that at a minimum, we are attracting a very diverse range of applicants. So at least we're not shooting ourselves in the foot right at the top of the funnel. And we're then making sure that as much as we can, that all of our evaluation processes, the even the words that we use in the job descriptions, the fact that the people that are participating in the interviews, we want to make sure even from our side, people that are interviewing, they are a diverse group and trying to see is there something we're missing in that conversion funnel from applicants to offer to hire. And we're making a really concerted effort to evaluate ourselves and make sure that we're holding ourselves up to a higher standard and hopefully things balance out. Personally, I'm not a fan of having hard quotas that you must have X or Y, because how far do you go with those quotas? We know there certain best practices and we want to get to that, but we have to fix from the top of the funnel down and and work towards getting to a nice balance split.

 

Craig Asano: [00:21:10] Very smart, very smart cookie, earlier before that last question you touched upon covid got to ask it.  You know, this and another interesting thing you talked about every nine months, every 15, whatever it is, you're almost like a chameleon. You come out of this shell and you reinvent yourself with covid reinvention and the size of the company you have with with one hundred do you have policies like are you allowing employees to work remotely, permanently, or is it a hybrid model? What are the trade-offs? And then maybe just what's the whole how are you approaching covid? And we're like, it's not over. We know it's not. But what what are your thoughts on covid?

 

Danish Yusuf: [00:22:00] Yeah. So we I was amazed when we when we were planning for covid all of our employees have laptops and my first job was at IBM in 2003 as a as a co-op or as they called it. And I had a laptop at the time and I didn't realize that the vast majority of insurance employees that either brokerages and insurance companies don't actually have laptops. It's a very desktop culture and a remote token with a VPN token. I didn't realize that was the case. Luckily for us, we were started as a digital company. And so for us technologically, it was very easy. On a Friday morning, we said, all right, that's it. Trudeau came out and announced a lockdown and it was declared a pandemic. Everyone was told to go home and not come back. And all people had to do is pick up their laptop and whatever else. And they went home. And we literally, over the coming weeks sent monitors and equipment by Uber to everyone's homes because we said, please do not come into the office. And to this day, we've told people don't come into the office. And in fact, we will never force anyone into the office ever. If you're not comfortable, work remotely. We are only now starting to allow people back into the office if we as we created all of the necessary tooling, you have to book a desk. You we have to get it cleaned. We have to have distancing one way past all of that we're setting up right now. But I think we are changed forever, as there are now. There's now somebody living in Vancouver and working here and there's somebody that we hired out of Calgary. We've never done that before. We've talked about it. But now we have the ability to hire anywhere in the world and we're going to take advantage of it. We're not confined to the small space in downtown. We also have had to spend a lot of money learning how to on board employees virtually. We we have forty percent of our staff that has joined during covid. We haven't met most of them yet. They have to feel like they're part of the company. They have to learn the culture. They have to work with their colleagues. They have to learn to use all of the tools and on the sales side and learn how to sell insurance and manage customers. So we've had to really learn that muscle of how to on board people and also, unfortunately, off board people. We had to part ways with somebody. We we did it over remotely. And five minutes later, we had an Uber waiting outside their home so that they can return the company equipment. And the Uber came back to the office and off we went. So there's a number of really interesting twists that I believe that this new model is here to say in some way or another. I don't think we're going to be one hundred percent remote forever, but we'll probably be largely remote forever because it helps us attract talent from anywhere. And I think that's the future of our business and for many startups, that's the case.

 

Craig Asano: [00:24:58] Yeah, the global resourcing is is critical. I wish in some cases that remoteness, the benefit of it, could hit areas like regulation and living in a global world were digital first.

 

Danish Yusuf: [00:25:14] So we haven't even touched on the regulation side. It's something I've thought about. So typically as a business, you buy a general liability policy and that covers you for workers at the office. Now, let's say someone's working from home in Calgary and something happens and they're working out of their house. Whose insurance policy covers that desert. Is that their home or is it the business? Or if they're flying here and it's partly vacation and partly visiting the office, what happens to all of these questions haven't been answered of the contract covid. And something happens. Who's responsible? It's all of these regulatory legal type things will have to go through the courts to get settled before we know where things will land.

 

Craig Asano: [00:25:59] Wow. Is there a model there where you could have, you know, like doctors are running their own small business, yet they're paid and organized and regulated by the government. And could it be that in Calgary, your employees all over the world, they run and you give them a pack and a policy and say here's how to get your business off the ground and we'll sell you insurance, too, because we're an insurance company, but you're actually running your own business and and you're working as a self-employed model. And, you know, that could be interesting because there's companies at that size. They have to start going through that sort of policy thinking.  very interesting.

 

Danish Yusuf: [00:26:42] They know the gig economy is sort of like that.  You're anywhere you log into this platform and you and you start working. So there are examples of that already. Or you you go via a staffing firm and the staffing firm helps you with your insurance and payroll and banking. So there's some examples out there that people can latch onto and use is all new to us, because for now, everybody has been employees and they've been in downtown Toronto or a commuting distance from downtown. We have to figure this out as we go. And I've been quite, quite a bit more active on LinkedIn over the last month. And I post about our learnings and our experiences and my thoughts on insurance. So as we learn more, I'll be posting stuff online.

 

Craig Asano: [00:27:25] Yeah, that's fantastic. Well, I'd like to get in a little deeper into the actual Zensurance business model. Can you talk to us a little bit about who your primary customers are, the stakeholders, the traction, what are the latest product innovations? What's going on? Or are you just who are you disrupting? Is it all the incumbents?

 

Danish Yusuf: [00:27:46] So we we're we're with the equivalent of a Kayak and Expedia for insurance for businesses, insurance, insurance can be split into Life health benefits, that's one half. And then there's property and casualty. We're in that half and then property and casualty can be split into insurance for people. So your home and your car or your cottage, and then there's insurance for businesses. We're on the business side and specifically on the small business side. And that hasn't changed for like 50 years. You still walk into a broker's office or you get on the phone, you get a 15 page document, you fill it in, you fax it over, you go back and forth for weeks sometimes and you often can't pay by credit card. It's it's cash or cheque or or something like that. And it amazes me that in twenty twenty you can't buy a five hundred dollar insurance policy online. Because presumably the incumbents say it's too complicated and it can't be done, but if planes can fly themselves and cars can drive themselves and you can buy all kinds of things online, why can't you buy a five hundred dollar policy online? It's really just data and algorithms applied, decision made, policy issued. And so that's the problem we're solving. And it's it's not a simple problem for sure. If it was, people would have already done it. But our whole philosophy is there's so many conflicts of interest in the current business. There's so many so much manual transaction and waste in there. How do we use an advanced platform, a technology platform to eliminate the waste, make the customer actually like the experience to buy insurance as much as possible? Nobody likes buying insurance, but make it as simple as possible and educate them about what they're buying.  Give them advice as to how to reduce the risk in their business and be that adviser, but in a very digital manner. We're still 50 licensed brokers. If someone wants to get on the phone and talk to us, we can do that. But it's that self-service model where half our customers come to us after business hours because they're busy running their business during the day that it would make it easy for them. And on the conflicts of interest, we haven't solved all the problems ourselves, but we're looking at it. And there's this really interesting concept of the loyalty penalty where probably and most often the longer you are with the same provider, the more likely it is that you're going to pay more than you need to, because every year you bump up the price by five percent, five percent the next year and five percent, you really don't do anything. And lo and behold, after a couple of years, you're paying 20 percent more than you were. But a brand new customer comes in with the exact same profile. They will be offered a thousand dollar policy, whereas you're paying twelve hundred only because you've been there for a while and you and you're not bothering to shop around. That's a big thing we're trying to solve for by having no difference between the price for a new customer and an existing customer, we're equal across the board and we believe that's the way it should be.

 

Craig Asano: [00:30:49] Mm. Yeah.  When I think about the opportunities in insurtech, number of years ago this idea of uberized-insurance, let's not charge the company a standard insurance policy that covers them for a year that looks like the big companies because they're a small company. And let's try to right size. Let's try to Uberize. Let's try to. But is it that technology that allows them through sort of filter by filter and then the data side where they can assess the risk more accurately. I guess what the question is, how are the products themselves being innovated on as opposed to the, market like the gig economy, the new trend. But what about those products? Is that where most of the innovation is happening or is it more on the market side?

 

Danish Yusuf: [00:31:41] Yeah, it's a great question. I think most of the innovations thus far generally has been happening on the distribution side. How do you buy the product? Innovation on the product itself is coming. There are companies out there that have pay per use type insurance or different things like that. But we have been doing is taking those traditional policies that have been geared towards midsize businesses that might be 10 or 20 million in revenue. And if you're buying a policy made for that business, you're going to pay based on that. So what we're trying to do is figure out how do you remake that policy so that it's more geared towards what that small business needs. You take out the stuff that they don't need. You add a few more things that they do need you right size it. You pay the appropriate amount, but it covers you for what you need. That hasn't been done a whole lot. We're only a year into that journey right now and we think the product innovation is critical. And you can't just take an old school product and put some lipstick on it and sell it online and hope you're successful. You have to innovate from from the front all the way to the back. But so far, most of the work has been on the distribution side.  In general, when you look at various insurtechs out there.

 

Craig Asano: [00:33:01] Insurtech in Canada can you talk to us a little bit about that? How many are actively pursuing innovation on that product side and is it growing? Is it is it mostly based here in Ontario? Is that all over the place? What where is the opportunity? What are the challenges to how do we know what is the future growth path look like?

 

Danish Yusuf: [00:33:24] Yeah, insurance is a massive industry. It's the property and casualty side to 60 billion in revenue per year. Just in Canada. It's six hundred billion in North America and a couple trillion in the world. It's a massive industry, lot of opportunity in terms of innovation, unfortunately, like in many things in Canada, where we are a little bit behind, there aren't too many businesses in insurtech at scale and there are a handful that are have raised a couple of million dollars and doing really interesting things. I think the innovation is following GDP. Ontario's Big, BC and Alberta's next. There's some of the Maritimes and the prairies, but it'll follow GDP and we're quite excited. I'm personally very excited every time I see a new startup in the space, we need more people lot. We need a lot more smart minds trying to figure out how to make it better. And we need enough critical mass to give what we're doing credibility and convince the big guys that there's something to it and they need to rethink their traditional philosophy of digital doesn't work. It's a traditional business. It's a handshake business that people don't want to buy online. The more companies out there knocking on that door, hopefully we convince some of them. But I think there's still a lot more work to be done. Many more startups are needed because we are behind, a fair bit behind the US and a lot behind the UK. The UK is probably amongst the furthest in the world.

 

Craig Asano: [00:34:56] Why is that is that because there's some regulation that's slowing the sort of Canadian adoption and interest in the space, or is it because it's so tightly controlled by incumbents and there's no incentive for that change and it's tough to break in?

 

Danish Yusuf: [00:35:15] There is some regulation. I don't think that's the reason. If you look at across verticals, we tend to be a very conservative culture here. This has changed in the last few years. But traditionally, if someone wants to convince or acquire customers quickly, they'd rather go to the US where people are a bit more of a risk taker. You'll have people sign up and try things. It traditionally hasn't been as much here. We also have a very cosy enterprise culture. You have five banks, three telcos. There isn't that much of an incentive for the big folks to really move the needle because it's quite comfortable versus in the US you have thousands and thousands of banks. That has changed, but that probably has a lot to do with it. For the UK and insurance in particular, regulation was a big part of it. It's much more lax. For better or worse, there's arguments on both sides and insurance, particularly much more lax in the regulation which facilitated the rapid rise of auto insurance online. So Canada is a bit more regulated in the US is much more particularly when it comes to auto insurance.

 

Craig Asano: [00:36:27] I mean, we have these a lot of discussions right now about the prospects of open finance, open banking on open-X, if and when that comes down to Canada. I mean, we've already seen a number of jurisdictions that were behind. But when that comes down in Canada and this focus around, consumer access to data and the privacy standards, how does that blend into Insurtech and are you preparing for that eventuality? Will that help you? Hinder you? What what do you think?

 

Danish Yusuf: [00:37:01] I am a huge supporter of that, giving the control of a consumer's data back to the consumer and in some ways encouraging or enforcing the opening of the platforms to allow new players to come in and run on the existing rails. No one's used the word that I've heard open insurance. I'm not sure quite what that even means, but anything that is talking about greater transparency, greater control for the consumer, that's what we stand for. And we're big supporters of that. Essentially, what we're doing is bringing transparency to products and pricing of commercial insurance to the customer. And we get a lot of push back from incumbents saying you're just commodatizing the market. If you make it easy to compare products and pricing, prices come down. And I say, yes, probably. But if that's the only reason you're in business, which is the lack of transparency, you're not running a good business. Let the commodity products trade as commodities and then you go and add value in other ways. You can buy a Dell machine for seven hundred bucks, but I paid two thousand for my Mac. They do similar things they're both computers. I could do Zoom calls on both, but the Mac just is so much better in many ways and I'm willing to pay more. And I think the same with insurance. If all you're doing is selling a commodity, it deserves a commodity price. Add some more things in it that people are willing to pay for and they will pay for it.

 

Craig Asano: [00:38:34] Yeah, absolutely, yeah, I know very well said, if if there is a partnership that's out there or an investment, perhaps, what is Zensurance looking?  What does Zensurance need and where do you see Zensurance as well as yourself being in five years? So, you know, is there a partner and how do you how do you get to that next iteration of growth? You said earlier on that, you've had some success as a long way to go to want to get into the future a little bit.

 

Danish Yusuf: [00:39:06] Sure. covid has been good to us in many ways. We have a lot more volume than we can even handle. We had 10 people, 10 new employees start on Monday. We have a bunch more starting. So if you'd asked me this pre-Covid, I would have said the thing that will one of the things that will help us is connecting to pools of businesses where we can get more customers and learn more from them. That will always be the case, but it's not the highest priority at this point for us. It's just being more connected to the insurance insurance company community and sharing more with them what we're doing and figuring out ways to get more insurance companies on our platform. We work with 50 today. There's probably one hundred and fifty in Canada, so we represent one third of the market. There's a lot more to be done there. As a broker, we support choice and the more choice we can provide the customers, the better our experience to them until the future is more insurance companies, more insurance products, more tailored products, and eventually tapping into bigger, bigger and bigger pools of businesses and getting them to even just to use to learn about insurance, even if they buy elsewhere that's fine. We want to be that central place where businesses, particularly the smaller businesses, come to learn about managing risks and running a more effective business. If we accomplish that in the next five years, I will be able to sleep happy every night.

 

Craig Asano: [00:40:33] Absolutely.  Is there any insurance product specific for the fintech industry that you see as a potential area of interest?

 

Danish Yusuf: [00:40:42] Fintech has been a really hard space for insurance because of the perceived risk. If you're sure if you're moving money, your your insurance policies are issuing mortgages. It was extremely hard. We've been fortunate over the last two months to work with a couple of our partners to come up with insurance products specifically built for the fintech community be that electronic crime coverage or coverage for the directors coverage for you, you make a big round of incorrect credit score guesses and you lend money that you shouldn't have and your algorithm goes haywire. So there's a number of things that we've we worked on with a couple of partners geared towards the fintech community. And I think anyone that's beyond a certain level of scale should really consider that product just because the the downside risk is huge. We had one customer that had some sort of theft digitally and they lost well over a million dollars over it and they had insurance and so they were OK.

 

Craig Asano: [00:41:49] Well, I just think about all these, you know, the automation and the smart contracts and transactions that are happening while everybody's sleeping at night, it's going to be a certain, certainly interesting challenge to to look at insurance in those automated spaces. But I think we're we're going to start moving into that rapid fire question round. I could talk to you all day, man, this has been awesome. But I know, you know, you've got ten new people waiting for Ubers at the door to start work.  So let's get into these rapid fire questions, just like a one word quick response not. And you can you can pass it. It's just, you know, let's let's finish it with some fun here. So you you ready for for these rapid fire questions?

 

Danish Yusuf: [00:42:33] I feel like it's coming whether I'm ready or not. So let's do it.

 

Craig Asano: [00:42:35] It's come in and you don't need insurance for this. Here you go. What keeps you up at night?

 

Danish Yusuf: [00:42:43] Keeping people engaged, all our employees engaged as we double and triple in size and making them feel like they're still at a startup.

 

Craig Asano: [00:42:51] Nice. What's your favorite book?

 

Danish Yusuf:  I just read it. Awesome book, You Are What You Do by Ben Horowitz.

 

Craig Asano: [00:42:59] Oh, I don't know that I have to get it. What new technology will transform the future?

 

Danish Yusuf: [00:43:07] Oh, well, what one new technology will transform the future, I may have to pass on this one. There's so many things I can think of, right?

 

Craig Asano: [00:43:17] So what is so that's a pass what is one piece of advice that you'd give yourself if you went back in a time when you were a university student?

 

Danish Yusuf: [00:43:26] Take a lot more risk much earlier in life. The downside is limited, but the upside could be massive. Not only because you can form a company out of it, but the amount that you could learn by taking that risk.

 

Craig Asano: [00:43:39] Good answer. Good answer. What epic experience in your life will you never forget?

 

Danish Yusuf: [00:43:48] Closing the first round of funding for Zensurance, the day Trump was elected.

 

Craig Asano: [00:43:54] Oh, you won't forget that one.

 

Danish Yusuf: [00:43:57] I'll never forget it.

 

Craig Asano: [00:43:59] I should probably add a rapid fire question. Who's going to win the US election?

 

Danish Yusuf: [00:44:04] The American people?

 

Craig Asano: [00:44:06] The American people which one  so the last rapid fire question, What motivates you each and every day?

 

Danish Yusuf: [00:44:17] Every time we hire a new batch of people, we had a new batch this week, they tell us how excited they are to be with the company and how cool they think what we're doing. They That's really inspiring to hear after after four years, you sort of forget what you're doing and it's day to day. But when someone new comes in and they make you step back and think, yeah, really, it is cool what we've all built together. It's not just me, it's the whole team hearing that every once in a while makes it all worthwhile.

 

Craig Asano: [00:44:50] That's fantastic. Is there any last message you want to to part with the Fintech Fridays audience that are listening here?

 

Danish Yusuf: [00:44:59] There will be many incumbents that are not happy with what you do, take that as a positive sign and just keep plugging away persistence. In my mind, persistence is a huge factor in success, not not necessarily being the smartest or being the most well-connected, just having that grit to keep going and keep going. There's probably a huge correlation between that and success.

 

Craig Asano: [00:45:26] Very wise words. Well, everyone, that's a wrap, folks, on behalf of the Fintech Friday's podcast, we'd like to thank Danish for joining us on the show. I had a blast and really enjoyed a convo. Please come back any time and before you go. Last thing is, can you tell the audience how to get in touch with you if they have any questions? Want to learn more?

 

Danish Yusuf: [00:45:46] Yeah, absolutely, you can find me on LinkedIn, I've been quite active recently, and then the company Twitter handle @zensurance, I'm plugged into that as well.

 

Craig Asano: [00:45:56] Ok, everybody, there you have it. If you have any questions hit up Danish on LinkedIn or check out the Zensurance platform and I'll of course, be sure to include the contact information, what we can, as well as his bio and all the links in the show notes. So thanks again, everyone, for joining us. And episode forty one with Danish Yousef, the CEO and co-founder of Zensurance. If you're new to FinTech Fridays, please check out some of the incredible past episodes on the site. I'm sure you'd be surprised at what you find. We look forward to seeing you next Friday for another episode of Fintech Fridays. Have a great weekend, everyone.

 

Danish Yusuf: [00:46:33] Thank you.

 

Craig Asano: [00:46:35] Thank you.

 

Outro : you've been listening to Fintech Fridays brought to you by NCFA and partners. Tune in weekly for the latest fintech Friday podcast by subscribing to this channel. The National crowdfunding and Fintech Association of Canada is a non-profit actively engaged with social and investment fintech sectors around the globe and provide education research industry stewardship services and networking opportunities to thousands of members and subscribers. For more information please visit ncfacanada.org. Oh yeah.

 

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NCFA Jan 2018 resize - Fintech Fridays EP41:  40% pandemic growth, taking risks and innovating Insurtech in Canada 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, 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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FINTECH FRIDAYS Podcast: Season 3

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JOIN US ON A STORYTELLING JOURNEY:  SEASON 3

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EP41:  40% pandemic growth, taking risks and innovating Insurtech in Canada

NCFA FF Podcast Ep41 Danish Yusuf Zensurance Banner - FINTECH FRIDAYS Podcast:  Season 3

 

GUEST: DANISH YUSUF, Founder and CEO, Zensurance (Linkedin)

BIO:  Danish Yusuf is the Founder and CEO of Zensurance, a Toronto-based technology company focused on building curated insurance solutions for business owners.  Danish is a former leader in McKinsey & Company's Digital Insurance practice, supporting insurance clients globally on defining their digital strategy. Prior to McKinsey, Danish was a software architect and developer at IBM Canada, covering everything from mainframe development to web development.  Danish earned a bachelor’s degree in Software Engineering from the University of Toronto and has an MBA from Harvard Business School. In 2018, he was named by Canadian Underwriter as one of the Top 10 Brokers Under 40 in the Canadian Property and Casualty industry.

Enjoy! (Full TRANSCRIPT)

PAST SEASON 2 EPISODES:

Ep20-Jan 11:  Bitcoin Backed Loans and 2x Credit - Putting Your Crypto to Work (Mauricio Di Bartolomeo)

Ep21-Jan 18:  Meritocracy, Decentralized Innovation and the Power of Collaboration (Hussein Hallak)

Ep22-Jan 25:  Reducing Regulatory Burden by 25% in Ontario (Amar Nijjar)

Ep23-Feb 1:  Getting Smart About Crypto and Insurtech Snapchat Models (Justin Hartzman)

Ep24-Feb 8:  Re-imagining Philanthropy (Daryl Hatton)

Ep25-Feb 15:  Unlock the World (Kate Guimbellot and Jason Sosnowski)

Ep26-Feb 22:  Investing in Private Canadian Companies (Peter-Paul Van Hoeken)

Ep27-Mar 1:  Blockchain Gaming and esports (Shidan Gouran)

Ep28-Mar 8:  Rethinking Brokers (Muhammad Rashid)

Ep29-Mar 22:  The Future of Securities (Richard Carleton)

Ep30-Apr 12:  The Future of Canadian Crypto (Andrei Poliakov)

Ep31-May 14:  Blockchain Law (Jason Saltzman)

Ep32-May 24:  Rallying behind Bitcoin (Frederick T. Pye)

Ep33-May 31:  Indexing Consumer Loans and Financial Literacy (Phillip Postrehovsky)

Ep34-Jul 6:  Accelerating Fintech Growth (Brendan Holt Dunn)

Ep35-Aug 9:  Autonomous Alternative Lending (Vit Arnautov)

Ep36-Aug 22:  Techfins (Michael King)

Ep37-Sep13:  Funding is Female (Jill Earthy)

Ep38-Mar25: Why Identity Matters in an Evolving Online Environment (David Lucatch)

Ep39-Apr23: The Power of Digitization and How to Get Exponential (James Wallace)

Ep40-May22:  Why Bitcoin Exists and Education for the Masses (Austin Hubbell)

FINTECH FRIDAY$ is a weekly podcast brought to you by NCFA and partners, where we sit down with the incredible people in the Fintech and Funding community and talk about trends, product innovations, developments and challenges!

Fintech Fridays is an evolving and innovative educational platform focused on delivering authentic personalities, content and story telling on the journey of mainstream adoption of new financial technologies and their impact on the future of finance.

Subscribe and tune in each Friday to check out the latest movers and shakers with hosts Manseeb Khan, Tristram Waye, Anna Niemira, and others coming soon.

Want to get involved?  Contact us about partnerships opportunities, hosting and more:  info@ncfacanada.org

NCFA Fintech Fridays podcast - FINTECH FRIDAYS Podcast:  Season 3

NCFA Jan 2018 resize - FINTECH FRIDAYS Podcast:  Season 3 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, 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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Gangster capitalism and the American theft of Chinese innovation

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Techcrunch | Danny Crichton | Sep 20, 2020

US and China politics - Gangster capitalism and the American theft of Chinese innovationIt used to be “easy” to tell the American and Chinese economies apart. One was innovative, one made clones. One was a free market while the other demanded payments to a political party and its leadership, a corrupt wealth generating scam that by some estimates has netted top leaders billions of dollars. One kept the talent borders porous acting as a magnet for the world’s top brains while the other interviewed you in a backroom at the airport before imprisoning you on sedition charges (okay, that might have been both).

The comparison was always facile yes, but it was easy and at least directionally accurate if failing on the specifics.

Now though, the country that exported exploding batteries is pioneering quantum computing, while the country that pioneered the internet now builds planes that fall out of the sky (and good news, we’ve identified even more planes that might fall out of the sky at an airport near you!)

TikTok’s success is many things, but it is quite frankly just an embarrassment for the United States. There are thousands of entrepreneurs and hundreds of venture capitalists swarming Silicon Valley and the other American innovation hubs looking for the next great social app or building it themselves. But the power law of user growth and investor returns happens to reside in Haidian, Beijing. ByteDance through its local apps in China and overseas apps like TikTok is the consumer investor return of the past decade (there’s a reason why all the IPOs this seasons are enterprise SaaS).

It’s a win that you can’t chalk up just to industrial policy. Unlike in semiconductors or other capital-intensive industries where Beijing can offer billions in incentives to spur development, ByteDance builds apps. It distributes them on app stores across the world. It has exactly the same tools available to it that every entrepreneur with an Apple Developer account has access to. There is no Made in China 2025 plan to build and popularize a consumer app like TikTok (you literally can’t plan for consumer success like that). Instead, it’s a well-executed product that’s addictive to hundreds of millions of people.

So much as China protected its industry from overseas competitors like Google and Amazon through market-entry barriers, America is now protecting its entrenched incumbents from overseas competitors like TikTok. We’re demanding joint ventures and local cloud data sovereignty just as the Communist Party has demanded for years.

Hell, we’re apparently demanding a $5 billion tax payment from ByteDance, which the president says will fund patriotic education for youth. The president says a lot of things of course, but at least the $5 billion price point has been confirmed by Oracle in its press release over night (what the tax revenue will actually be used for is anyone’s guess). If you followed the recent Hong Kong protests for a long time, you will remember that patriotic youth education was some of the original tinder for those demonstrations back in 2012. What comes around, goes around, I guess.

 

How Technology Saved China’s Economy

AI Implementation: A Day in the Life in Shanghai (FFCON20 Video)

What to expect from Biden-Harris on tech policy, platform regulation, and China

The future of Asia: Asian flows and networks are defining the next phase of globalization

 

Development economists like to talk about “catch-up” strategies, tactics that countries can take to avoid the middle income trap and cut the gap between the West and the rest. But what we need now are developed economists to explain America’s “fall behind” strategy. Because we are falling behind, in pretty much everything.

As the TikTok process and the earlier Huawei imbroglio show, America is no longer on the leading edge of technology in many key strategic markets. Mainland Chinese companies are globally winning in areas as diverse as 5G and social networks, and without direct government intervention to kill that innovation, American and European tech purveyors would have lost those markets entirely (and even with those interventions, they may still lose them). In Taiwan, TSMC has come from behind Intel to take a year or two lead in the fabrication of the most advanced semiconductors.

Continue to the full article --> here

 


NCFA Jan 2018 resize - Gangster capitalism and the American theft of Chinese innovation 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, 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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Fintechs to play an “even more important” role coming out of lockdown, says British Business Bank

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AltFi | John Reynolds | Sep 16, 2020

BBB 2020 Annual report - Fintechs to play an “even more important” role coming out of lockdown, says British Business BankFintechs will be “even more important” coming out of lockdown than they were during lockdown helping smaller businesses return to normality, according to the British Business Bank (BBB), which has reported a £2m loss in the year ending March 2020.

The government-backed bank, which is responsible for organising the CBILS, BBLS and other government emergency funding schemes, has updated the market on the impact that Covid-19 has had on financial institutions, businesses and its organisation in its annual report.

It cited fintechs as playing “an important part of delivering emergency schemes during the crisis” adding “they will be even more important in the recovery, when the UK’s smaller businesses will still need to be served by a healthy, competitive and diverse finance market.”

Starling Bank and OakNorth Bank are among the fintechs which have offered loans during the pandemic through the BBB.

See:  Refusal to embrace open banking puts Canada behind yet another curve

The annual report covers the period to the year ending March 2020 but the BBB offers an update on the impact of Covid-19.

It said the Coronavirus Business Interruption Loan Scheme (CBILS) has 97 accredited lenders and, as of August 11, provided 60,000 loans worth £13.4bn.

The Coronavirus Large Business Interruption Loan Scheme (CLBILS), meanwhile, has 23 accredited lenders and has delivered 500 loans worth £3.4bn.

The Bounce Back Loan Scheme (BBLS) has given out over 1.1m loans worth £35bn while the Future Fund has delivered over £560m of funding to 565 businesses.

CBILS is due to end on September 30 while the BBLS is due to end in early November, although the government has said they might continue beyond the deadline.

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Download the BBB Annual Report 2020 --> here

 


NCFA Jan 2018 resize - Fintechs to play an “even more important” role coming out of lockdown, says British Business Bank 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, 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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KYC and KYP led banks to push in-house products more, exec says

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Investment Executive | Rudy Mezzetta | Sep 2, 2020

bay street toronto - KYC and KYP led banks to push in-house products more, exec saysIncreasing compliance requirements — such as enhanced know-your-product rules — provided cover for Canada’s banks to focus ever more exclusively on selling their in-house investment products, shutting out independent products and limiting client choice, says Sheila Murray, a corporate director and former president of CI Financial. 

“Under the guise of compliance and risk aversion, and doing the right thing for their clients, [banks] moved in favour of their own products to the detriment of having a balanced product shelf,” Murray said, speaking on a panel presented by NEO Exchange on Wednesday. The topic: Ontario’s Capital Markets Modernization Taskforce consultation paper, released in July.

Murray made the comments in support of proposal in the paper that banks be directed to offer independent providers greater access to their distribution channels. The task force set a deadline for Sept. 7 for comments, and intends to provide a final report with recommendations to the Ontario Minister of Finance before the year’s end. 

See:  NCFA Response to the Modernizing Ontario’s Capital Markets Consultation Taskforce

It’s really difficult [issue], but I think [the task force] is going in the right direction of encouraging more open shelf and transparency on the shelf,” Murray said. 

In its paper, the task force proposed that closed product shelves/proprietary-only shelves be banned in the bank-owned distribution channel. The task force noted that an estimated 80 per cent of product distribution currently goes through bank distribution channels, and that such concentration encourages the sale of proprietary product. 

The task force also proposed that bank-owned dealers be required to include products on their shelves if requested by an independent provider — unless the bank has determined “on a reasonable basis that a particular product isn’t suitable. Bank-owned dealers would have to document “a detailed rationale” for excluding a product and provide that documentation to the requesting producer. 

Finally, bank-owned dealers would report on the percentage of proprietary versus independent products on the shelf or sold on a quarterly basis to the Ontario Securities Commission.

Murray says independent providers, such as her former firm, were already having a difficult time gaining access to bank channel distribution, and “that only became more difficult with enhanced know-your-client and know-your-product rules, [and other] enhanced compliance obligations.

Banks “understandably” decided to concentrate on selling their own products rather than expend effort on assessing the risk profile of competitor products, she said. 

See:  C.D. Howe Institute Report: Open Banking Holds Promise, Risks for Consumers

In reply to Murray’s comments, panellist Cindy Tripp, a task force committee member, and founding partner and former co-head of trading at GMP Securities LP, said,

“I think we all agree that there were unintended consequences from know-your-client and know-your-product [rules].” 

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NCFA Jan 2018 resize - KYC and KYP led banks to push in-house products more, exec says 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, 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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Detour: An altered path to profit for European fintechs

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McKinsey & Company | Chandana Asif, Max Flötotto, Tunde Olanrewaju, and Giuseppe Sofo | Sep 9, 2020

Alternative path to profit - Detour: An altered path to profit for European fintechsTo navigate the economic fall-out from COVID-19, Europe’s fintechs will need to adjust their playbook.

Fintechs have been on a roll. Fueled by generous amounts of venture capital funding, last year 24 financial services startups hit a valuation of more than $1 billion, bringing the global total of such highly valued “unicorns” to 58. Together, these and other fintechs have ushered in a revolution in customer experience: Consumers can now open an account or get a loan in a matter of minutes (instead of weeks or months), exchange and send money internationally at low or no fees, and buy products with instantly created no-interest installment plans. Fintechs have also upped the ante for speed and agility, launching new features and initiatives in weeks instead of the six- to twelve-month timeframes more typical of banks.

See:  Setting up small and medium-size enterprises for restart and recovery

The emergence and spread of COVID-19—in the first place a world health crisis—is also causing unprecedented economic damage across the globe. Most McKinsey COVID-19 scenarios show European economies contracting by 11 percent in 2020 and not returning to pre-crisis levels until 2023. Fintechs are already feeling the squeeze. Venture capital funding has slowed, business model vulnerabilities are being exposed, and competitive dynamics are shifting. This has brought the sector’s underlying profitability and long-term business model sustainability into sharp focus—to a point where we believe the path to profitable scale for many fintechs has been structurally altered.

This is not at all to write off the sector. Fintechs have several long-term advantages—they are native to the digital arena, with more efficient cost structures, organizational agility, and, most importantly, higher customer loyalty. Consumers are now accustomed to quick, easy, low-cost financial transactions, and we believe there is no going back. In this article, we explore how the dynamics for fintechs have changed (particularly in Europe), the opportunities and implications for financial services incumbents, and how fintechs can weather the storm.

Fintech funding has slowed, and scarcity may be with us for a while

In a matter of weeks, venture capital funding for fintech companies went from surplus to scarcity. After growing more than 25 percent a year since 2014, investment into the sector dropped by 11 percent globally and 30 percent in Europe in the first half of 2020, compared to the same period in 2019. 1 In July 2020, after months of COVID-19-related lockdowns in most European countries, the drop was even steeper—18 percent globally and 44 percent in Europe, versus the previous year (Exhibit 1).

fintech funding has declined 2020 - Detour: An altered path to profit for European fintechs

It is only when the tide goes out that you discover who’s been swimming naked.  Warren Buffet

See:  Fintech Acquisitions Show Sector Strength Despite Covid-19

This constitutes a significant challenge for fintechs, many of which are still not profitable and have a continuous need for capital as they complete their innovation cycle: attracting new customers, refining propositions and ultimately monetizing their scale to turn a profit. The COVID-19 crisis has in effect shortened the runway for many fintechs, posing an existential threat to the sector.

Adjusting the playbook: Four actions to consider

1. Targeted retrenchment combined with big bets

With core economics challenged and capital sparse, it is obvious that many fintechs will have to retrench thoughtfully if they want to avoid burning money unsustainably and spending themselves out of business. This will mean trimming international expansion plans, business lines, products, and initiatives. Fintechs have to focus their energies and capital on areas where they can truly make a difference—and do so quickly. Importantly, this entails not just cutting back, but also placing bigger bets and directing leadership attention to areas with long-term potential. London-based Revolut, for example, in addition to taking steps to adjust its cost base has also indicated it is looking at inorganic options in the travel space.

See:  Rebank Podcast: How to Build a Profitable Digital Bank with Tinkoff

2. Leaning into next-normal behaviors

B2B fintechs also have an opportunity to meet new needs. OakNorth, a lender for small and medium-sized companies, sold its platform to two large US banks to help them analyze and monitor the impact COVID-19 is having on individual loans and to automate the customer journey for small businesses applying for and receiving Paycheck Protection Program loans.

There is also an opportunity for B2C companies to expand into B2B markets.

3. Business model course corrections

The potent combination of changing customer buying and consumption patterns, a weaker economy, lower interest rates, and reduced creditworthiness represents a fundamental challenge to many fintechs’ business models. Company leaders need to take a hard look at their economic model and make adjustments, while preserving the best aspects.

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NCFA Jan 2018 resize - Detour: An altered path to profit for European fintechs 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, 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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The new urgency of global tech governance

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Brookings | Landry Signé, Mark Esposito, and Sanjeev Khagram | Sep 10, 2020

Global tech governance - The new urgency of global tech governancePandemic lockdowns, digitalization, and the acceleration of the Fourth Industrial Revolution (4IR) are all driving a shift in global governance. Since the world’s technological leaders will also be geopolitical leaders, the competition for dominance in cutting-edge sectors like artificial intelligence is intensifying. The 4IR technology race will be the primary factor influencing global economic and political arrangements in the post-pandemic future.

Although the United States remains the top AI power, it is closely followed by China, and then by other players such as Russia. For its part, China has already invested an estimated $300 billion in the field (including chips and electric cars), adopted a national innovation strategy (“Made in China 2025”), and enabled the rise of pioneering tech giants like Baidu, Alibaba, and Tencent. But while China has massive potential for AI development, it also has a lot of work to do before it surpasses the U.S. Studies show that China still lags on three key fronts: hardware, research, and the commercial sector.

See:  Global Survey on Impact of Covid-19 and Recession Risk: Fintech and Financial Institutions

Beyond the U.S. and China, European and Asian countries are also pursuing 4IR innovation. The United Kingdom, for example, is in the top quartile of countries in terms of AI readiness, owing to its top-tier research universities and generous public research funding. Similarly, many Asian countries have demonstrated an obvious advantage in terms of technological diffusion and robot density. With 774 robots per 10,000 workers, South Korea is far ahead of most other countries; and Japan, with its already-dominant automobile industry, has begun to establish itself as a leader in autonomous vehicles.

Against this backdrop, the COVID-19 pandemic has accelerated trends toward digitalization, with an array of 4IR technologies being adopted to track, trace, forecast, diagnose, and contain the virus, in addition to enabling remote work, e-commerce, and other behavioral shifts. In fact, it was an AI platform that first spotted the signs of a viral outbreak more than a week before the World Health Organization’s official announcement. And since then, AI and machine learning have been used to track and anticipate the evolution of the pandemic, identify high-risk patients, and optimize resource usage.

Moreover, scholars are using AI to detect new COVID-19 outbreaks and to drive the research for effective treatments or a vaccine. But this work points to the need for more regulatory clarity at the global level. To avoid zero-sum “vaccine nationalism,” we need better processes for the cross-border sharing of data and technological solutions, so that no one is left behind.

The recent dynamism in health care is emblematic of 4IR geopolitics more broadly. Plenty of attention has been devoted to the escalating Sino-American rivalry since the start of the COVID-19 crisis. Less noticed is the opportunity for developing countries to use the crisis as an impetus to expand their own adoption of 4IR technologies.

In Africa, for example, an AI-powered SMS platform has been deployed to deliver educational content to out-of-school children who lack internet access, smartphones, or even textbooks. Such innovations will become even more important the longer schools remain closed. Similarly, retailers and consumers are increasingly relying on e-commerce and mobile money to maintain social distancing and preserve supply chains. And in agriculture, more farmers are using information from big-data platforms, augmented by the Internet of Things, to guide their decisionmaking.

See:  What to expect from Biden-Harris on tech policy, platform regulation, and China

But fully capitalizing on these opportunities will require more coordination between the public and private sectors and with multilateral institutions. By its very nature, the 4IR competition tempts countries to use their economic power to shape international standards. In a data-driven age, how leading governments define their approaches to regulation, including key issues such as individual privacy, will affect the entire global economic order in the years ahead.

This dynamic is already evident in how different countries have managed the use of AI-driven facial-recognition and digital contact-tracing tools during the pandemic. In South Korea and China, these technologies were widely adopted early on, and have (so far) proven effective in limiting the spread of the virus, but indisputably at the expense of individual privacy.

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NCFA Jan 2018 resize - The new urgency of global tech governance 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, 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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