Global fintech and funding innovation ecosystem

Fintech Fridays EP44: The Vanguard of Digital Innovation and Ecosystems in Canada

NCFA Canada | Oct 16, 2020


FF EP44 with NCFA Advisors banner 2 - Fintech Fridays EP44:  The Vanguard of Digital Innovation and Ecosystems in Canada

EP44:  The Vanguard of Digital Innovation and Ecosystems in Canada


RICHARD REMILLARD, President, RCG Group (LinkedIn)

ROBIN FORD, Principal, Robin Ford Consulting (LinkedIn)

DAVID LUCATCH, Co-Founder and CEO, KABN Systems North America (LinkedIn)

LYNN JOHANNSON, Owner, E2 Management Corporation (LinkedIn)

EP44 podcast logos - Fintech Fridays EP44:  The Vanguard of Digital Innovation and Ecosystems in Canada

About this episode:

Join us for a special Episode 44 where Craig Asano sits down with a panel of NCFA Advisors and members who discuss the vanguard of digital finance and it's ability to fund, develop and scale digital innovations in green finance, digital identity and other emerging ecosystem opportunities in Canada. Are success stories like Wealthsimple and Shopify repeatable? Covid has afforded us all the time to take stock on the past and present while considering a relaunch of the future. Will Canada get it right?

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Fintech Friday Transcript of Episode 44:


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: [00:00:17] Hello, everyone.  My name is Craig Asano, the founder and CEO of NCFA, welcoming you to a special Episode #44 of Fintech Fridays. Today's weekly podcast brought to you by NCFA and Partners, where we sit down with incredible people in the fintech and funding community coast to coast across here in Canada, as well as around the globe to talk about trends, product innovations, developments and challenges. Fintech Friday's is an evolving and innovative educational platform focused on delivering authentic personalities, content and storytelling on the journey of mainstream adoption of the new financial technologies and their impact on the future of finance. As mentioned earlier today, we have a special episode with a few NCFA Advisors joining us today to discuss recent current trends in news. It's something that we've been meaning to do for a while here on the podcast. And today is a perfect day to pilot our first based adviser podcast. There's there's no scripts here. We've just advised our advisors to come up with a topic that they'd like to bring forth to the table for discussion. And we'll probably run with that format for the next forty five minutes. So just a quick introduction or maybe I'll have the guests introduce themselves. We have four guests joining us today, all of which are valued, and NCFA advisors and members here at the association. I would just say maybe I'll call in no particular order. Richard, could you just do a quick intro and maybe also just mention your involvement and any thoughts within NCFA as an advisor as well?


Richard Remillard: [00:01:56] And thank you very much, Craig. Good afternoon, everyone. Good afternoon, panel. It's a privilege and an honor to be here with you today. My background is all finance going way back to the Jurassic period when I had hair up. Lately, I've been engaged in doing some fairly heavy duty research from the private sector and public sector clients on risk capital issues, on access to capital for startups and what I call today scale ups, most recently a major report I shall talk about shortly to the federal government on a capital raising prospects for medium size, high growth companies in this country. Thank you.


Craig Asano: [00:02:48] Perfect. So we certainly got capital covered. Sounds good to me, That's Robin, could you introduce yourself?


Robin Ford: [00:02:56] Yeah, thanks, Craig, great to be here. My background is law and regulation, not entirely in the financial services sector, but certainly for the last 15, 20 years in the financial services sector, both in the United Kingdom and in Canada. I'd love to talk about some of the recent regulatory activity around the globe and in due course.


Craig Asano: [00:03:28] Perfect. Sounds like something that we can kick off next, but before we do, we got two more participants today. David Lucatch, can you introduce yourself?


David Lucatch: [00:03:39] Thanks, Craig, and great to be here with everyone on a what I would hope is a beautiful day, but David Lucatch, CEO and Chair of KABN Systems North America, we're in the business of verifying and managing and monetizing digital identity. We help people control that new area of self-soverign a digital identity and we're a Canadian listed company on the CSE under the symbol KABN, K-A-B-N.


Craig Asano: [00:04:12] Perfect, sounds great. I certainly have been following the ticker myself, and we have Lynne Johannson, then can you introduce yourself, please?


Lynn Johannson: [00:04:23] Sure, thank you very much, Craig has been a great decade so far this week, so much going on.  And in this space here I am in a management consulting firm in the environmental area, and I have been very much involved in the whole field of green finance.  And a couple of years ago, I caught on to what Craig was doing and I said it was very interesting because typically in the green finance discussions i'm involved when we're setting standards, international standards, and we're dealing with very large companies.  But some of the people that have been involved in NCFA have brought to my attention a very different way of looking at green finance, and I think there is an extraordinary opportunity here not only to help drive the opportunities that digital finance offers, but also how it can interface with the whole idea of green finance and move things along.


Craig Asano: [00:05:28] Mm hmm. Perfect. Maybe we should jump right into that topic and I know Decentralize Finance really took the financial services, the entire finance community, the crypto world as well by storm this past summer and it really poses an interesting tech stack that might be able to use in green finance markets. I know that Defi or decentralized finance has cooled off a little bit since then, but it doesn't seem like it's going away. And it seems like a very interesting framework of model to aggregate communities and stakeholder participation on multiple levels. And what are your what are your thoughts? Let's start getting into the discussion about the potential opportunities and obstacles of marrying initiatives like Defi with green finance.


Lynn Johannson: [00:06:22] Thanks.  If you sort of look at what's going on in the last little while, there was a report I actually just got up just before this call that talked about how a group of entities including the World Gold Council, the Silver Institute, European Central Bank and some others said that the value of global money supply in last year was 600 times higher than the value of the gold coins minted. And in part, I think because of the government is trying to bring out capital to help companies get through this thing called covid, they were saying that that has increased to sixteen hundred times over minted coins. The opportunity, I think, is if you of look at it and I've got my you know, my green hat on here, my ecological hat on here is one of the things we're very concerned about in the environmental world is not just climate change, it's the whole concept of biodiversity. And I think what the digital finance situation brings forward is what I call digital diversity. And there's so many aspects that we could be looking at if you wanted to, at a straight sort of environmental impact, if we can move from digging up minerals out of the ground and moving to electrons. There still is a carbon footprint to that, but it might be appreciably less and as opposed to being localized, it's a diversified impact. But I also think that one of the opportunities is and I have to apologize to the gentleman to name at your conference Craig, but they talked about democratization of capital markets that give us the ability to vote with results. And so if you think of some of the developments that we need to occur to get a green economy going, you have the chance to dramatically increase the speed of transfer and also help small businesses at the forefront of mitigating (raising) ten thousand dollars, you can have people who want to contribute into that idea and then through that process, move faster than we have before. So interesting to see how other people, how they can see this shift or and changes developing may assist us.


Craig Asano: [00:08:59] Right, one thing I just want to make sure you're speaking directly into that microphone, it was a little just a little bit, but I think most of us got the gist of the points. I'd love to. I heard the topic around, you know, access to capital. And one reason why we're looking at the innovative opportunities in Decentralized finance and how that can benefit the areas in climate change and green finance initiatives you're looking at. And Richard, really, this is a question for you, since you've been doing some research on access to capital and does a technology and a model like it going to go to work or an initiative like green financing? I mean, I know in your networks you've been talking to a lot of folks that have certain strong perspectives on both sides, you know, of of what is green finance. And I'd love to hear your thoughts.


Richard Remillard: [00:10:06] OK, in no particular order. And as a former. Board chair of the Sierra Club of Canada Foundation, way back when, and confirmed environmentalist and biodiversity supporter. I'd like to see personally as much as many resources and efforts devoted towards what we could call green finance as possible. The difference between, to my mind, green finance or financing green companies, to put it a little bit differently and financing IT (information tech) or bio lifesciences or AG, is that a huge amount of the private sector appetite depends on what governments do. So if you look south of the border right now, there's this immense contest going on between the Republicans and Democrats, and there will be a materially different cast to the opportunities for green finance in the states and spilling over to Canada. If one party wins rather than the other party, as Trump and his Republicans win, it'll be a lot tougher. If Biden and his party wins, it'll be a lot easier. And there will be big spin overs, spin offs here into Canada. If you look at. The capital raising issues today, research I've done on behalf of the federal government shows that finance companies tend to be largely these days, with some exceptions, at the smaller end of the SME spectrum, small, medium-sized enterprises and as such, their capital calls. At least they are not all that great. Cast your mind to recent news. Look at fintech emerging unicorn Wealthsimple, which is backed by Power Corporation here in Montreal and their last financing, around 140 million US led by three U.S. gigantic venture capital funds. I know that there are separate and distinct markets tiers one, two and three for capital raising for earlier stage and SMEs in this country and Wealthsimple is at the Top End, which cuts off at about 20 million US. In that market, if you've got a fast growing company, you've got between one hundred and five hundred four ninety nine employees. U.S. funds will be knocking on your door like there's no tomorrow at TCV, the lead investor in the Wealthsimple deal acknowledged that it had had Wealthsimple on its radar since twenty fifteen. There are extensive what are called "smile and dial" operations in Canada, whereby call centers very high end call centers usually out of New York, simply dial every company That's raise five million dollars in a series a round and they try to get meetings with the likes of TCV or Kane Andersen or Warburg Pincus. At the bottom end, which is more which is mostly where the green finance companies are of one sort or another. That's company is looking for less than five million and the market there is very jumpy pricing is incredibly uneven, and your best bet of getting financing is probably in Quebec and we probably said enough.


Craig Asano: [00:14:07] Well, I mean, you touched upon the US election and, you know, most people who are following would know that if Joe Biden becomes voted in power, the strength in the whole green case. I read an interesting article the other day about the green ETFs that have grown one hundred and sixty percent the last six months. And it's not a small sum of money. I think these these funds have grown, as you're mentioning, much, much larger than anything potentially could be put together here in Canada. But is it with the federal governments in Canada support for those pipeline projects and the folks in Alberta that are still getting paid on? Let's call it a declining industry at this point with peak oil, where how from a capital raising perspective and how that's going to marry with these new sort of innovative financing models, even if they have a role to help finance, as you were saying earlier, stage, maybe smaller green finance companies. Are they small companies we're talking about here, Lynn? Or just to come back to you, is are these what kinds of projects are required? I would have thought their massive infrastructure projects that require all sorts of capital, they're not small, small companies.


Lynn Johannson: [00:15:40] Well, there. Can you hear me OK?


Craig Asano: [00:15:43] Yeah, we can, it's much better yup.


Lynn Johannson: [00:15:45] OK, well you are looking at infrastructure projects and those are more often public partner, public and private sector sharing's of those things. So what I came in under is I'm currently involved in running a green finance standard. It's an international one and our interest is to make sure that there is a mechanism so that if person A has money and person B wants money, the first thing they really do is the question is asked is have you looked at your environmental impacts of what you're trying to propose, whether it's a performance issue or whether it's a specific environmental impact issue. But so the other gentlmen said so much of the opportunity out here is in very small companies because they are the ones who do the innovations and they don't typically get looked at in terms of financing and what I'm talking about here is, you know, really micro-enterprise. And so much of what I think the digital economy or digital finance opportunity offers is that you have people that do crowdfunding and they what they need is they need twenty five thousand dollars and they don't have the time to do all the paperwork that these bigger projects would require.  So this is, I think, really where my interest area is, is seeing how can we get the digital finance situation to make finance available, because those are the critical times to get money in the door to get these innovations going. Oh, and also that's quite answered your question, but. Infrastructure projects. I mean, that's that's big money and you've got several of the big banks in Canada have put forward the fact that they're going to be offering sustainable finance funds. So, for example, Bank of Montreal, they've earmarked four hundred and fifty billion to be available by 2025. They're not going to fund a micro-enterprise out of that purse. I just don't think so. But there's things that they could do to help that. But so there's you know, it's such a big playing field and there's so many variables, whether it's to finance a green company and then who determines what that means, and then is the financing itself, is it a green bond or are you doing a green lease? It's just such open ended field at this point in time. Mm hmm. Mm hmm.


Robin Ford: [00:18:34] It's just to interject briefly, I mean, we're so, so desperate for funding for green activities globally. You know, entities like the Asian Development Bank and so on have put absolutely enormous figures on the amount that's going to be needed both from governments and from the private sector. And so it seems crazy that we're not more advanced in Canada on the democratization of capital side and and on the standard side, both. It's crazy to me that it's not much easier for retail investors to spend a thousand dollars or 5000 dollars on green bonds, for example. And you know, what specifically can Finechs be doing to help on this front?


Craig Asano: [00:19:29] Mm hmm. Well, Robin, since you want to jump in here from a I know you track all things, it seems regulatory and certainly abreast of some of the changes that are happening and the Defi the crypto space. But are there specific regulatory activities that are, you know, coming out around the globe and that that will put Canada further behind without those standards? And what is the approach?  I guess the question is really around, how do we finance innovation here in Canada and its degree of importance? And it comes back to that, you know, how productive are we? How competitive are we? Are we operating, you know, out of an expensive pocket because the rest of the world continues to move forward? And it seems like Canada is always on the cusp of obtaining that capturing and monetizing the value, if we can use the word, monetizing it for the benefit of the greater good. But what are you seeing it from a regulatory perspective?


Robin Ford: [00:20:36] Yeah. Are we on the cusp? I don't think so. I think we're increasingly falling behind, not just in in the area of innovation and fintech but let's just stick with that for now. Let me just whiz through some regulatory activities. They're coming down fast and furious, so much so that it's all becoming a bit of a dog's breakfast. And just just to Segway off briefly, if it occurs to me that we could use some kind of grand map that can show us what is going on in various jurisdictions, I mean, we're well beyond the Excel spreadsheet stage now and some of the more innovative regulatory activities, the more sensible regulatory activities are actually happening in smaller jurisdictions like Gibraltar, like Malta, like Hong Kong, like like like Singapore. So you don't want to leave them off a regulatory map. So I just I just put that out there for now, perhaps, you know, let's say Icomply. Could you could you step up and produce such a map? I'm I'm sure some organizations are monitoring all of this in a more much more sophisticated way. And it would be good to hear from them. So can I just talk about the UK briefly? Because I like their approach with respect to crypto and fintech and all things innovative.


Craig Asano: [00:22:14] Sure. Absolutely.


Robin Ford: [00:22:16] Ok, I you know, my preference is for the UK, it's my my background. But they have been very sophisticated about doing the analysis, examining the obvious problems and taking taking care of those relatively quickly. So AML, CFT, fraud, theft, market manipulation and so on. And they've produced an excellent piece of guidance which talks about crypto assets, digital assets, virtual assets, however you want to label them, and then sets out which virtual assets will be a security, which will be a utility token in which an exchange token. Those are those are the three categories. It's simple and they haven't overly complicated it and I recommend it to to everyone on this who's listening to this podcast, they're now they're being very conservative because of their strong belief you don't regulate unless it's clearly demonstrated to be necessary. They are not a jurisdiction that regulates to fill a gap. That is not the way their analysis works. If they identify a market problem and if it's a problem that the regulator should fix, then they go to consultation on solutions. They go to consultation on cost benefit analysis in a way that very definitely does not happen here in Canada, by and large...I mean, OSFI is close but they're not there. So at the moment in the UK, in addition to AML fraud and so on, they're proposing only to extend their financial promotion rules to some crypto assets that are not regulated at all. And so that's very interesting consultation document to look at. And there's going to be a consultation document soon on stablecoins and question mark, so we wait to see what that will contain, hopefully before the end of this year and I will make a couple of comments on Canada, Craig, or does anybody else want to kick in at this point?


David Lucatch: [00:24:40] Well, I was going to comment today that I was going to comment on AML and fraud when it comes to the U.K. and and I'll agree with that because KABNs ID platform was actually born out of Gibraltar and the U.K. and it's you know, the rules are been very, very favorable in those jurisdictions to me to be able to manage fraud detection and AML compliance. So I think that's an important point when it comes down, as I hope we talk a bit about digital identity, but those are definitely contributing factors. But I will also mention that I'm sure that some might be aware that with the recent Brexit issues, the both the UK and now the US are having GDPR compliance issues and those are going to have to change as well because both are falling outside the purview of GDPR. Hmm.


Robin Ford: [00:25:40] Yeah. Isn't that a huge issue, data? It is. I know. KABN/David, you'll talk about how you can talk about that in a sec. I don't want to spend too much time on regulation. Craig, if it's OK, I might just gallop through the list. There is just so much going on.


Craig Asano: [00:26:00] Yeah, but let's let's cover the Canadian perspective and then we'll try to tie it back into some some takeaways of thoughtful takeaways here.


Robin Ford: [00:26:11] You know, Canada is not operating at a high level at the moment on the financial services side. And I'm just going to mention a couple of things again, because there's so much going on in Canada as well, not necessarily entirely positive. And then I'll throw it open. And if anybody wants to raise something specific, they should they should do that. The approach here is very different from the approach in the UK. We're still very the regulators here are still very, very old school. The CSA, Canadian securities administrators have put on a staff notice this year that proposes to regulate crypto exchanges in via a rather contrived theory that essentially turns a traded crypto asset that would otherwise not be a security into a security when it is not delivered to the purchaser more or less instantly. This is a pretty this is a pretty novel approach and we're getting some squeaks back from the industry and we'll wait to see how CSA reacts to that. Otherwise, other entities that actually want to be regulated because it gives them it makes them in the face of the public more more reliable, more able to be trusted. Various entities have become regulated through various mechanisms in Canada and I have to say it is rather confusing. So it would be great if, Richard, if you were up on this, it would be great to hear a little bit more about Wealthsimple. I think three of their subsidiaries have got three different registrations, one of which is in New Brunswick. And in and in other respects, we know that not others than Wealthsimple have become regulated recently by becoming dealers, for example. So it's just yet another form of a dog's breakfast and it's a bit hard to pick it all apart, and that is in part because we're not there at the table, so we don't know exactly what's going on between these entities and the regulators so that we're able to understand what hoops they jump through and just precisely what it is that the regulators are looking for. Are you able to say anything?


Richard Remillard: [00:28:45] A few things, not particularly about Wealthsimple, but stepping back as long as longer, in my view and my research that we are we're grossly overregulated and poorly regulated and sofar as the entire financial services industry is concerned. It's a God awful mishmash. I apologise for the swearword. I'll put twenty five cents in cryptocurrency into a box. It's it's just a dog's breakfast. And when you say, why is that the case? It's not culture. It's it goes right back to 2008 when our financial system emerged relatively unscathed from the monstrous financial debacle that hit the UK in the US and other countries as well, but those two in particular, and which led to a resurgence of industry challengers and a receptive regulatory environment that was grossly dissatisfied with the performance of the existing status quo financial institutions that never happened here. And what has happened with the benefit of history is that sometimes your best learnings are come from your biggest failures, not from your successes. And in a sense, regulators here, by and large, are fighting the last war. They're putting up national lines all over the place and and stifling the sort of innovation that I think you see and other more nimble jurisdictions from Singapore to Australia to the UK. One counter point to this is, is some analysts think it really doesn't matter and it really doesn't matter, because once new digital technologies are rapidly adopted in other countries, we'll be fast followers and it won't matter too much. In fact, the Canadian banking industry as a whole and I'm talking about schedule one banks now, and have a long history as being fast followers. And and the system is setting itself up now to to try and take that route. I'm not sure if that will succeed because the real challenge will be coming from Bigtech, whether it's American or Chinese, whether it's Google, Facebook, Intuit, PayPal or Tencent, Alibaba.


David Lucatch: [00:31:55] I'd like to comment here, because I think there's there's a huge piece we're missing, and I want to be a counter to part of this argument that Canada actually is one of the primary leaders in the formation of a self-sovereign ID and digital identity, which for most crypto backed assets, especially when it comes to security backed assets is a fundamental requirement.  Canada actually leads with companies, I like to say, like ourselves, companies like SecureKey, DIF, Trust over IP Foundation, where if you think about the Internet, if we are to shift for a moment into technology based on Rich's comment when the Internet was designed, and unfortunately, I guess we're fortunate I've been around since that beginning. When the Internet was designed, the identity layer was something that was never considered.  And now we're we're focusing on whether it's the travel rule. FATF, you know, there's so many issues that are coming up because the movement of crypto, the movement of securities, is going to be tied to an individual or tied to an organization or a holder, as we call it. And I want to be clear here. Canada is a paramount leader in this industry, and it's a very quiet industry that is going to become very vocal in the next couple of years. And I think that's a fundamental situation right now when we think about the safety of assets and security of assets, we're all fundamentally controlled by username and password. I mean, ultimately, we saw the CRA breach and we see breaches every day, fundamentally not in Canada, but we see fundamental banking breaches in the US and beyond. And I think the Canadian banks have taken a very, very strong position that they are going to move to what's called self-sovereign identity. And just for the listeners, you know, if I take out my wallet today, my regular wallet, I can control what goes in there.  That's a self sovereign wallet. And my keys become an opportunity for me to protect my valuables. If I can digitally tie those to my identity, then I am in control of what I can share when I share and how I share. And I think all of what we talk about is going to come down to how whether it's, Wealthsimple, whether it's funds, whether it's banking is all going to be controlled by a holder's ability to prove who they are. And that goes that extends to I don't want to say contract tracing, but venue location check-in and safety measures and airport security. In fact, we see companies like Clear which those that may have traveled to the United States see the clear program and are now moving into a more digital identity focused business. So I think I think what we're seeing is we are seeing pockets of major innovation in Canada and it might be quiet, but it's at a baseline layer that is going to become very important to the overall spectrum of financial services in the next two to three years.


Richard Remillard: [00:35:07] I think those are really well-chosen points. They're really well chosen. And I think my mind goes back to that Jerry Maguire question. Show me the money. So where is the money going to come from? And the chances are that given where we are as a as a late industrial country, the chances are that our best and our brightest will get the growth capital that they require, either from an investment fund like TCV or Greylock, or they'll get it from US listing on the Nasdaq because we have much more liquidity there than on the Canadian exchanges or Microsoft, Google, Amazon will come in and do a kill merger. And I think the looming national security issue for the country is in in the world of self-sovereignty for health products, for supply chains, for digital identity. How can we ensure that those very interesting shoots that you've identified actually grow up into great big tall trees that can go toe to toe with the biggest and the best?


David Lucatch: [00:36:32] Well, Richard, I'm going to I'm going to introduce a concept called the Trust Triangle, and we're very familiar with this type of triangle when it comes to very simple everyday use. When I walk into I'm going to use this example when I walk into the Wal-Mart and make a purchase, when I'm ready to cash out, there is a there is an immediate trust triangle between myself, between Wal-Mart and between my bank. I scan my card or swipe my card and that initially requires that all three parties participate. So Wal-Mart's into the transaction over to the bank asking, is David's car good enough for his bank account, good enough to be able to verify that transaction? The bank says yep. And David has to verify with a pin. And the US is a bit of a different animal in the UK and everyone else uses a pin.  So that trust triangle happens in merchants and there is a flow of funds throughout that spectrum. If you think of identity, if somebody wants to use or wants me to, if I want to walk into an establishment that wants to verify that I'm over, you know, 19 in the province of Ontario, why do I have to give them my address? They just need to know I'm over 19. Again, a trust triangle can occur between myself, the establishment being the verifier and the issue of that digital credential that I've created and that verifier might pay a micro cent for that. And I think when we look at it, these things are going on. If you look at the fraud industry for credit cards, which I think globally is about a 30 billion dollar industry, nine billion in North America. We're seeing companies like MasterCard on the Trust over IP Foundation and we're seeing companies like Visa on credentials on file, getting into verification, because if I can verify that a user online has a trusted identity and proves that transaction, then I can reduce the cost of the ecosystem. So I think when you look at that part of the transaction, where does that befallen? Well, I'm going to mention a very wonderful Canadian success in the last few years. Shopify, will Shopify have interest in that? So we will know Omers ventures. Who will who will be involved in that? I think if we can promote that emergence of this digital transformation technology, it will extend, as it was mentioned earlier, now you can have accredited credentials, are non accredited credentials. Know who the user is, know who that they've been verified by a brokerage firm or an independent financial service. And now maybe they can buy a thousand dollar green bond because we know who they are.


Robin Ford: [00:39:11] So I think when it yeah, I just going to say that I don't think anybody in this call would argue with the idea that digital identity is incredibly important. But and nor would  anybody argue with the fact that we've got some wonderful innovators in Canada. And the same is true in particular AI and Cleantech. So all I just want to throw in there that there is an unfortunate side to that, which is that the governments in Canada, in particular, the federal government, has chosen winners. And this is something that governments need to be very, very careful not to do, because the downside is that the rest of the innovation ecosystem is not supported in the same way. And this is one of the arguments that the NCFA has been making to governments for the last four or five years, Craig? So, yeah, digital identity is a fascinating topic. Absolutely. So sorry I sort of interrupted you. So carry on.


David Lucatch: [00:40:25] Well, I agree with you, but the interesting part, and you've just said a key word, I think when we think of this next generation, we're going to think of ecosystems. So there is going to be we're going to see an opportunity for a more level playing field. I might have a technology that verifies or does something in one area. And I need to be a verifier in an ecosystem. So I might be an innovator in health care technologies or health care information. I may be able to crawl into an ecosystem on an even playing field with a major player. That that's the real neat part about this is I think we're going to be offering more parity, whether you're a caretaker of data, whether you're a processor of data or whether you're an innovator of data. And I think that's going to touch all aspects of all industries. And I think Canada has a massive opportunity to be leaders in that space. And and the other thing that I'll just touch on is that data will be country centric. So Canada can can provide major infrastructure opportunity, but US data will reside in the US and UK data will reside in the UK. So I think we're seeing that the opportunities for Canada to be innovative in the technology arena, I think is very opportunistic right now.


Lynn Johannson: [00:41:53] Can I just take your guys over to Mongolia for a minute? When I was there in 2016, I like to get around. When I was there in 2016, the banking system had basically they were taking away the the bricks and mortar.  And if you wanted your money, basically you got hold of the bank. And I know the phone call or email or what, and they would bring the money to your door and how they would identify you as you would put your thumb into this little device and it would normally take your thumbprint, but your heartbeat and apparently those are unique signatures.  Now to bring it back to Canada because the technology came out of Vancouver.


David Lucatch: [00:42:37] Yeah, yeah, biometrics, again, is a big area for Canada, if there is this leadership position and unfortunately, Mongolia also had one of the biggest failures of a digital crypto exchange fraud. But but generally speaking, yes, there is there is huge opportunities in the space.


Robin Ford: [00:42:58] Yeah, I think Canada does lead in various areas, not just this one, but we're not saying that it doesn't lead in any areas. I that's not quite the point that we're making.


Richard Remillard: [00:43:12] Well, I think it's to build on what colleagues have said and just to step back a tiny bit, a recurring public policy challenge, and industrial challenge, is to scale up our best and our brightest. It's great to point to Shopify and they've been a wonderful success with even this current federal government, at least the minister of innovation, something development several years a couple of years ago said what I'd like to see is 25 Shopify's. And he's right. It's just wonderful. But where are we? I'm not sure that we're all that far advanced. Ultimately, we might get there. But there are great risks that will be a farm team for other countries, other countries industries principally in the U.S., but also China and others.


Lynn Johannson: [00:44:26] Sorry, but isn't part of the problem. I mean, from my perspective, from the environmental side, if you had an innovation and you wanted to get it off the ground, you'd take it to California or you take it to Germany because they are the ones that would fund it. You couldn't get support within country to do those things. And I think that's a travesty because we may have the idea, but we may not commercialize the idea.


Richard Remillard: [00:44:54] Well, it's interesting because one of the CEOs I interviewed, oh, nine or 10 months ago for this report I did.  The CEO of a high tech info tech company in Saskatoon. And he said the difference between here and there is that if I if my burn rate is really fast and I need to get more Capital, if I'm in Palo Alto down the valley, then I could just walk across the hall and get it. But here in Saskatoon, you know, there's no local guys.


Robin Ford: [00:45:32] It's not as though the capital doesn't exist in Canada. It does. There's money sloshing around all over the place. I mean, we're one of the leading funders of mining, for example. So just so that we're not creating a false impression that somehow there is no ability to fund in Canada, it's just that perhaps that funding either is being used at all. We know various entities are just sitting on cash or it's going to what some of us might argue is to the wrong place, like the oil sands, for example.


Richard Remillard: [00:46:10] I was going to say that the incentive structure in place to grow companies, capital, incentive structure and mining, oil and gas have benefited from accelerated write offs, capital cost allowance, and they've benefited from flow through shares. And there are large parts of the tech industry today in Canada that are pushing for the transferal of flow through share concepts to high tech with a very broad definition and away from mining, oil and gas.


Robin Ford: [00:46:47] Yes, and the incentives, as Mark Carney has just recently said, we need to get on the ball with the with the carbon capture carbon tax, getting rid of the subsidies as soon as possible. But that's a bit of a different argument or a different topic here.


David Lucatch: [00:47:04] Yeah, being a microcap company and being on the public exchanges and having had multiple companies in that position since the late 90s, I will agree with what we said is the key. I think you can it is you can always get Canadian money to develop something.  World capital is not generally within the spectrum of funds or investors. So if you've got a great idea, you're going to likely get the minimum necessary capital to get to an MVP, minimum viable product but you are not likely to get growth capital in Canada. It is a unique situation. And that's why we have the export of the brain trust, because people developed something here, they develop it here and then they take it South. And that's why I went back to Shopify, because Shopify is a wonderful example and we do need twenty five fifty one hundred two hundred Shopifys. And we have had them over the years, initially RIM and we've had some great successes. But but we don't see that repeatable enterprise over and over again. That's, that's the challenge. So getting money to start - easy..getting money to grow tough.


Craig Asano: [00:48:26] Yeah, I mean, we we've heard this commercializing and scaling IP and some of the gaps and the it's really a question to everyone, try to bring this together and, you know, we'll we'll move to potentially wrap up the podcast. That's a very interesting discussion. I've sat back and really just been taking in the different perspectives. But with the government having so much involvement in innovation and its importance to the Canadian economy in light of all the changes in the world with and I read that I think it was 70 per cent of Canada's exports go to the US and there could be additional tariffs and we need to be more self-sufficient here. We talked about capital gaps. How do we get our infrastructure to a point? And this is not so. It's only the government we have to go to and say we don't like you picking horses, but you can't get everything because we've sort of been under the thumb. We've been I'm not sure at this point if it's only a regulation. I'm not sure at this point if it's the government only picking horses. But I do sense that there's been a lot of resources spent but the average infrastructure, I'll use that expression, the tide that lifts all boats, the ability for industry to self certify and create standards and as a result create value that will bridge to larger sums of capital to the point where we're attracting, you know, those larger US VC investors and funds up to actually operate up here, which is starting to happen as opposed to the brain trust or drain that David was mentioning about. So what would this group here on the call like the priorities to be in that regard? And what do they think the government's role should really be when it comes to supporting innovation, being that first customer, but being able to create enough infrastructure here so we can feed ourselves and get to that point where we do have enough capital? Or is it we're just limited to the population and GDP growth that we have and will always be, you know, a smaller country and probably smaller going forward. As far as the global impact is concerned.  I love innovators, but we're coming down at the end of the podcast. I want to pose that question.  David, go ahead.


David Lucatch: [00:51:06] Yeah, I want to say that right now the B.C. government is is just taking sort of a leadership position in support of an idea, digital identity. And and tomorrow, Ontario is extended the submission guidelines and they've had town halls about self-sovereign identity, privacy reform, all those type of things. So I think we're seeing governments get in the way. You know, one of the things that has helped in this initial area is the framework for the data, which is which is germane to most technology industry has been sort of developed through GDPR in Europe. And I like to think that it's been to some extent overdeveloped, although that will take some time to come back in California with the CCPA.  But Canada, based on PIPEDA being a federal guidelines for sort of the major of data, the provinces are now seriously looking at how to home grow these opportunities. And I think that's going to lead to an entire new industry and technology that fosters cybersecurity, data infrastructure, data management, self-sovereign identity, digital credentials. And we are seeing, again, that leadership in Canada. So I think the government right now and digital innovation, I think is doing a good job to try and figure out where we can lead.


Robin Ford: [00:52:29] I disagree. I've got to say.


David Lucatch: [00:52:32] I've been I've been on town hall the last few days, so that's why I'm taking that position.


Robin Ford: [00:52:35] I'm sure you have in that sector but but Michael King has been very very good about this for years going into Finance Canada and elsewhere to talk this through. What we what we need in the federal government must lead on this is an overarching innovation strategy and we don't have it. What we have is pathetic. And, you know, all you need to do is compare it to what's going on in the UK with their overarching strategy. And we don't even we don't even come close. So I would go for Michael King's first and foremost thing that we need is a properly thought through and properly followed up national strategy.


David Lucatch: [00:53:23] Well, I guess I just want to rebuttal that. For one second, so I'm going to take the U.K. strategy and take it down to Gibraltar, where one of the first crypto security exchanges was developed and out, and ultimately which one of my companies was part of and ultimately left for Estonia because they just couldn't work within the regulatory framework. So I think the U.K. is a great place in developing a lot of great standards. But but for many organizations, I'm not sure that the framework for the emerging digital transactions and digital economy is working that well. And I'm not I'm not disagreeing that Canada doesn't have a long way to go. But we're seeing on the ground today the opportunities that provincial governments. I'm not talking about federal and the provincial level are taking a very, very good look at what technologies will transform the digital economy.


Richard Remillard: [00:54:21] From my perspective, there are a number of steps that could be taken, starting off with recognizing the fact that this covid pandemic has provided us with an opportunity to rethink pretty well everything. So let's start off with the tax system and the tax credits system. I don't know if, Fred, tax credits do anything except provide opportunities for employment for accountants and other advisors. Whether or not they actually result in commercialization benefits is questionable. That's four billion bucks a year change the tax system so that growing companies are taxed less than non growing companies. There's a there's a bias in the system so that startups, smaller companies benefit from a lower marginal tax rate and larger companies get rid of that, take a flow through shares and apply them to all the interesting tech sectors, including digital identity verification, security that that we have. And I'd I'd look for opportunities to increase the availability of earlier stage tech offerings to retail investors and change the definition of accredited investors more along the lines of what the SEC has for at least recently.


Craig Asano: [00:55:56] Hear, hear, that sounds like increasing the caps and crowdfunding and maybe changing the name to me.  I know that, but well, I mean, we gotta keep up with the Jones.  I know Europe just past their five billion cap euro. The US is moving that way. Change the credit. We we need to move on some of those initiatives and they have been studying it long enough. And the boogeyman of fraud never appeared despite all that concern. And it's not a time to put it in a box and wait for it to either go this way or that way. They got to enable it. But, Lynn, I'd like to hear your closing thoughts on some of this, the government's role in the innovation space.


Lynn Johannson: [00:56:46] Well, I guess I'm going to come back to my ecological mindset, and this is a systems approach that we need, and I do agree that we have to this is a moment in time when we get to rethink the system. But this is all part of, you know, how do we bring forward a green economy and how do we how do we rebuild? Well, when you look at a forest, a forest doesn't start with the canopy trees, the big guys, the forest starts on the floor. And so we need to get opportunity for lower cost financing into the hands of the innovators who largely are the small businesses need to remove the barriers to success for them to get going. And we need to sort of bring together, you know, get rid of the subsidies of the things that we really don't want to support anymore, because it's, you know, giving one large company so you can get a nice photo op in for one town doesn't help everybody else who maybe wants to buy the hydrogen car as opposed to the EV car. So I think there has to be a real serious fundamental systems rethink, but we got to start by supporting small business in the first place. 95% of businesses in Canada are in companies with fewer than 50 people. That doesn't include the one person shops and you're talking about about a million companies who are, you know, their family operated things that they don't have. You know, they don't report their accounting systems to the extent that we have to when we have a larger company, but they still are part of the economy and we need to get our heads around engendering that growth from the ground up, and I think that digital finance has the opportunity that if we get it right, that's how you can flow money faster, reducing the cost of getting capital to them but it's also we can overcome some of the, you know, the barriers that small businesses have with the large financial institution who, you know, you pay something but they sit on your money for two days to collect the interest of those two day period. So I'm very hopeful that we can get the digital economy figured out quickly because I think it offers not only environmental, social, but economic value.


Robin Ford: [00:59:35] Perfect, Robin, before we move to close today's very valuable discussion around capital and government's innovation stuff, do you have any closing thoughts here?


Robin Ford: [00:59:49] I gave no my my national strategy point will do it, I think I'll give you less to do on the editing front.


Craig Asano: [00:59:57] Well, I guess I want to just take this time to thank everyone for their valuable time and insights. We had a very vibrant discussion, very interesting for a pilot for an NCFA adviser podcast follow up. So certainly covered a lot of ground and a lot for everyone to think about. If anyone would like to get in touch with with any of our guests today, I'm certainly going to share their contact information and some of the links that were discussed in the podcast in the show notes. And so I just want to thank Richard, Robin, David and Lynn for joining us. Thanks so much, everyone, for your time and for your valuable participation in NCFA as an adviser to the community. Thank you so much.


Speaker group: [01:00:40] Thank you. Thank you. Thank you. Stay safe.


Craig Asano: [01:00:44] That's a wrap, folks. So thanks for tuning in to this very special NCFA advisory edition of Episode 44 for Fintech Fridays. If you're new to Fintech Fridays, please check out some of the incredible past episodes on the site. We think you'll be surprised with what you find. We look forward to seeing you next Friday for another episode of Fintech Fridays. Have a great weekend, everyone. Bye for now. Thanks.


Speaker group: [01:01:09] Thank you. Take care, everyone. All the best to be safe. Bye for now.

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 Oh yeah.


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