Fintech startup looks to expedite tax-free shopping online for First Nations

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Globe and Mail | | July 29, 2018

Richard Cochrane thinks he has the solution for a problem that has plagued First Nations online shoppers since the start of the digital age.

That solution is his fintech startup, Status Exempt. The 29-year-old entrepreneur has developed a service and plugin for Shopify Inc.’s e-commerce platform that allows First Nations people to shop online without being charged the harmonized sales tax (HST), provincial sales tax or goods-and-services tax.

First Nations people who buy items online and have them shipped to a reserve are exempt from these taxes on purchases. But Mr. Cochrane says most retailers do not have an online process that takes the taxes off immediately. First Nations shoppers must submit their receipts to a provincial ministry of finance or the Canada Revenue Agency to get a refund, which Mr. Cochrane says can take up to 90 days to arrive.

“I’m thinking about 500,000 First Nations live in rural areas,” Mr. Cochrane says. “They don’t have access to Canadian Tire or Walmart. Almost their entire wallet will be spent online or through catalogues. This is one of the few interactions outside their reserve, and this is how they are experiencing it. I knew I had to build something a lot better.”

His business idea was born out of personal experience. Mr. Cochrane is a member of Curve Lake First Nation, north of Peterborough, Ont. In 2016, he was bedridden after knee surgery, got bored and decided to shop online. He says very few stores had a process to refund the HST.

“The stores that did have processes had poor ones. It took them at least a week to process the transaction for me,” he said. “I realized then what First Nations people in this country have to deal with daily shopping online.”

Status Exempt is intended to expedite that process . First Nations shoppers register online. Their Indian status cards and addresses are checked, and then they get login credentials. When they shop, retailers that offer the service will take the tax off immediately.

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The service is free for First Nations people who register, and Mr. Cochrane says it takes about five minutes to validate the status card and address. Status Exempt will get its revenue from fees of 3 per cent to 5 per cent that retailers will pay for every purchase made online via the app.

For the roll-out, retailers need to be on the Shopify platform to add the plugin to their sites. However, Mr. Cochrane is working on plugins for other e-commerce platforms, such as Magento and WooCommerce. He’s willing to build a custom plugin for major retailers not on an e-commerce platform.

Canada has more than 970,000 First Nations people, and the number is growing, and it’s a young population. The 2016 census found that one-third of First Nations were 14 and under – a group raised with digital devices and who are comfortable shopping online. Of the First Nations people with registered or treaty Indian status, 42 per cent live on reserves, according to the 2016 census.

Mr. Cochrane thinks his startup could open a sizeable market. “This is a huge opportunity for online merchants to increase their sales overnight by providing this service,” he said. “Online stores are missing out on a huge percentage of the Canadian population that is hesitant to shop online because the experience isn’t up to par compared to the bricks-and-mortar experience.”

Tom Phillips, an economist with Trent University’s School of Business in Peterborough, says Mr. Cochrane has an innovative idea, but his primary challenge will be getting widespread adoption from First Nations and retailers.

“There are lots of apps that have great application and make a lot of sense, but have a roadblock in terms of adoption,” Mr. Phillips said. “You’ve got to spend some money exposing the market to the benefits. Users have to have knowledge of it.”

He says Mr. Cochrane will need money to expose Status Exempt to shoppers and businesses, and he will also need to use his networks in the aboriginal and entrepreneur community to help market it.

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Mr. Cochrane has been funding the development of Status Exempt with his personal savings and about $30,000 in grant funding.

The University of Windsor graduate worked in Toronto with the Bank of Montreal’s aboriginal banking unit as well as at HSBC Global Banking and Markets before deciding to launch Status Exempt in 2017. He has used the funding to hire professional developers to build his plugin and is targeting Sept. 1 as the date for it to go live.

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