Form Fintech & Holt Accelerator Create Map of Canadian FinTech Ecosystem


Montreal’s newest startup accelerator isn’t afraid to try new things.  The Holt accelerator, established earlier this year, has teamed up with Form Fintech and Lab Zed to produce what they are calling the first exhaustive map of Canada’s FinTech ecosystem.

“We’re pretty well connected with the Canadian fintech community and we hadn’t seen anyone build anything like this, so we decided hey, let’s do it” says Jan Arp, Managing Partner and founder at the Holt Accelerator. “It’s an ecosystem map. There’s also some analysis in there so people can start to see who’s doing what across Canada. It’s what everyone’s been talking about, but we haven’t seen anything as comprehensive as this yet”.

“The idea is that the more we can add the data and metrics, then the more interactive of a platform it can become for users” added Geraldine Holliday, Head of Digital Product at Form Fintech, who was part of the team building the map. “You’ll be able to see what stage each company is at, how much money have they raised… have they been part of different accelerators or incubators and so on…”.  Her partner on this project, Sagar Agarwal, Head of Research and Analysis at Form Fintech added “The next step would be to do a thorough analysis and give meaning to all this data that would lead to reports and publications. We want to provide information on how banks are working with fintechs, which areas had the largest churn and the like – information which can be used by anyone interested in the Canadian fintech ecosystem”.

Some of the findings from this project may surprise those who follow Canadian fintech. For example, the number of new fintechs being established in Canada each year is actually shrinking according to these findings. A surprising revelation given all the VCs, incubators and financial institutions who have been upping their game over the last few years. Here are the findings:

  • The number of new fintechs founded in Canada crested at 94 in 2015 and has been declining since then. 68 new fintechs were created in Canada in 2017
  • The number of fintechs created in Quebec has risen from the low teens to the mid twenties over the last 5 years. Despite a slight decline in 2017, this number has remained fairly steady from 2015 to 2017.
  • Quebec has seen strong growth in the proportion of fintechs being launched, accounting for 16% of new Canadian fintechs in 2014, 25% in 2015 and 35% in 2016 and 2017.
  • Of the 870 fintechs in Canada, 37% were created from 2014 to 2016
  • Approximately half of Canadian fintechs created from 2014 to 2016 were in Ontario
  • Quebec fintechs are the youngest in Canada, averaging just 5.5 years since being founded

These numbers tell us clearly that despite being a bit late to the party, Quebec has fully embraced the need for fintech, and its entrepreneurs, financial institutions and the ecosystem as a whole have thrown their collective weight behind supporting this vertical.

The spike in 2015 was caused primarily due to the establishment of more than 20 new fintechs in Ontario that year in 2 specific categories; finance & accounting and alternative lending.  Creation of new startups in both of those categories has slowed considerably.

Arp believes this slowdown is actually a good thing. “Since 2015, the fintech frenzy has calmed down to more sustainable new fintech creation growth levels. Given that Canada still has a wealth of opportunities to build new fintech startups, especially when comparing to more developed markets, or assessing the numerous problems faced across the financial system, we expect the growth of new fintech startups to at least sustain at these levels. At the same time, we are expecting more established fintechs to grow as they also take advantage of these opportunities, but also growing by partnering with other fintech startups to capture these opportunities more quickly, potentially leading to some consolidation down the line.”

Top Fintech Categories

Currently these are the categories with the most fintechs in Quebec and Canada (number of entities)

Quebec:

  1. Investment Tech (28)
  2. Payments (27)
  3. Insurance Tech (18)
  4. Finance and Accounting (17)
  5. Alternative Lending (16)

Canada:

  1. Payments (142)
  2. Finance and Accounting (122)
  3. Investment Tech (109)
  4. Alternative Lending (89)
  5. Insurance Tech (89)

The payments space is the largest employer in Canadian fintech, providing 28% of the jobs, and second is Finance and Accounting with 13%. BankingTech, insurancetech and alternative lending are bunched closely in 3rd place with around 7% each. Overall about 27,000 people work in fintech in Canada, with roughly 5,000 of those jobs here in Quebec.  47% of Canadian fintechs are located in Ontario, with Quebec coming in second at 23%.

This has changed somewhat over time. Back in 2014, the biggest vertical was the payments sector, accounting for approximately 20% of the startups, ahead of alternative lending (14%) and Cryptocurrencies (13%).  Whereas in 2015, the proportion of cryptos created fell to just 6% and payments down to 17%, whereas alternative lending increased slightly to 16%. Form Fintech suspects that the decline in the payments space could be attributed to the industry reaching a stage of maturity, as it is the oldest fintech vertical in Canada. Meanwhile, they also suspect the drop in crypto-related fintechs could be due to a general cooldown of the market.

Rise or fall, Arp believes the Canadian fintech space is healthy, and will remain strong for sometime. “Based on our international travels, we can proudly say we have world-class fintech capabilities in Montreal, Quebec, and Canada” adding that the goal of this project was to showcase the Canadian fintech ecosystem to the world, and identify opportunities in underserved areas for Canadian entrepreneurs to continue this rapid growth trajectory.

 

 

  • This analysis includes startups that were created and still running operations. It does not include those that have ceased operations.
  • The term fintech could represent a startup, SME or fintech-focused Corporation.

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