At Ferst Capital Partner‘s (FCP) lovely St. Henri space, nearly a dozen startups are working away to change the way Canadians use their money.
FCP co-created three startups, Mylo, Covera and Ferst Digital, while eight early-stage companies also work out of the no-strings-attached startup hub.
We spoke to several of the teams. Here’s why readers may want to put these businesses on their radars:
Mylo – Automatically rounds up everyday purchases and invests the spare change
Founded by Concordia University graduate Phil Barrar in 2013, Mylo calls itself the world’s first completely free investment account, an AI-powered app that “empowers Canadians to make better financial decisions.”
It does this by linking to a debit or credit account, rounding purchases to the nearest dollar and investing the money in one of five exchange-traded funds (ETFs) based on a scale from conservative to aggressive. The app adds up and takes the rounded-up money from an account once per week.
“We found that 53 per cent of Canadians 18-24 don’t have $1,000 in their bank account. Whether they’re making 30,000 a year or $130,000, they’re spending everything they make,” said Barrar.
The founder says its a similar app to Acorns in the United States. Their motto is “Automatically Invest Life’s Spare Change.”
Mylo says it’s different because it’s completely free and Canadian.
Meanwhile, there are online stock trading platforms like Robin Hood that are almost free. However, Barrar says these platforms are for people who feel comfortable investing.
“For people who just want to start investing and don’t have the knowledge to do so, we’re the first free account that’s fully-managed with a portfolio manager,” he told MTLinTECH.
Mylo’s business model is based on making future recommendations for other financial products. User data is never sold, claims Barrar, but rather Mylo presents users with financial insights based on their account and they can choose whether they’re interested, like insurance for that car they’re saving for. Or it’s someone paying 19.9 per cent interest on their credit card debt who could save significant amount of interest by using an alternative lender. If the user goes for this, Mylo gets a fee from the service.
Barrar is a dual-citizen from New Hampshire and a self-described finance nerd. He says he’s tried nearly every fintech service in North America, but he wanted to build one available to Canadians.
Mylo raised $500,000 from FCP last year and will look to raise $2 million next year. Over the next year the company will look to hire 20 more people.
We found one reddit post more valuable that anything we could write on the company. Four months ago, Barrar went on reddit’s PersonalFinanceCanada and put everything about his business on the table for users to dissect. As expecited, redditers dissected, criticized, challenged and complimented Barrar . For the most part he did a good job responding to concerns and the move was a transparent one.
Covera – Automating the insurance re-shopping process
Scott Loong is a former corporate lawyer now running a fintech startup. He told us that on average, 80 per cent of insurance customers in the massive $48 billion Canadian P&C premium insurance industry renew policies every year without investing the time to shop for alternative coverage.
And for Loong, this is pure madness.
Founded in June 2016, Covera is making the process of getting and renewing insurance easier and more intuitive. According to Loong, the insurance business is an antiquated, legacy industry waiting to be turned on its head by digital solutions.
“Having insurance is required if you want to drive a car in all 13 provinces and territories. So this is a product that’s so completely embedded. Market penetration is probably 95 per cent in Canada and it’s shocking that it’s continuously delivered in such a bad way.
There’s these huge legacy systems that are bolted together, coded on extinct coding languages. You’ve got an incentive structure that was created during a time when people couldn’t buy anything online because the internet didn’t exist. You’ve got major disconnects towards how its structured towards the consumer.
When you take a look at insurance brokerages, there’s tons of people working there who make a lot of money, who don’t really contribute a lot of value. Theres a tremendous amount of redundancies in the way they’re working. The software tools in the industry haven’t evolved.”
Covera is building backend tools to allow the “ginourmas” industry to evolve.
Nearly 70 per cent of cases are bought through a broker who makes healthy commissions of between 13 and 20 percent. Loong said people are so apathetic to the process that they keep on renewing for an average of eight years. It’s almost like throwing away extra money for no reason.
“At Covera we’re trying to awaken that apathetic portion of the market – 80 per cent – and we’re giving consumers tools to make it easy. We’ll reach out to you with curated options for renewal every year and you can tell us which one you want,” said Loong.
“The market will never be the problem. Neither will the timing,” said Loong. “I’m totally convinced that whether its me or someone else, there will be digital brokerages rolling out in the next few years that are going to completely smash everything.”
Ferst Digital – A fully digital, mobile-only tool for cashless businesses in Canada
Ferst Digital founder Eytan Bensoussan is as personable as they come.
His team’s vision is to offer a fully digital, mobile-only tool for cashless businesses in Canada. Ferst Digital is not a bank, but wants to provide a new banking solution for small businesses.
As Bensoussan put it, his team wants to do the “plumbing of fintech,” an area that will be highly profitable. American competitors are already trying to do it like Bancorp, WebBank and Bank of Internet USA.
Ferst Digital wants to “rebuild the bank,” stripping away unnecesary layers that small business owners don’t want and adding things they need.
“We want to eliminate the burden and pain imposed on startups and small businesses by financial management,” said Bensoussan. “Things like bookkeeping, capital and payment are all sources of stress and anxiety for SMBs. If you’re bank is your first line of defence against the pains of financial management, things get really interesting.”
Payment Rails – A powerful fullstack payout API
Payment Rails CEO Tim Nixon used to work for a PayPal competitor. Now his team is building “the most powerful payout API that can pay anybody in any payment method, in some cases instantly.” It functions in 220 countries and 150 currencies.
Payment Rails’ target use case is for an online marketplace or a platform like Airbnb or Uber. Or any large company that needs to make regular payouts to sellers on their platforms.
Sellers can easily integrate with Payment Rails’ API, where they can make international payments at lower costs, and with fast service. “It’s a white label, so they can brand it as their own. A service like Paypal requires the receiver to sign up on their end but we dont require that. We just need their bank account details through the business and we send payments directly.”
There exists competitors in the space, said Nixon, and there’s good reason for that. For four weeks, Etsy‘s payment processor, WorldPay, couldn’t pay out sellers. As expected, people were very unhappy. Apparently a software update on one of Worldpay’s servers caused the outage.
Payment Rails is positioning itself as a lower-cost alternative to WorldPay.
The seven other startups at FCP’s fintech studio are:
RealStarter: “A real estate crowdfunding platform that allows you to invest up to $1500 in real estate projects driven by experienced developers.”
Seedlify: “Canada’s first Capital as a Service provider of revenue-based financing for early-stage businesses.”
Just Insuring: “Changing insurance through gamification.”
Ziero: “Providing a full service lending platform to help business owners deliver interest free loans to employees.”
Shake Pay: “Buy literally anything with digital currencies.”
Meridex: “Currency exchange and money transfers for businesses.”