5 minute read 20 Feb. 2017
business colleagues discussing project office

How the right environment can propel FinTech forward

By EY Canada

Multidisciplinary professional services organization

5 minute read 20 Feb. 2017

Montréal is poised to be a real player on the FinTech scene. How can we cement its place among the world’s leading financial centres?

As a start-ups and major financial institutions move into the space, FinTechs are continuing to change the way financial services consumers transfer, borrow, protect and manage their money. But this isn’t just shaking up the banking and payments world. From retail investments and pensions to insurance, FinTech is sending shockwaves across a range of sub-sectors.

Although it still lags well behind the United States, Canada’s FinTech market is expanding fast and has the potential to be a more influential region among global financial centres. In Canada, from 2012 to 2014, FinTech investment grew at an annual pace of 35%. From 2014 to 2015, investment growth soared by about 300%.

Montréal, Québec is well positioned to play a significant part in that growth. Our EY FinTech Adoption Index surveyed more than 10,000 digitally active people around the world (including more than 2,000 in Canada) to understand the overall rate of FinTech adoption, and the outlook for future usage. The findings reveal clear indicators that Montréal has what it takes to continue carving out a spot among the world’s leading financial centres.

What will it take to build on that momentum and make the FinTech ecosystem successful in Montréal? Success will come by creating an energetic, creative and innovative environment where entrepreneurs can thrive.

Prioritizing four key steps forward can accelerate FinTech development in Montréal:

1. Create a true FinTech hub in Montréal

Setting the right stage for success means building a shared stakeholder vision and adequately supporting existing or development-stage FinTech firms. By creating a standing working group of specialized resources, supported by long-term financing, we can ensure a governing body assumes responsibility for all activities related to the FinTech project launched by Finance Montréal to encourage networking, and build connectivity among community stakeholders.

The working group could focus on developing a distinctive trademark for the Québec FinTech sector, to foster a sense of belonging. They could also concentrate on key priority-development subsectors (like data science, AI, gamification, and IoT) that play to Québec’s distinctive strengths to differentiate from other financial centres. An integrated network of complementary work spaces exclusive to FinTech entrepreneurs could also be a focal point. Same goes for creating a one-stop FinTech entrepreneur portal with relevant information on starting up and developing a tech firm and, in particular, a marketplace offering various professional services to ensure supply meets demand.

2. Implement a formal mentoring program for FinTech entrepreneurs, supported by all Québec financial institutions

All the financial institutions we interviewed said they were actively involved in, and keen on, further supporting the development of Québec FinTechs. A formal mentoring program could effectively match financial institutions and FinTech mentees at any stage of the lifecycle to provide access to financial institution professionals, key resources, and physical workspaces. This would go a long way to building bridges between financial institutions and FinTechs, while broadly forging a trusting and transparent environment at the same time.

3. Work with regulatory authorities (AMF, OSFI and FINTRAC) to implement a sandbox environment, and promote experimentation with new technologies

Canadian and Québec regulatory authorities can work together to cultivate the kind of environment that fosters testing and trials. Compliance with an effective regulatory framework is key to smooth operations for financial ecosystems. But regulatory authorities agree that innovation results in better customer service, financial institution productivity, and risk management overall. Setting up a sandbox environment can allow for the kind of testing and trials that drive new financial services technologies and business models in a controlled space, under rules tailored specifically for development-stage FinTechs. That could go a long way to mitigating the financial risks related to the services firms offer, while also driving innovation forward.

4. Develop a standardized university curriculum in a handful of Québec universities to promote professional tech and financial services career paths

The financial services sector isn’t typically a first-choice for engineering and tech grads. Most students aren’t familiar with the range of career options open to them in the finance industry. As players in the financial services space push their digital transformation plans forward, the very shape of work is changing. Some jobs may disappear, while others will be created across engineering, business and IT. A working group that draws from both financial institutions and the academic world could establish measures to modernize the multiple professional careers open to future graduates, standardize the terminology used in defining the jobs of the future, and promote them accordingly. An accredited, inter-university and inter-disciplinary study project could be a good place to start.

Where do FinTechs grow from here?

From IT to capital to talent, Montréal is well-quipped to compete with other FinTech ecosystems around the world. Universities, large tech firms and the financial services sector collectively represent a hot bed of high-quality bilingual students and employees in a market where salaries are competitive. While tech grads may not yet fully appreciate the evolving opportunities that financial services represent for them, they constitute a rich pipeline of future talent.

We don’t expect the FinTech fervour to subside any time soon. New municipal, regional and national associations are forming every day to help cities ride the wave of FinTech potential. Some groups are even working to bring various hubs under a single, unified international umbrella.

Securing Montréal’s place on the list of go-to FinTech centres can be a big part of the region’s future success. Making that happen will require true organizational simplicity based on collaboration. Allies who are committed to building the ecosystem together will need to work hand-in-hand, encouraging a relentless focus on local innovation. As a start-ups and major financial institutions move into the space, FinTechs are continuing to change the way financial services consumers transfer, borrow, protect and manage their money. But this isn’t just shaking up the banking and payments world. From retail investments and pensions to insurance, FinTech is sending shockwaves across a range of sub-sectors.

Although it still lags well behind the United States, Canada’s FinTech market is expanding fast and has the potential to be a more influential region among global financial centres. In Canada, from 2012 to 2014, FinTech investment grew at an annual pace of 35%. From 2014 to 2015, investment growth soared by about 300%.

Montréal, Québec is well positioned to play a significant part in that growth. Our EY FinTech Adoption Index surveyed more than 10,000 digitally active people around the world (including more than 2,000 in Canada) to understand the overall rate of FinTech adoption, and the outlook for future usage. The findings reveal clear indicators that Montréal has what it takes to continue carving out a spot among the world’s leading financial centres.

What will it take to build on that momentum and make the FinTech ecosystem successful in Montréal? Success will come by creating an energetic, creative and innovative environment where entrepreneurs can thrive.

Prioritizing four key steps forward can accelerate FinTech development in Montréal:

1.       Create a true FinTech hub in Montréal.

Setting the right stage for success means building a shared stakeholder vision and adequately supporting existing or development-stage FinTech firms. By creating a standing working group of specialized resources, supported by long-term financing, we can ensure a governing body assumes responsibility for all activities related to the FinTech project launched by Finance Montréal to encourage networking, and build connectivity among community stakeholders.

 

The working group could focus on developing a distinctive trademark for the Québec FinTech sector, to foster a sense of belonging. They could also concentrate on key priority-development subsectors (like data science, AI, gamification, and IoT) that play to Québec’s distinctive strengths to differentiate from other financial centres. An integrated network of complementary work spaces exclusive to FinTech entrepreneurs could also be a focal point. Same goes for creating a one-stop FinTech entrepreneur portal with relevant information on starting up and developing a tech firm and, in particular, a marketplace offering various professional services to ensure supply meets demand.

 

2.       Implement a formal mentoring program for FinTech entrepreneurs, supported by
all Québec financial institutions.

All the financial institutions we interviewed said they were actively involved in, and keen on, further supporting the development of Québec FinTechs. A formal mentoring program could effectively match financial institutions and FinTech mentees at any stage of the lifecycle to provide access to financial institution professionals, key resources, and physical workspaces. This would go a long way to building bridges between financial institutions and FinTechs, while broadly forging a trusting and transparent environment at the same time.

3.       Work with regulatory authorities (AMF, OSFI and FINTRAC) to implement a sandbox environment, and promote experimentation with new technologies.

Canadian and Québec regulatory authorities can work together to cultivate the kind of environment that fosters testing and trials. Compliance with an effective regulatory framework is key to smooth operations for financial ecosystems. But regulatory authorities agree that innovation results in better customer service, financial institution productivity, and risk management overall. Setting up a sandbox environment can allow for the kind of testing and trials that drive new financial services technologies and business models in a controlled space, under rules tailored specifically for development-stage FinTechs. That could go a long way to mitigating the financial risks related to the services firms offer, while also driving innovation forward.

 

4.       Develop a standardized university curriculum in a handful of Québec universities to promote professional tech and financial services career paths.

The financial services sector isn’t typically a first-choice for engineering and tech grads. Most students aren’t familiar with the range of career options open to them in the finance industry. As players in the financial services space push their digital transformation plans forward, the very shape of work is changing. Some jobs may disappear, while others will be created across engineering, business and IT. A working group that draws from both financial institutions and the academic world could establish measures to modernize the multiple professional careers open to future graduates, standardize the terminology used in defining the jobs of the future, and promote them accordingly. An accredited, inter-university and inter-disciplinary study project could be a good place to start.

Where do FinTechs grow from here?

From IT to capital to talent, Montréal is well-quipped to compete with other FinTech ecosystems around the world. Universities, large tech firms and the financial services sector collectively represent a hot bed of high-quality bilingual students and employees in a market where salaries are competitive. While tech grads may not yet fully appreciate the evolving opportunities that financial services represent for them, they constitute a rich pipeline of future talent.

We don’t expect the FinTech fervour to subside any time soon. New municipal, regional and national associations are forming every day to help cities ride the wave of FinTech potential. Some groups are even working to bring various hubs under a single, unified international umbrella.

Securing Montréal’s place on the list of go-to FinTech centres can be a big part of the region’s future success. Making that happen will require true organizational simplicity based on collaboration. Allies who are committed to building the ecosystem together will need to work hand-in-hand, encouraging a relentless focus on local innovation. 

Summary

As FinTechs continue to change the way financial services consumers transfer, borrow, protect and manage money, new opportunities are emerging for businesses and regions alike. Canada’s FinTech market is expanding quickly, with Montréal showing real potential to solidify itself as among the world’s leading financial centres. Prioritizing four key steps forward could help cement the city’s spot among top locals for FinTechs looking to grow and thrive over the long term.

About this article

By EY Canada

Multidisciplinary professional services organization