Canada has a Vacuum in Marketplace and Peer to Peer lending David Gustin - December 22, 2014 4:22 AM | Categories: Trade Credit Commentary | Tags: alternative finance, crowdfunding, Fintech, Fundthrough, Peer to peer lending As you look south of the Canadian border, the world explodes with financial innovation – online auctions for invoices, peer to peer lending solutions for companies, crowdfunding models for business credit lines, dynamic discounting solutions, etc. So what about the North, and I am not talking the Toronto Raptors. It’s pretty much a vacuum up here for fintech innovation. There are a few start-ups that are trying. FundThrough offers secured lines of credit online to growing businesses based in Canada. I spoke to the cofounder Steven Uster recently and he believes the fintech market in Canada is wide open and that the secured lending space (starting with invoices) is a huge growth opportunity. He also runs Zillidy, which provides personal asset loans using jewelry, luxury watches, gold and precious metals as collateral. Borrowell is an online marketplace lending platform. They are retail focused and provide fixed interest loans and fund those loans with accredited institutional investors. It is a peer lending model that attempts to disintermediate the banks. I could and will offer several hypotheses why innovation is lacking in Canada: One always needs to understand the regulation environment first. Securities regulations in Canada currently do not allow for any exemptions that would make peer lending available to retail investors without each loan requiring a prospectus. Companies attempting financial innovation must deal with each provincial regulator independently as Canada does not have a national securities regulator. That is costly. The banking sector here is a cozy oligopoly that has ridden the wave of high housing prices and up until recently a strong energy sector. Who needs to innovate? Let’s copy what our friends in the States have found successful. We can always use a PrimeRevenue platform if our clients force our hand. Lack of a critical mass of venture capital and private equity to help fund financial innovation. The business sector in Canada is really Energy, Financial, and Metals/Mining, with the other 20% being everyone else. In Canada, business is either big or mostly small. There is not the critical mass of middle market companies in the $500m to $2billion range like you have in the U.S. Banks continued to be the major supplier of debt financing to businesses in Canada and outstanding debt of borrowers with authorization levels less than $1 million, generally the smaller companies was $94.6 billion in the first half of 2014. Hopefully what is happening in the USA and globally will be a wake-up call to Canadian entrepreneurs, regulators, and investors. Otherwise we might just have to count on banks for innovation. Related Articles Voices (2) Dmitry: 11.02.2015 at 3:50 am Yeah, how about Webtransfer? Reply Mike Katchen: 06.01.2015 at 1:52 pm Canadian fintech definitely has a ways to go, but don’t forget about some of the other exciting companies shaking things up like Wealthsimple, Grouplend, FinanceIt, StreetContxt, and many others. Reply Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of new posts by email.