The Future of Canadian Fintech

Written on June 3rd, 2016

Written by:

Difference Capital Fintech Team
Tom Liston, CFA, Managing Partner –
Jordan Udaskin, Vice President –

At Difference Capital we’re proud to have been one of the first Canadian funds with a focus on the Fintech sector.  We invested before Apple Pay and “Tap and Pay” became household terms and have strong relationships with most of our homegrown tech leaders and innovators. Today our Fintech investments represent a material portion of our portfolio.

Consolidation the Theme For 2017

The sector has seen significant levels of investment in the past few years (OMERS Ventures estimates over $1bn of capital has been deployed since 2010), and, as entrepreneurs follow the money, over 100 Canadian Fintech startups have emerged.  While we remain optimistic about the sector, we also believe that it is unrealistic that this many companies can independently achieve success in the Canadian market, especially given the dominance of the Big Five banks.  We envision a consolidation of the market, likely beginning during 2017, where companies in adjacent subsectors will partner together or merge and the big banks will take more significant steps to directly compete with these new startups, either by making acquisitions or building up their technology offerings.

Customer Acquisition Costs are Killer

Canadian Fintech companies are currently in the midst of a major land grab – they are highlighting the cost effectiveness and/or innovativeness of their product offerings and trying to grow their customer bases as quickly as possible to gain scale.  Several players have enjoyed rapid early adoption, but as they grow, there typically comes a point where the number of early adopters (with low CAC) dwindles, and they experience a change in their growth pattern with an accompanying increase in customer acquisition costs.  For many, this means large-value marketing spend such as WealthSimple’s Super Bowl ad ( or Mogo’s partnership with Postmedia (  We’re also seeing some expensive Google/Facebook spend, where the competition for ad space, and therefore cost, is high.  All these startups are trying to scale to the point where they become widely-known brand names and can attract users other than bleeding-edge adopters at much lower acquisition costs.

Market is More than Millennials

Many of the B2C Fintech companies are going after a similar demographic – tech savvy millennials who may have relatively above-average incomes.  We believe we are rapidly approaching a point where it is much more cost-efficient for companies in adjacent segments to share access to each other’s customers.   A great example of this is Credit Karma in the US.  They grew their member base to over 50 million members (>20% of all Americans with credit profiles!) by offering their users free credit scores.  They are now leveraging this huge user base (with significant credit data for each user) by providing a dashboard where third-party lenders can provide targeted loans to individual users in an (evidently) more efficient manner than historical sales channels.  Mogo is pursuing a similar strategy; they provide free credit scores to Canadians, offer loans to consumers and have announced plans to offer mortgages, credit cards, savings accounts and wealth management services via partnerships.  Check out their investor deck for more details (  We think some of the most likely combinations or partnerships in the near-to-medium term will be those in the Lending and Personal Finance subsectors.  Aside from Mogo’s announced plans, we’ve also seen this from Wealthsimple and Borrowell, who have marketed an RRSP top-up loan ( – they also share Power Financial as a major investor.

We continue to actively monitor the trends in the sector and invest where we see unique opportunities arise.  There is a significant level of expertise in Canadian Fintech and any increase in collaboration should prove very beneficial for the entire sector.

Fintch Blog1


Note: Difference Capital has investments in Carta, Ethoca, Mogo (GO-TSX) and TouchBistro.

Link to PDF version http:

Back to Blog

    Search the Blog