Canada’s fintech industry stands at a crossroads. Despite its robust financial services sector, global reputation for innovation, and a tech-savvy population, fintech adoption in the country remains surprisingly low. With evolving consumer needs, regulatory reforms on the horizon, and a wealth of untapped opportunities, the question remains: Is Canada ready to claim its place as a global fintech leader?

A Snapshot of Fintech in Canada

Canada’s banking sector is one of the most profitable in the world, contributing $180 billion in revenues—or 7.9% of GDP—in 2023. Yet, fintech accounts for only 3% of these revenues, far behind countries like the U.S., where penetration is 8%. While Canada ranks high in smartphone penetration and internet usage, its adoption of digital financial services ranks among the lowest in developed economies.

Some homegrown players, such as Wealthsimple in wealth management and Nuvei in payments processing, have demonstrated that success is possible. However, these bright spots are the exception rather than the norm.

Barriers Holding Back Growth

Consumer Loyalty and Reluctance

Canadian consumers remain loyal to traditional financial institutions, with 61% using the same bank for over ten years. This loyalty stems from high satisfaction levels and the complexity of switching providers. For fintechs, overcoming this inertia is no small task.

Lack of Collaboration

Bank-fintech partnerships, common in markets like the U.S. and Europe, are still in their infancy in Canada. Lengthy sales cycles, high compliance costs, and exclusivity clauses have stifled collaboration. Without these partnerships, fintechs struggle to scale and access broader markets.

Funding Gaps

Although Canadian venture capital is growing, it pales in comparison to global fintech markets. Between 2017 and 2023, fintech funding in Canada grew by just 1.8% annually, compared to 18% in the U.S. Early- and mid-stage companies are particularly underserved, leaving little room for innovative start-ups to flourish.

Opportunities for Fintech in Canada

Serving Niche Markets

Canada’s high immigration rates offer a prime market for fintech growth. Many newcomers are accustomed to digital banking in their home countries and seek accessible, innovative financial solutions. Products tailored to immigrants—such as seamless account setup, access to credit, and money transfer services—could unlock significant potential.

In addition, underbanked Canadians represent another opportunity. While 98% of Canadians have access to banking services, many lower-income individuals use only basic accounts. Fintech solutions aimed at this demographic—such as budgeting tools and low-fee financial products—could help bridge the gap.

Regulatory Reform

Canada’s regulatory environment has historically been cautious, but change is coming. Proposed open banking legislation will allow third-party providers to access consumer financial data with consent. This framework promises to lower barriers for fintechs and enhance competition, while initiatives like real-time payments could modernize the sector further.

Leveraging Talent

Canada is a global leader in STEM education and produces a highly skilled tech workforce. Cities like Toronto and Montreal are hubs for artificial intelligence and data analytics, technologies with transformative potential for fintech. However, a shortage of experienced executives with the expertise to scale start-ups remains a challenge.

A Roadmap for Growth

Build Strategic Partnerships

Collaborations between fintechs and traditional financial institutions can unlock significant value. By leveraging incumbents’ infrastructure and fintechs’ agility, these partnerships can reduce costs, optimize processes, and deliver innovative solutions to consumers.

Address Funding Imbalances

To foster a thriving fintech ecosystem, Canada needs a more balanced distribution of venture capital across early, mid, and late-stage companies. Supporting start-ups in their initial phases will ensure a steady pipeline of disruptive innovations.

Innovate for Impact

Canadian fintechs must go beyond “me-too” products and focus on solutions tailored to the country’s unique needs. Developing intellectual property and technology that address gaps—such as outdated payment methods or underserved markets—will attract both consumers and investors.

Why Fintech in Canada Matters

Fintech in Canada is more than a story of profits and disruption; it’s an opportunity to reshape the financial landscape for consumers, businesses, and investors alike. With the right mix of innovation, partnerships, and policy reforms, Canada’s fintech sector could deliver solutions that are not only competitive globally but also transformative locally.

While progress won’t be uniform across all segments, the sector’s untapped potential is undeniable. By targeting niche markets, embracing collaboration, and leveraging upcoming regulatory changes, fintech in Canada is poised to evolve into a significant driver of economic growth.

The next decade will determine whether Canada’s fintech ecosystem remains a laggard or emerges as a leader. For the players willing to bet on its future, the rewards could redefine the financial services industry as we know it.

Photo of the portrait: Depositphotos