FinTech companies employ technology and innovation to improve on what we know as traditional financial methods. This typically results in digital products and services that are easily accessible to anyone and everyone with the internet. But, what does this really mean for consumers? It means that financial services, which were once complex, costly and time-consuming, are becoming approachable and easy to understand.
This Financial Literacy Month, we’re breaking down how FinTech brands are shaking up the finance industry and helping you be smarter with your money.
What is FinTech?
FinTech is short for financial technology. ‘FinTech companies’ refer to businesses that apply technology to traditional financial activities. This innovative approach to finance typically uses the internet and computing to automate insurance, banking, investing, accounting and so much more.
Often perceived as disruptors in finance, FinTech companies are rapidly shaking up the industry and Canadians are starting to see how it benefits them. According to a new survey by EY, FinTech adoption in Canada has increased from 18% to 50% since 2017. But, we still have more room for growth, as our adoption rates currently lag behind the global average at 64%.*
How has FinTech changed financial services?
FinTech companies are democratizing financial services as we know them. Democratization in this sense means ‘making accessible to everyone’. Traditionally, financial services have had lengthy processes that required paper applications and forms. Today, technology applied to these services has automated them, removing human error and inconvenience.
Here are just three examples of how FinTech is making life easier:
- Increased availability. If you can access the internet, you have equal access to many financial services thanks to FinTech. Take the example of cashing a cheque. Previously you had to go to a bank teller in person during the bank’s set hours. Depending on your schedule, getting there to deposit a cheque might have been hard. Now, you can deposit that same cheque online at any time of day.
- Cancellation of minimums. Traditionally, certain financial services have had minimums for participation. For example, established investment portfolio managers would prefer to work with larger sums of money, since they stand to earn more on these accounts. In comparison, robo (robot) advisors are automated and not limited to a maximum number of portfolios. This means they are optimized to take on as many users as possible. The result is that you can start an investment portfolio with $100 and get the same advice that used to be reserved for people with tens of thousands to invest.
- Knowledge sharing. Typically, automation puts the customer closer to the product. In other words, it cuts out the middleman. But, in order to be successful in this direct to consumer world, companies need to educate and empower their customers to make responsible decisions. This means that more and more resources on financial services are available free of charge with a quick web search.
There are also many other ways that FinTech is shaking up traditional financial services. At Sonnet, technology and innovation applied to insurance means we can calculate a quote in as little as five minutes, plus you can buy and manage your policy all online, among other things.
Who are Canadian FinTech companies?
In honour of Financial Literacy Month, we want to celebrate some of our favourite Canadian FinTech companies. Let’s talk about how these Canadian FinTech brands are changing the game and how they can help you be smarter with your money.
Who they are: Offering customers an alternative to the traditional banking experience with no fees, cash back, savings goals, and roundups.
What they do differently: Real-time updates on exactly what you’ve spent where and how much is remaining.
How they can improve your finances: The average KOHO user reduces their spend by 15% and saves nearly $500 within their first three weeks.
Estimated set up time: Less than five minutes.
Who they are: The first AI-powered credit coaching tool, providing Canadians with free credit scores to help them understand and improve their financial well-being.
What they do differently: Free credit score and report monitoring, with monthly updates, credit tracking over time and personalized credit improvement tips – without the red tape.
How they can improve your finances: Members who monitor their credit score more frequently improve their score over time.
Estimated set up time: Less than three minutes.
Who they are: Guidance in creating customized legal documents to make estate planning as painless as possible
What they do differently: The step-by-step process makes it possible to make a will online, without seeing a lawyer.
How they can improve your finances: Get a basic will for as little as $99, compared with a standard will that costs around $1,000.
Estimated set up time: As little as 20 minutes.
Who they are: The simple way for customers to grow their money like the world's most sophisticated investors.
What they do differently: Smart investing, without the high fees and account minimums associated with traditional investment management.
How they can improve your finances: Grow your money with a personalized portfolio designed for your goals – without minimums, lock-ins, or penalties.
Estimated set up time: Under 15 minutes, with funds invested in as little as 48 hours.
Who they are: The app that helps Canadians automatically save and invest towards their financial goals.
What they do differently: Automate savings by rounding up your purchases and investing the spare change while taking advantage of the tax-benefits of TFSA and RRSP account and socially responsible investing (SRI).
How they can improve your finances: Easily save and invest without changing your spending habits or needing any investment knowledge.
Estimated set up time: Five minutes.
What they do differently: Intelligently selects participating brands at the right time to automatically reward consumers, without the work, whenever they use their credit card to pay.
How they can improve your finances: Rewards back on an existing spend convert into overall savings.
Estimated set up time: Five minutes.
While these tools can empower you to take control of your finances and help you save money, some complex financial questions may still be best handled by professionals. If you’re ever in doubt, there is a human touch driving our FinTech partners, and ourselves, forward.
All in all, we can’t wait to see how FinTech will continue to change the status quo.
Sonnet and Borrowell have a commercial marketing partnership.
Sonnet and Willful have a commercial marketing partnership.
Wealthsimple and Sonnet have a commercial marketing partnership. Sonnet is not registered as an investment advisor or investment manager under the securities laws of any Canadian province or territory and does not provide investment advice or investment management services. Sonnet offers no assurances that Wealthsimple and its services are suitable for any particular investor.
Sonnet and Moka have a commercial marketing partnership.
Sonnet and Drop have a commercial marketing partnership.