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Elodie Bouneau , Sr Director Product, Flipp. Cultivating performant, resilient teams to innovate and deliver impactful digital solutions. In 2022, I was hired by the eighth (now seventh, at the time of writing) largest Canadian bank to build and launch an all-digital challenger banking solution for Canadian small businesses.
Oh wait, doesn’t this exist already? Well, shocker! Not in Canada. Here’s why, as well as the lessons learned from this journey to market in a country where traditional banking reigns supreme. The Canadian fintech landscape is specifically challenging due to three main factors: • Lack Of Centralized Business Registries: Unlike other Western countries, Canada’s federal and provincial governments typically do not maintain accurate, structured and accessible business registries.
Without this essential infrastructure, banks must independently verify business identities, making the onboarding process cumbersome and risk-prone. • Delays In Open Banking Implementation: Although open banking has been discussed for years, its implementation in Canada remains elusive. This initiative would greatly enhance data sharing between financial institutions, benefiting customers through improved service fluidity and innovation.
• Special Status Of Sole Proprietorship: In Canada, individuals can use the sole proprietor's status to operate without registering their business , complicating the verification process for banks. This flexibility, while beneficial for entrepreneurs, adds a layer of complexity for financial institutions trying to verify business activities. Over the past 10 years, Canada's banking sector has become increasingly consolidated, resulting in a less competitive landscape for the major financial institutions, especially when compared to other Western countries.
This consolidation, coupled with Canada’s smaller population size, has led to less innovation and a reduced focus on solutions centered on user benefits. This issue is particularly visible in the small business banking segment. Small businesses require more day-to-day servicing than retail customers but generate much lower returns compared to larger commercial clients.
Despite the enormous economic contribution of small businesses, they often face limited banking options and much less favorable terms compared to their counterparts in other countries such as the U.S., U.
K., Germany and France. Thankfully, the sheer size and potential of the small business segment are beginning to catch the attention of financial institutions and corporate investors.
Even with digital challenger banks now attempting to disrupt retail banking, small business banking remains largely underserved in Canada by all types of financial actors. Thankfully, there is increasing recognition of the need to develop more tailored services for small businesses, aiming to bridge the gap and foster a more competitive, innovative banking environment. Developing a minimum viable product (MVP) in banking is extraordinarily complex: regulatory compliance and risk management demand rigorous testing and adherence to convoluted rules designed for traditional banking models.
This makes launching even a slimmed-down product a monumental task. Actionable Insight: Identify early what needs to be done from a regulatory and compliance standpoint. Make this your primary focus and build your MVP around it.
While automation and scalability are important, prioritize regulatory compliance to launch sooner and start learning from the market. Banks often operate on outdated, monolithic tech stacks. Transitioning to a digital-first model requires a carefully architected system that balances agility with the constraints of legacy infrastructure.
This necessitates a dedicated, inventive team to ensure seamless integration and superior customer experience. Actionable Insight: Instead of overhauling legacy systems, decouple the components necessary for real-time, day-to-day operations and innovate specifically on those. Focus on delivering a seamless, modern experience to the end user.
While optimizing the back end and back office over time is important, prioritize enhancing the user experience first. Changing banking in Canada is a marathon, not a sprint. Development, testing, compliance and risk assessments extend timelines significantly.
Protecting customers' financial assets is paramount, and this requires thorough, deliberate processes. Actionable Insight: Prioritize building strong relationships and identify all the small ways to modernize the experience rather than fighting the existing broader system. Strategic creativity can make a substantial difference in complying with regulations while still delivering innovative solutions and great user-centric experiences.
The success of launching an all-digital bank depends on the collaboration of a cross-functional team of experts: persistence, constant problem-solving, creativity and a united effort are essential to overcoming regulatory and technical hurdles and delivering to the market an easy-to-use, compliant offering. Actionable Insight: Building and delivering digital products in regulated environments like banking is particularly challenging. Ensure you assemble a strong cross-functional team with expertise across various domains.
No single person can foresee all potential solutions, so it’s crucial to have a solid team that can rely on each other daily as you work toward impactful results. Building an all-digital bank for small businesses in Canada taught me invaluable lessons about resilience, innovation and the importance of a strong, collaborative team. Despite the challenges, the team was able to launch a solution that I hope provides a fairer deal for Canadian small businesses.
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