The fintech sector in the Toronto region has enjoyed strong growth over the past few years, but it continues to trail other major financial centres in terms of the volume and value of investment, according to a new report.
The report, published Monday by Toronto Finance International (TFI) — a partnership between government, financial services firms and academics — was written by consulting firm Accenture and law firm McMillan LLP, and follows up on an initial report from TFI published in 2017.
It notes that fintech investment in the Toronto area has jumped from just eight deals worth a combined $24 million in 2013 to 25 deals totalling $221 million in 2018. Yet, despite this growth, the report says the Toronto region fintech sector “still has a nominal share of global fintech deals (by number of deals and size of deals).”
To drive greater growth and innovation, the report says the region needs a supportive regulatory environment, recommending “an approach which focuses on openness, proximity, and global awareness of the fintech ecosystem.” The report also recommends the fintech ecosystem “create an environment that encourages innovation and drives collaboration among ecosystem partners.”
The report notes that initiatives such as the creation of regulatory sandboxes — and the participation of the Ontario Securities Commission (OSC) and Quebec’s Autorité des Marchés Financiers (AMF) in an effort to create a “global sandbox” — represent steps in the right direction, but suggests policymakers should also look to other countries to develop policy that enables closer collaboration between governments, regulators and the industry.
“Since the original report was published in 2017, government and regulatory bodies have taken positive steps to start addressing some of the concerns and needs of the fintech industry both in the form of legislative action and policy recommendations,” Pat Forgione, a partner in the financial services practice group at McMillan LLP, said in a statement. “However, it will be important as we move forward that all stakeholders continue to actively participate in policy discussions that support this momentum, in order to develop an environment that enables new and established fintech companies to thrive.”
Alongside recommendations for policymakers, the report also calls for greater efforts at sharing and collaboration between fintechs to produce ideas that generate technological improvements. It also recommends working to enhance the region’s global reputation as a fintech hub, “in order to attract and retain start-ups, talent and investments both nationally and globally.”
“We have one of the highest investment growth rates globally, with a compound annual growth rate of 118% since 2010. While this is a much smaller absolute investment base than that of global hubs like London, New York and San Francisco, we have the opportunity to leverage North America’s second-largest financial centre, combined with its third-largest tech cluster, and use this momentum to become a global fintech leader,” said Jennifer Reynolds, president and CEO of TFI.