We started the year 2023 in something like a state of chaos: Tech was in the middle of layoffs, remote work was in a tug-of-war with a return to physical offices, and generative artificial intelligence was just beginning its all-permeating takeover of newspaper headlines and humanity’s imagination.
A year on, layoffs have slowed, hybrid work appears to be the imperfect victor over both all-remote and entirely in-person working environments, and AI continues to expand its role in society, raising at least as many questions as it grants answers to.
One of the fastest-moving areas of tech-fuelled transformation hails within the financial sector—a pace of change that is likely perturbing the ancient incumbents who enjoyed several consecutive decades without competitive interference. Today they must contend with a growing armada of digital-focused startups who aim to permanently shaken up Canada’s finance industry.
For better or worse, fintech startup disruption will alter the game forever. And that’s just one technology trend forever shifting the sands of Canadian finance.
As another year wraps up and the next looms, let’s break down what’s happening (and what’s not) at the intersection of tech and finance in Canada.
Betting the Bank on AI
We have been saying at Fintech.ca for some time now that AI is taking over; examples are legion.
This trend is exemplified well with regards to a Canadian commerce icon: Shopify. The Ottawa-born company helped pioneer the era of e-commerce, and now Shopify has targets locked on what it perceives as the next big thing: generative artificial intelligence.
“I’ve been part of the technology industry since the mid-nineties,” Tobi Lütke, Chief Executive Officer of Shopify, said in July. “I have never seen anything like AI.”
At Shopify, part of the boon hails from Sidekick, an AI-enabled commerce assistant that has been designed to interact with business owners across various expertise levels, aiding in tasks ranging from setting up discounts for holiday sales, redesigning a store to suit seasons, providing insights into products, or guiding an email campaign.
Sidekick is the centrepiece of Shopify Magic, which is what Lütke earlier referred to as his company’s “main quest”: a suite of all-new commerce-specific tools whose DNA is AI.
“Already, AI is changing how customers shop and businesses operate,” Shopify noted in a blog post. “We see massive upsides to AI in the hands of business owners from entrepreneur to enterprise, and we’re filling this unmet need with infinite potential.”
By integrating AI into Shopify’s backend, “We’re keeping businesses on the cutting edge and helping them thrive in today’s competitive market,” the company stated.
We would name other fintechs investing in AI in some way, but we’d have to list just about every fintech in Canada. That fact alone tells us plenty about the trend.
Tokens Take a Dive
In September, we mourned the non-fungible token market.
Hype around NFTs peaked in a 2022 bull run that captured worldwide attention, but trading volume of the asset in 2023 is barely 3% of its 2021 peak.
In our eulogy, we acknowledged that some of the emerging technology behind NFTs still shows promise and is being used by innovating companies in 2023—pointing to a collaboration between Vancouver startup ethos and Shopify as one illustrative example of such potential.
But as for digital pictures of apes, it’s probably over.
The only hope for NFTs making it as a viable asset class in the financial realm is if the next generation of investors adopt the commodity en masse.
Such a notion did seem possible for a while. After all, those investing in NFTs and other cryptocurrency assets throughout the bull run undoubtedly skewed younger. Gen Z appeared ready to carry the torch.
But in a world of increasingly high living costs and an increasingly less certain future, Gen Z does not appear interested in taking on risky assets like NFTs in their investment portfolios, especially following the crash.
According to a survey from Leger, nearly half of teenagers in Canada plan to invest in their Tax-Free Savings Account, while one-third plan to contribute to their Registered Retirement Savings Plan. The survey found that real estate was also a popular investment opportunity, with 29% of respondents seeking to get involved.
But as for NFTs? Well, so much for capturing worldwide attention: A mere 10% of Gen Z plans to touch them, despite the fact 63% use modern financial technology platforms and mobile apps to manage money.
That’s a big nail in the coffin for tokens as an investment. Moving forward, the trend appears that NFTs will earn their value through tangible utility, not financial speculation or moonshot hype.
Open Banking Still Closed in Canada
Since the creation of online banking two decades ago, there hasn’t been much progress in the Canadian banking system—and other countries are zooming ahead, argues Tyler Thielmann, who serves as President of Spring Financial.
Thielmann laments how, at the expense of a “safe” financial system, Canada has become a laggard with regard to innovation.
“Let’s face it: this emphasis on stability hasn’t exactly encouraged us to push the envelope when it comes to innovation,” he wrote in an op-ed for Fintech.ca in November. “Canada’s legacy banking sector has consistently prioritized the status quo over experimentation and innovation [and] this focus has completely stalled progress and made our customer experience much worse than other nations.”
Open banking, a tech-forward followup to online banking, emerged a few years ago carrying a promise of transformation throughout the financial industry.
With open banking, people share their financial data with fintech companies seamlessly, allowing for non-traditional financial service providers like mobile banking apps, trading platforms, and alternative lenders to reach everyday consumers.
Yet, despite promises from the government of a Canadian-made open banking model by the end of this year, progress has all but completely stalled.
“To say our government has been hesitant to embrace change would be an understatement,” Thielmann said.
Michael Garrity, founder of Financeit, understands the logic behind thoughtful approach to updating a nation’s financial system.
However, there are limits to patience. One has to wonder whether Canada is simply dropping the ball on this play.
“We are one of the slowest countries in the Western world to implement open banking,” he lamented in a May interview with Fintech.ca, adding there are no excuses for Canada: “In the end, it is really not rocket science and there are plenty of effective, operational frameworks to borrow from.”