New York and London might come to mind as the world’s biggest fintech hubs, but Toronto isn’t far behind. The Canadian metropole is driving the country’s fintech market forward, becoming an international destination for investment.
Read on to learn more about this booming market, including the best opportunities for investment.
Global fintech market growth
Global investment in the fintech market is growing every year. The MARS Discovery District calculates that there was around $6.8 billion funneled into this market in 2014, more than double the $3 billion invested in fintech the previous year.
Much of this investment is moving towards the established fintech hubs of New York and London. However, an ever increasing percentage of global investment is being funnelled towards emerging fintech capitals, which currently have smaller markets but are pitching above their weight when it comes to output and innovation.
Toronto draws international investment
Toronto is one such markets. Ranked the 9th largest fintech market in the world and the third largest in North America, the Toronto fintech scene saw 12,000 firms and 350,000 employees last year. What’s lying behind these jobs and companies is a strong Canadian investment scene.
In 2013, the Canadian financial sector spent $12 billion in technology spending. A year later, this figure jumped up to $14.8 billion. Although comparable statistics aren’t yet available for last year, the trend is obvious: every year, the Canadian financial sector is spending more and more on technological solutions, which is directly benefiting the country’s fintech innovators.
What makes Toronto unique
Investors are drawn to Toronto for a number of reasons. According to the Globe and Mail, Toronto has more financial institutions with a market cap over $50 billion than there are in New York or London. Seeing as the vast majority of fintech companies focus on business-to-business sales, this presents a broad pre-existing infrastructure that fintech innovators can capitalize on.
Furthermore, Canada’s financial-services market is relatively concentrated, making it more appealing for customer adoption. Canadian companies find it relatively easy to adopt new standards in payment, cybersecurity and electronic authentication. This, in effect, makes it easier for startups and small- to mid-cap companies to survive the difficult adoption period, and focus on long term growth plans concerning scalability.
Where to invest
So what is the best way to invest in this growing market? There are numerous small- to mid-cap companies operating in this space that would benefit from direct, public market investment. VersaPay Corporation is one such company. VersaPay (TSXV:VPY) provides a cloud-based accounts receivable automation software and integrated payments solutions. In the past three months alone, the company has seen strong 15.38 percent growth.
That being said, Toronto isn’t the only city in Canada that’s supporting innovative young fintech companies. Calgary-based Directcash Payments (TSX:DCI) operates in the payments service space, offering switch and transaction payment processing services for ATMs, debit and credit card services. In the past three months, Directcash Payments as seen a whopping 42.98 percent growth.
All told, the Canadian fintech is in a strong position right now, and Toronto is at the heart of this growth. Investors across the world are looking to Canada as a promising region for fintech investment. Right now, it seems like the biggest anxiety in this market is the fear of missing out, as Canadian fintech prepares to adopt an even more prominent global market position in the years to come.
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Securities Disclosure: I, Morag McGreevey, hold no direct investment interest in any company mentioned in this article.