Accrued: After Hours - Episode 21
The newest episode of the Accrued podcast is out. Hosts Tedd Huff of Fintech Confidential and Colton Pond of LoanPro are joined by Canadian fintech extraordinaire Jeff Adamson, the co-founder and Chief Commercial Officer at Neo Financial. Despite a lack of fintech infrastructure in Canada, Neo has built an in-house technology stack that enables them to offer personalized credit rates and a cashback system tailored to spending habits.
This article will give a quick recap of what they discussed and examine the major takeaways from the discussion. To hear the full conversation, stream it wherever great podcasts are available.
Here's what went down
In this episode, the discussion focused around three main topics:
- Canada’s lack of digital banking. Canada lags behind the U.S. in digital banking adoption. Although the countries are very similar in many related metrics, Canada lags behind in terms of digital banking.
- A banking revolution is coming to Canada Despite the current state of digital banking in Canada, the hosts agree that the country is primed for rapid development that will give everyday borrowers a white-glove banking experience.
- How compliance impacts development While Jeff and the hosts agree that regulation and enforcement are important bulwarks against fraud and financial abuse, they also acknowledge that regulations often bring unintended consequences, which can be especially difficult for startups and smaller businesses to adapt to.
The current state of Canadian digital banking
Despite similarities in many relevant areas, the U.S. and Canada see significant differences in the adoption of digital banking. Where digital banking is ubiquitous in the U.S., it’s far less common in Canada.
Differentiation between Canadian banks, Jeff explained, is largely superficial, with all of the major banks offering similar products and services, touting the same value props, and running on the same underlying technology. He even shared an anecdote where Canadian banking leaders were shown blank-and-white versions of their website with their companies’ names and logos removed. Without the superficial branding elements, none of them were able to distinguish which site was which.
For fintechs and neobanks, this makes breaking into digital banking an uphill battle. In Canada, there’s far less existing digital finance infrastructure than we enjoy in the U.S., with hardly any banks involved in credit sponsorship/Banking-as-a-Service. This means that new market entrants have to build much more of their tech stack in house, requiring more time, more money, and specific domain expertise that may not be available.
For the majority of would-be fintechs and neobanks, that technical hurdle is a non-starter. But for the companies that do manage to build their own infrastructure, like Neo Financial, they now enjoy full vertical integration and control over their operation in a market with limited competition.
A banking revolution on the horizon
While Canada may have lagged behind the U.S. and other international banking markets in the past, Jeff is optimistic about the future:
It’s probably one of the most exciting times to be working in financial services, and I say that because we’re just seeing this massive application of new technologies to an industry that’s typically shunned technology.
Powered by modern fintech platforms, Canadian challenger banks can leverage tools like AI to rapidly upgrade their customer experience. Instead of the white-glove banking experience being reserved for only a tiny fraction of customers, AI tools can expand that experience to all consumers, giving them instant access to their financial information and the ability to make informed, real-time decisions through an AI agent.
Compliance
Compliance is obviously necessary to protect consumers and enforce contracts, but Jeff points out that it’s also something like an industry-wide brain drain: Instead of building new programs, products, and services that can meet customers’ needs, designers and developers at every credit provider are devoting their time to building around new regulations.
The U.S. has seen several major pieces of consumer finance legislation in just the past year, from BNPL falling under Reg Z scope to the 1033 rule. In Canada, credit providers are grappling with their own new regulation: the Retail Payments Activity Act (RPAA). As in the U.S., well-established players can adapt far more easily than startups and new market entrants. Although Jeff is hopeful that RPAA will offer long-term benefits as payments compliance becomes easier, he points out that smaller companies will struggle in the transition before they see any benefits from the regulation.
Key takeaways
Here are the major takeaways from the episode.
- Stop waiting for support—build it yourself. The lack of existing digital banking infrastructure has forced Canadian fintechs and neobanks to build their own tech stacks from the ground up—but for those who succeed, they end up with a solution that they control. Even in the U.S., where there are generally more partners to integrate with, sometimes building a system yourself is the best course of action.
- Make fair lending your priority. While compliance is obviously a concern, a credit provider’s main priority should be lending in a way that’s fair, honest, and upfront. Whether a company skirts the rules and gets fined or follows the letter of the law while deceiving borrowers, those practices will catch up to them when borrowers migrate to more attractive—and fair—alternatives.
- Turn regulations into opportunities. Regulators are waking up to the reality of modern banking and fintech, and beginning to write laws that are more flexible and adaptive to technological changes. Credit providers and other companies in the space can leverage the changing regulatory landscape to deliver better payments, open banking, and a variety of other services.
- Create value beyond basic rewards. Everyone loves cashback and free airline tickets, but the market is already hyper-saturated with lookalike cards that offer virtually identical rewards. Whether you’re offering cards or other credit products,
- Focus on clear and simple communication. Clear communication is essential, but it’s all too easy to overcorrect and just create noise. Too many meetings and memos or too much repetition can create confusion where a simple, straightforward message would have been understood. If you deliberately make your communication as concise as possible, you’ll naturally focus on the things that matter most.
