Fintech Finance on a phone
Keren Moynihan
Co-Founder & CEO - Boss Insights

Digitization, Data and the Future of Finance  

Takeaways

  1. SMBs and commercial businesses are majorly underfunded, and digitization of the lending process will increase capital flows.
  2. Canada has a rich entrepreneurship ecosystem for early stage companies but there is no clear path to commercialization.
  3. Trade programs, conferences and accelerators in Canada are too general and should be more industry specific.

Action

It is not the responsibility of fintechs or banks to change the financial landscape in Canada on their own—there must be collaboration between them. Players in the financial ecosystem must be aware of what they can and cannot do and be open to working together to create a more cohesive and competitive Canadian marketplace.


How would you characterize the entrepreneurship ecosystem and the support that exists for Canadian entrepreneurs? 

Boss Insights has been a recipient of the many resources available to Canada’s entrepreneurship ecosystem. The innovation ecosystem is built to empower startups to hire new talent and train our workforce of the future.  It also supports companies as they get up and running so that they can hire more people and keep them local. That is how I would describe it in terms of its strengths. I am a firm believer that Canadian entrepreneurs have a competitive advantage. This is information that we take for granted in Canada, and we have it as a result of funding in a system that is leading to more jobs. 

The government funds accelerators and companies that show they are contributing—that is the key. You have to show you are giving back. At Boss Insights, we agree with the Canadian premise that if you provide the resources that businesses need, they will create jobs in the future and support the economy. Businesses are the economic engine of the future—if you fund them properly and measure them accurately, there is no limit to what the economy can do.  

“By and large, businesses are underfunded by lenders. The solution is to digitize the process.”

What we have today is an economy where 28% of small and medium-sized businesses and 60% of commercial businesses get approved for loans. So by and large, businesses are underfunded by lenders. The solution is to digitize the process, and that is what we do. We make the funding process less expensive to operate and more intelligent when it is operating. We digitize lending to grow business relationships between lenders and the businesses they support.  


What is the entrepreneurship ecosystem’s biggest weakness? What can we do to solve it?  

Canada is a rich landscape and a fertile place in which to start a company, and there are many services in Canada that entrepreneurs do not have elsewhere. There is learning on the entrepreneurship side through mentors and access to information on what customers want. However, Canada is not a rich environment in which to sell, and that presents the largest challenge.  

The ecosystem is meant to be a springboard, and it often feels like you are jumping—but where are you jumping to? Some people decide to jump to the United Kingdom, and others jump to Asia Pacific or the United States, because there is not a clear path to commercialization here. As a result, you have sophisticated entrepreneurs with great talent and prospects selling elsewhere.  

“Canada is not a rich environment in which to sell, and that presents the largest challenge.”

Many people point to the size of the Canadian market as the culprit. Like many entrepreneurs, I look at problems that are incredibly complicated to solve and try to solve them. We cannot fix the size of the market, so we should focus on something that we can change readily. What we can change are the systems and processes we have in place. The main challenge we’ve experienced is the lack of industry specialization in the ecosystem.  It’s only when Boss Insights participated in fintech focused programs in the US that we realized how key they were to getting access to early clients. Fintechs, in particular, could benefit from an access to early adopters in the market they sell to. That’s what industry specialization provides. 

There are a lot of challenges in front of us and, with the COVID crisis, we are in a time right now where the government has done a lot really quickly to help with those challenges—but that still does not mean the local market will partner with fintechs. How do we get fintechs and early companies in a position where established players will be interested and willing to work with them in a commercial way? Perhaps the springboards could work towards supporting that, so that the industry becomes more self-sustaining.  


What are the challenges with managing data in finance? How must we look at things differently? 

The challenge has always been about the quality of data. We were one of the Canadian companies sent to a foreign market to listen to challenger banks and incumbent banks on a panel. It was really fascinating because someone in the audience asked why the incumbents, who are sitting on so much data, don’t use it to crush their competitors. Why don’t they do that? The incumbent bank answers, “It’s not that simple. We cannot clean it, we do not know how to use it, and we cannot action it.” I sat in the audience wanting to shout that Boss Insights is Mrs. Clean, we will offer the structured usable data for you. 

So why is that not happening? For years, everyone has been hearing that data is the new oil, but it is not actually the data, it is the actionable insights that can be derived from that data. And that is the challenge: how to create quality and usable information. The answer to that challenge is you need to have a way to create structured data, and that can happen through API-based digitization. 

There’s an evolution to digitization. Step 1 is paper. Step 2 is email and PDFs, that are basically electronic paper. Step 3 is digitization. The difference between step 2 and 3 is that while they’re both electronic, only one allows the user to search information automatically. That is everything.  It shortens loan requests, approvals, it puts the bank in the position to proactively serve their business customer. Without it, everything is as manual now as it was a decade ago.   

“If the information is digitized, you have more transparency and democratized access to capital.”

The industry tends to think that digitization is the PDF and that stage 2 is the same as stage 3, but it is not the same. If the information is digitized, you have more transparency and democratized access to capital, which can empower the banks and the businesses so that they can both live to fight another day. 

That’s what Boss Insights has been fighting for since day one. 

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How is artificial intelligence impacting finance?  

This is both a hot topic in the media and something that is far in the future at the same time. Artificial intelligence is affecting the industry because it is a more powerful tool. If you think of regular intelligence like walking, artificial intelligence is like driving. You can process more information when you are driving, but if you are walking you are more connected to the world around you. When you are using artificial intelligence, you do not have that connection. 

With artificial intelligence comes the need for much more fuel—and that fuel is data. All of this is tied together. With AI, we have the need for more data, but we must also correct a problem that has been plaguing society for a while: bias. 

Bias is what happens when you are not in possession of real information. Bias is a natural reaction to lack of information, and it causes people to make snap judgements. From that point forward, every single piece of information that supports your bias gets funnelled in and everything that does not support your bias gets funneled out. We know this but bias still exists. We also know that by having a more diverse team, you get a better product, but challenges still exist on this front as well. 

Data is the antithesis of that. The more information you have, the less possible it is to live in your bias. You can pretend not to know, but once you know, you either have the choice of acknowledging that diversity brings a better product, or you have the choice of ignoring it and continuing to sit in your bias.  

“With AI, we have the need for more data, but we must also correct a problem that has been plaguing society for a while: bias.”

However, it is really easy to comment on what is going wrong. I challenge everyone in the marketplace, especially people in Canada, who have the benefit of this rich and robust entrepreneurial landscape, to challenge themselves to do better than they are doing today. You can comment on what is wrong, and that is an important part of innovation, but we need to provide concrete suggestions for ways to move things forward in a better way.  That’s why we’re pushing for industry specialization for entrepreneurial services.  


What has been your experience expanding to the US? What can Canada learn from the US ecosystem? 

It has been thrilling, challenging and very educational to expand to the US, and there is much that we can learn from our southern neighbours. 

One thing that I am communicating to those working to shape the Canadian ecosystem—politicians and finance industry players—is that Canada needs industry-focused accelerators. The Canadian ecosystem might be rich, but it is a segmented industry. Our trade programs, conferences and accelerators are all general, whereas in the US they are industry specific.  

If I were to recommend one thing to a company that is expanding to the US, I would tell them to look beyond the main accelerators for those that are specific to your industry and which have connections to people who make buying decisions. There are more educational environments in the US, and if you pitch in an educational environment—as opposed to a formal pitching environment—you are going to get feedback and you will improve. So that would be my number one piece of advice. 

There is also a way for Canada to make the best use of the US market by creating a corridor for those industry-specific programs that include fintechs as part of those conversations. This would make a huge difference. It is not as if we can snap our fingers and change the Canadian ecosystem, but we can partner with our neighbours to the south. 

I have been writing to decision makers to try to improve the ecosystem in that way, but you cannot always count on politicians to support you. As an industry, you need to understand that we need market specialization, and we have to collaborate with the US so that we can elevate one another. Ultimately, it is not a fintech’s job to make the ecosystem any better, nor is it a bank’s job—it is both of us in collaboration and partnership.