The Canada Expansion Field Guide for Global Fintechs

Canada has immense opportunity for global fintechs, but regulations can be complex to navigate. Here’s how global fintechs get through complexity.

This is part one of a three part blog series that goes in-depth on the Canadian market and how global fintechs can profitably expand into Canada.

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Key takeaways:

• Canada represents a massive, highly profitable opportunity for global fintechs, driven by a multi-trillion dollar GDP economy featuring over $2.5 trillion in foreign-held assets and nearly $13 billion in annual outgoing remittances.  
• Navigating the complex Canadian regulatory landscape requires acquiring RPAA registration, maintaining FINTRAC compliance, and securing domestic sponsor bank rail access—a cumbersome process that can take anywhere from 18-24+ months to build independently.  
• Global fintechs can compress this timeline down to weeks by leveraging a regulated domestic payment orchestration partner like Cybrid, which provides a pre-built regulatory posture alongside white-labeled, Canada-specific payment rails via API.

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With over 40 million people, a global diaspora, and high average earnings, the Canadian market is a profitable place for global fintechs to expand.

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Indeed, many already have; huge global players like Wise, Stripe, and Remitly are active in Canada and serving Canadians. The government of Canada is also pushing for further competition in the financial sector with recent budget changes, signalling to the market that Canada is indeed open for business.

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Now, smaller businesses want a piece of the pie.

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Rather than succumbing to the regulatory burdens in the financial sector that make expansion difficult, innovative fintechs are pursuing a different path to entering the Canadian market.

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A dynamic, globally connected market

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Canada is a multi-trillion dollar GDP economy that is globally connected across businesses and individuals.

• Canadians remit nearly $13 billion annually to individuals around the world, a figure that has grown consistently over the past decade with signs that it will continue to grow.
• Foreign-owned firms operating in Canada hold over $2.5 trillion in assets in the country.
• Foreign-owned firms operating in Canada employ nearly 3 million people domestically.
• Canadian firms employ over 2 million people outside of Canada.
• Over 15% of firms in Canada export goods or services to customers outside of Canada.

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In almost every instance – whether a foreign firm in Canada or a Canadian firm doing global business – there is at least one foreign exchange transaction. For example, a UK firm operating in Canada might earn CAD from revenues domestically but will likely hold treasury funds in GBP or USD. That means in the course of doing business there are foreign exchange transactions to move money in and out of the treasury.

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Measuring across all businesses, this represents trillions of dollars in annual money flows in and out of Canada, whether for payroll, business payments, or individual remittances.

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The three regulatory bodies for expanding payments companies

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Canada’s attractiveness as a market stems from its globally-connected business and individual financial activity. However, fintechs need to be aware of three key regulatory and registration elements that can make or break the profitability of expansion.

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RPAA - Retail Payment Activities Act

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The RPAA exists to build confidence in payment providers and protect end users from fraud or other issues. For payments companies operating in Canada, RPAA registration is mandatory and can be quite cumbersome, including capital reserve requirements, registration with the bank of Canada, and mandatory reporting. Becoming fully RPPA registered can take months, or even up to years, depending on the complexity of your global business.

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FINTRAC - Financial Transactions and Reports Analysis Centre of Canada

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FINTRAC is the financial crimes and intelligence unit of the Canadian government. It’s the primary body in Canada responsible for combatting money laundering and other types of financial fraud. Operating in Canada requires FINTRAC compliance, which includes different transaction tracking requirements, KYC needs, and a list of other obligations required to maintain compliance.

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Bank rail access

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Bank rail access in Canada is how money actually moves, once you’re registered with RPAA and FINTRAC compliant. This typically requires building a relationship with a sponsor bank domestically, as getting an individual banking license can take a decade or more. Further, companies have to continually demonstrate that their compliance and AML postures are in line with any bank risk requirements. From there, companies might be required to pursue membership in Payments Canada, the national organization that runs Canada’s financial clearing house services.

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The secret: regulated local infrastructure partners

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These three regulatory bodies unlock the Canadian market, but are not the end of the road. Continued compliance, additional regulations, and keeping up with changes are all mandatory parts of expanding in Canada.

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Where things get a lot more streamlined is working with a regulated local partner. These domestic-global connectors already hold the licenses, sponsor bank relationships, and other regulatory postures necessary to do business in Canada.

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1. Pre-built regulatory posture

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A payments orchestration partner handles all of the regulatory nuance for you so you can focus on operating. This setup works because regulatory compliance can be sublicensed in Canada. Global fintechs don’t need to become RPAA members or maintain FINTRAC compliance by themselves — if their partner is compliant, they get automatically onside of regulations.

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2. Canada-specific infrastructure

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Have you ever heard of an e-transfer? Or an EFT? What about CADD? Just like the US has ACH and the EU has SEPA, Canada has its own unique infrastructure for moving money both domestically and abroad.

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Orchestration partners will already have these rails built and set up for use. Often connected into your application via API, it’s completely white labelled and ready for production in a matter of weeks (versus months or years if building in-house).

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3. Local market knowledge

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Orchestration partners maintain relationships with all key regulatory, compliance, and government bodies in the payments world in Canada. So if you ever need assistance, you aren’t coming in cold or wondering who you need to engage with. That kind of relationship takes years to build and can save huge amounts of time and money from lost revenues if a problem arises.

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Breaking into Canada

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Canada is a profitable market to exist in, but it can be cumbersome and expensive to launch by yourself. Working with a regulated local partner bridges that gap. It ensures your compliance posture is fixed from day one and your platform has white labelled technology underneath it that is ready to go live.

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If you’re ready to prioritize speed to market and unlock Canada for your customers, book a call to share your goals and see how Cybrid can help.

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