Although it’s unlikely technology in the financial services world will really do big damage to Canada’s banks, there are still many reasons why investors should monitor the space.
There’s plenty of potential for these innovators to sneak in and take market share from financial services bigger players ignore. Or they can simply create a market.
Mogo Finance Technology Inc. (TSX:GO) is one example. Think of it as a new spin on unsecured credit. Mogo uses software to analyze borrowers instantly, cutting down on the underwriting process. Its online-only business model keeps costs down too, cash Mogo is spending on marketing.
Borrowers can borrow up to $35,000 from Mogo in mere minutes using just their smartphones. That kind of convenience is hard to beat.
Another example is Ottawa-based Shopify Inc. (TSX:SH)(NYSE:SHOP), which handles e-commerce for small and medium sized business. Shopify takes care of everything from designing the website to processing payments--all for a fee, of course. It’s the perfect solution for a web entrepreneur.
Shopify isn’t quite profitable as yet, but it is very close to becoming cash flow positive. It also has $180 million in cash on its balance sheet.
Finally, there’s Wealthsimple, one of Canada’s leading robo-advisors, which are companies that invest in a simple portfolio of ETFs for clients using software to help with asset allocation. Power Financial Corp (TSX:PWF) owns 60% of the company, which could end up being a very big threat to IGM Financial, another holding of the Desmarais family.
