HomeBlogThe winds of change for fintechs in Canada could help small businesses set sail

News & Views

Updates and analysis of the SME market

Sign up for our newsletter to stay current on industry issues and news for small and medium-sized businesses across Canada.

The winds of change for fintechs in Canada could help small businesses set sail
March 14, 2022

By John MacKinlay, Chief Executive Officer at Caary.

As the COVID-19 pandemic approaches its second anniversary, small to medium-sized business owners continue to experience financial pressures from a lack of cash flow and disrupted supply chains.

I was shocked to read global research from Accenture that indicated 10 to 30 per cent of small and medium-sized businesses (SMEs) are expected to go bankrupt as a result of the pandemic.

SMEs are the backbone of Canada’s economy. They make up 98 per cent of all businesses and employ around 70 per cent of the workforce. This predicted outcome of the pandemic could be staggering! What can the financial sector do to help? Whether in times of crisis or to improve the everyday experience of an SME, here are a few key needs that I hear about on a day-to-day basis from our customers and target customers:

SMEs need access to credit
SMEs face an uphill battle to secure credit from Canada’s big banks, even with substantial capital. We experienced this ourselves at Caary. We had $1.6 million in our bank account from a recent funding round but still couldn’t get a corporate credit card.

Traditional banks often have lengthy application processes for corporate cards and require personal guarantees. As a result, over 45 per cent of small business owners use personal cards for business spending, taking on risk that should be carried by the business, as well as the burden of reconciling expenses every month.

SMEs need tailored financial services
The banking needs of SMEs can be as unique as their business offerings. Yet many banks group SMEs together based on criteria that don’t always connect them with the services they need.

For example, 85 per cent of banks surveyed by Accenture said they segment clients based on revenue. But this is too broad a criterion for clients as diverse as SMEs. Traditional segmentation can result in one small business being served by the retail side of the bank and another by the commercial side. The result is a lack of tailored solutions for the segment.

SMEs need progressive financial platforms
As innovation leaders, SMEs need innovative banking solutions. The same report found that only 14 per cent of medium-sized SMEs and just over half of sole traders are content with simple financial products and services. SMEs want – and need – to take banking to the next level.

What also caught my eye in the report, not surprisingly as the CEO of a fintech, is that 42 per cent of SMEs believe alternative providers can offer a better service than traditional banks. It’s taken a long time for Canadians to put their trust in fintechs and I’m pleased to see that trust is building. We certainly experience it here at Caary with the customers participating in our beta.

In any event, emerging players will create more competition in the space which will inevitably benefit the customer. This isn’t just good news in pandemic times, it signals a change in sentiment and behaviour that is likely to create favourable conditions for SMEs as they rebuild and move forward to a prosperous future. Let’s hope it’s a key step forward in helping our small business community recover from an extremely challenging couple of years.

John MacKinlay

Chief Executive Officer at Caary Capital

John has 25 years of experience in the IT and Financial Services industries as an entrepreneur, executive, investor, senior advisor and board member. John led the Financial Services platform for OMERS Growth Equity, undertaking investments in technology enabled Financial Services firms and developing the thesis and strategy around growth. John previously led PwC Canada’s Financial Services Consulting Practice, corporate development for global banks and the FS Strategy Practice for IBM Canada.