How to Start a Fintech Company in Canada?: Process & Benefits

Canada’s fintech industry is booming, and the numbers don’t lie. With over $39 billion in annual fintech revenue and a projected growth rate of nearly 20% annually, the country is becoming a magnet for innovative financial ventures. But why Canada? It’s more than just a stable economy. It’s the perfect blend of cutting-edge tech infrastructure, business-friendly regulations, and a diverse talent pool that’s ready to disrupt traditional finance.

Starting a fintech company here isn’t just a business decision—it’s a strategic leap into one of the world’s fastest-growing industries. Whether you’re crafting a game-changing payment app or revolutionizing blockchain solutions, Canada offers fertile ground to scale your vision. And it’s not as daunting as it sounds. From choosing the right province for your headquarters to understanding licensing requirements, we’ll guide you through every step to launch your fintech company in Canada.

Why Start a Fintech Company in Canada?

Canada is an attractive destination for fintech businesses for several reasons:

• Thriving Fintech Ecosystem: Canada is home to over 1,000 fintech companies, and the sector is growing at a rapid pace. The country boasts a robust financial services industry, ranked among the most stable globally.
• Supportive Regulatory Environment: The Canadian government actively supports innovation in financial technology through programs such as the Innovation, Science and Economic Development (ISED) initiative.
• Access to Talent: With world-class universities like the University of Toronto and McGill University, Canada produces a steady stream of tech-savvy professionals ready to fuel your fintech ambitions.
• Market Opportunity: Canada’s diverse population and high internet penetration (over 91%) make it an ideal market for digital financial services.

Understanding the Fintech Industry in Canada

The fintech industry in Canada covers a wide spectrum, including payment solutions, wealth management, blockchain, and insurtech.

Key trends shaping the industry include:

• Digital Banking: The shift to online banking is accelerating, with 76% of Canadians using digital banking services.
• Blockchain Technology: Canada is a pioneer in blockchain development, with initiatives in cryptocurrency and decentralized finance (DeFi).

• Artificial Intelligence (AI): AI-driven fintech solutions are widely adopted for fraud detection, credit scoring, and personalized financial services.

Legal Requirements to Start a Fintech Company in Canada

Navigating the regulatory landscape is crucial for fintech businesses.

Here’s what you need to know:

Business Registration: You’ll need to register your business with the appropriate provincial or federal authorities. For instance, if you’re planning to operate across Canada, a federal incorporation is recommended.

Licensing: Depending on your business model, you may need to obtain specific licenses, such as:

• Money Service Business license for payment processing.
• Securities registration for investment platforms.

Compliance with Financial Regulations: Canada’s regulatory framework includes entities like:

Financial Transactions and Reports Analysis Centre of Canada (FINTRAC): For compliance with anti-money laundering (AML).

Office of the Superintendent of Financial Institutions (OSFI): For banks and financial service providers.

Privacy Laws: Adhere to Personal Information Protection and Electronic Documents Act (PIPEDA) standards to protect customer data.

How can I start a Fintech company in Canada?

A number of steps must be followed, along with regulatory compliance, in order to establish a Fintech business in Canada. 

Take into account the following general guidance to get you started:

Create a Business Plan

A smart place to start is by writing a complete business plan that describes your Fintech concept, target market, revenue model, and financial projections.

Select the Legal Structure

Choose your company’s legal structure. Limited liability partnerships (LLPs), corporations, partnerships, and sole proprietorships are available as options.

Business Name Registration: 

Pick a distinctive and pertinent name for your Fintech business, and make sure it’s available for registration. By using the Canada Business Corporations Act (CBCA), you can determine whether a name is available.

Register your Business: 

Register your company either provincially or federally. Federal incorporation falls under the Canada Business Corporations Act (CBCA), which is recommended for businesses planning to operate in multiple provinces.

Acquire the Business Number (BN):

The Canada Revenue Agency (CRA) can provide you with a Business Number (BN) for tax purposes.

Create a Bank Account:

Create a company bank account in Canada to handle the company’s accounts from your personal ones.

Best Locations in Canada for Your Fintech Company

Your company’s success can hinge on choosing the right city to base your operations on.

Here are some top contenders:

• Toronto: Often dubbed the “Silicon Valley of the North,” Toronto is a leading financial hub and home to the MaRS Discovery District, one of the world’s largest innovation hubs.
• Vancouver: Known for its thriving tech ecosystem and proximity to Silicon Valley, Vancouver offers a wealth of networking opportunities.
• Montreal: With its low operating costs and bilingual talent pool, Montreal is an excellent choice for fintech startups targeting both English and French-speaking markets.
• Calgary: Emerging as a hub for blockchain and energy-focused fintech, Calgary is ideal for entrepreneurs interested in niche markets.

Services Offered by Canadian Fintech Business 

A top fintech company in Canada offers a variety of services, including:

• Online Banking: Delivering optimized online banking experiences is the focus of online banking.
• Digital Payments: Providing secure and useful choices for online transactions.
• Robo-advisors: Providing portfolio management and computerized investing advice.
• Peer-to-peer lending: Bringing together independent lenders as well as borrowers.
• Blockchain Solutions: Investigating the financial applications of blockchain technology.

How Fintech Companies are Changing the Financial Landscape?

Traditional Banking vs. Fintech

The old ways of banking are like your grandpa’s rotary phone—functional but outdated. The financial sector, which offers better and more efficient solutions, contributed to the development of smartphones.

Consumer Preferences

Consumers of today expect instantaneous and hassle-free services, and fintech provides both. 

What are the tax obligations for fintech businesses in Canada?

Tax compliance is a crucial aspect of any business, and fintech companies in Canada need to be aware of specific obligations:

• Corporate Income Tax: Canadian businesses pay federal and provincial corporate income taxes. Rates vary by province, with a general federal rate of 15% and provincial rates ranging between 11% to 16%.
• Goods and Services Tax (GST)/Harmonized Sales Tax (HST): Most provinces impose GST/HST on goods and services, requiring businesses to collect and remit it to the Canada Revenue Agency (CRA).
• R&D Tax Credits: Fintechs engaged in research and development may be eligible for Canada’s Scientific Research and Experimental Development (SR&ED) tax credit, which reduces tax liabilities.
• Payroll Taxes: If your business has employees, you must withhold and remit federal and provincial payroll taxes, including Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums.

Conclusion

Canada’s fintech landscape presents a golden opportunity for entrepreneurs looking to innovate in financial services. With a supportive regulatory environment, access to a skilled workforce, and ample market opportunities, starting a fintech business in Canada can lead to sustainable success. 

If you’re ready to embark on this journey, our team at OnDemand International is here to guide you through every step. From registration to compliance and beyond, let us help you build a thriving fintech business in Canada’s booming market.

Get in touch with OnDemand International today, and let’s turn your fintech vision into reality!