More immigrants are making Canada home, and the financial sector is catching up to serve their needs - New Canadian Media
Digital wallets are the primary money movement method in many developing countries. (Photo by Edi Kurniawan via Unsplash) Photo by Edi Kurniawan on Unsplash

More immigrants are making Canada home, and the financial sector is catching up to serve their needs

Remittance payments — already at more than $8 billion per year — are expected to surge as immigration levels climb

Surging immigration levels and Canada’s complex multicultural landscape are creating new opportunities for finance firms trying to ease the movement of money around the globe.

According to IRCC, 485,000 new permanent residents will land in Canada in 2024, and that number will increase to 500,000 in 2025. It is anticipated that immigration will plateau at this level from 2026 onwards. 

This new wave is sure to generate a ripple effect in many sectors of the economy, including remittances. The flow of remittance money out of Canada is already significant, with the latest data from the World Bank showing that more than $8.3 billion was sent last year. Analysts predict this number will grow. 

“Sending foreign currency has become an increasingly important part of many Canadians’ daily banking needs — a trend that we expect will continue for years to come,” said Jimmy Dinh, managing director, direct financial services at CIBC Capital Markets. 

Cost, accessibility, and trust barriers

Despite this, the cost of sending money remains high, and for those who are not technologically savvy, there is an accessibility barrier that results in slower processing times and additional fees. 

Data from Statista reveals that, in the first quarter of 2023, the cost of sending $200 went up 6.51 per cent. This is considerably more than the  target of three per cent established by the UN’s Sustainable Development Goals. It means that if you sent $200 to your loved ones abroad, they would only receive $186.98, unless you were to absorb the extra cost. 

For Erasto Ramos, who works as a financial advisor in Toronto, his perception of trust is a factor that plays a role in his decision of how to send money to his family in Mexico City. 

“I consider myself part of the older generation,” says Ramos, adding that he prefers using a legacy provider — Western Union — and visits a location in person. “I get a physical receipt, and I can use that in case there are any problems. Also, that way I don’t have to download an app. There are too many apps.”

A unique landscape

While companies like Remitly, Wise, and others have gained a stronghold in the Canadian market, the rapidly changing landscape of the country’s population is creating opportunities for new businesses. 

One example is Waverlite, a digital wallet focused specifically on immigrants that allows users to send money in ways like airtime vouchers and gift cards. Daniel Odinaka, a Nigerian entrepreneur who co-founded the Toronto-based company, referred to this as “dealing with many countries within one.” 

Waverlite is part of a large cohort of fintech companies that are setting up shop in Canada to capitalize on the enormous opportunities that its diverse multicultural market offers. Another example is Rextie, an online foreign exchange fintech founded in Peru that recently received a strategic investment from Citi. 

“There is a growing number of fintechs that are trying to scale in Canada,” said Matías Maciel, CFO at Rextie Canada. “The main problem they are trying to solve is getting to the end user in a more technological (i.e. easy to use) and cheaper way, facilitating access and increasing efficiency.” 

Simplification is key

Reducing access barriers has led to an increase in cross-industry collaborations, in which financial institutions partner with technology companies to facilitate cross-border transactions. 

To kickstart 2024, Visa announced a partnership with CIBC and Simplii  Financial. CIBC’s digital banking division.

Using Visa Direct’s technology, customers will be able to send money directly to a new range of digital wallets in key remittance destinations, including the Philippines, China, Bangladesh and Kenya. 

“Visa Direct enables consumers and businesses to send money cross-border with ease, and we are thrilled to work with industry leaders like CIBC and Simplii to provide even more remittance options for their customers,” said Sam Fuda, vice president and head of commercial money movement solutions at Visa Canada.

The new feature, which will be available later this year, is an important breakthrough considering that in many of these countries, digital wallets prevail over conventional financial institutions. For example, in Kenya, mobile transfer service M-PESA has more than 30 million users, while in Bangladesh, digital wallet bKash boasts over 60 million active customers and processes more than 75 per cent of the financial transactions in the country. 

“Together, we are working to break down the barriers of cross-border money movement to improve speed, transparency, and accessibility for both the sender and receiver,” said Fuda.

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Javier Ortega-Araiza

Javier Ortega-Araiza a de multiples expériences mondiales en tant qu'écrivain et entrepreneur social, ayant voyagé dans plus de 30 pays. Aujourd'hui installé à Toronto, il est un auteur publié en anglais et en espagnol.

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