In recent months, several payments industry players have expanded north into Canada, benefiting from the country's similar financial landscape and largely absent language barrier, but sometimes slowed by differences in regulation and technology.
Square Inc., the mobile card-acceptance provider that has been promising to expand beyond the U.S. since it received a $25 million investment from Starbucks Corp., said this week it is seeking merchant clients in Canada. Stripe, which facilitates online payments for developers, expanded to Canada last month. And video banking provider uGenius Technology is bringing 15 personal teller machines to the provinces.
uGenius' personal teller machines are ATM-like devices that allow financial institutions to connect with remote customers face-to-face through video. The machines provide conventional ATM services, such as accepting deposits, as well as branch services such as handling account and loan applications.
North Peace Savings and Credit Union, headquartered in Fort St. John, British Columbia, partnered with uGenius to provide a PTM in Taylor, British Columbia. The credit union was able to provide banking services to the community whose population of about 1,200 people couldn't support a traditional brick-and-mortar institution, says Paul McAfee, vice president of service at North Peace.
"Canada is a logical second market for many US companies given the many similarities between Canadian and US consumers," says Tracey Black, consultant at GFH Group Inc. who sits on the Advanced Card Technologies (ACT) Canada board.
Jed Taylor, president at Utah-based uGenius, agreed, saying U.S. companies don't have to translate their product or documentation in the country, plus Canada's financial system is comparable to that of the U.S.
uGenius' technology "gives financial institutions the ability to use one person across multiple locations based on skill set or language," says David Albertazzi, senior analyst at Aite Group.
The product fits well with the Canadian market, says Taylor, since the country has vast amounts of rural space.
"Canada is a less complex market because there are fewer players/partners which can make for a relatively straightforward entry," Black says. "However, this lack of complexity may also create some challenges in creating traction for a new entrant."
In the past month, both Stripe and Square have also broadened their reach into Canada.
"Canada is a big step for us … but it's only a small piece of what we have in mind," Stripe's Sheena Pakanati wrote on the company's blog. "We grew up in countries from Honduras to Kenya, and a large part of why we're so eager to build Stripe is to help those outside the US to participate as first-class citizens in the Internet economy."
During an interview with Quartz, Stripe co-founder Patrick Collison said Canada's rules and regulations for accepting credit cards are arduous, though this also creates an opportunity to offer a simpler process for handling payments.
"In Canada we have a small number of large players in both the issuing and acquiring industries, and that can make market entry challenging for startups," Black says. The dynamic Canadian payments market surely has a lot of red tape, she adds.
Plus Canada is ahead of the U.S. in EMV chip-card adoption, so for card technology companies the transition might be more complicated.
But Black says this offers U.S. payments companies expanding to Canada a close business partner to launch EMV and contactless products before they're adopted in the U.S.
"I am curious to see if Square will opt to leverage contactless here – the majority of payment cards in Canada support EMV contactless payments, and mobile payments should be commercially available in the market very soon," Black says.