Vancouver's growing financial technology (fintech) industry can expand beyond the confines of the B.C. and Canadian domestic markets – but only if companies take risks in going abroad, especially to locations beyond the United States.
That’s the view of one executive whose company might be on the brink of opening an online lending and borrowing platform that spans the Pacific, allowing Canadians to invest in East Asian projects more easily – and giving Canadian projects access to more capital for growth.
Alex Mateesco, CEO of Vancouver-based Lendery, visited South Korea’s Invest Korea conference in early November in an attempt to breach the Asian market. Mateesco, who returned with some leads that could open cross-border online lending, said it was vital for his company to reach beyond Canada to achieve his company’s vision.
“For some companies, it is easier to take the U.S. route, but that’s not the way to build a global enterprise,” Mateesco said. “Our vision is to be a world leader in the field of facilitating the creation of opportunities for people to prosper, and in order to do that, we have to be comfortable with going a little further out of North America.… Going to Asia expands both the availability of lenders and the number of borrowers we can assist on the platform.”
That process is in its early stages. Since launching its online platform technology in 2013, Mateesco and his team have slowly gathered lending companies within Canada to partner with, while testing artificial intelligence software on the platform that matches each incoming borrower with the most appropriate loan from a partnered lender. Lendery hopes to begin A/B testing next year, to demonstrate the system’s potential by comparing the results of the platform’s lender-matching software with the work of a lender’s underwriting staff.
But in the meantime, Mateesco said going to South Korea offers Lendery a couple of advantages. One is that it can benefit from the country’s highly educated workforce when it opens an office and localizes its platform for Asia. The firm’s hope is that Seoul’s proximity to China and Japan – it is less than two and a half hours away by air from other major centres like Tokyo, Osaka, Beijing and Shanghai – will allow Lendery to move into those markets as a lending platform.
“There are 390 million people living in Northeast Asia; that’s a mind-boggling number,” Mateesco said. “The region makes up a quarter of the global GDP, and if you want to be a player globally, it just makes sense to have a strong footprint in that area. And financial services already make up about 30% of inbound foreign investment [in South Korea], so we know companies like ours will be encouraged to do business there.”
But South Korea faces numerous trade challenges, even without the geopolitical uncertainty created by North Korea’s ongoing missile tests. For example, Seoul’s decision to implement the U.S. THAAD missile defence system has significantly chilled its relationship with Beijing. Some South Korean businesses in China were reportedly shuttered with short notice, and there have been anecdotal accounts of Korean delegations being disinvited from Chinese conferences since THAAD was announced in March.
South Korea also lacks a free trade agreement with Japan, which could complicate any foreign company’s move into the Japanese market from Seoul. And despite geographical proximity, barriers of language, culture and law exist between all three countries, further complicating localization efforts.
But despite these challenges, South Korea’s exports to China increased 12% this year from January to August, rising to US$88.1 billion, according to Korean statistics.
On November 13, Chinese Premier Li Keqiang called for the three countries to resume free-trade talks launched five years ago. It’s such outlooks that have entrepreneurs like Mateesco bullish on launching businesses in Northeast Asia.
Besides complications stemming from cross-border trade (Mateesco acknowledged the company is just beginning to figure out the logistics of what’s possible and what’s not in foreign lending), there’s also the slow adoption rate among traditional financial institutions for new technology like Lendery’s. Many in Vancouver’s booming fintech sector noted that banks and other institutions are often slow to embrace new technology, and a level of trust needs to be gained first.
“Strategically speaking, the people here [in South Korea] are more open to new technology,” he said, adding the financial sector’s attitude on tech tightens up the product development cycle and adoption rate. “It’s a generally tech-savvy crowd, and [it] makes it easier for a company like ours to develop a newer concept, to have a new technology and … the market to further that development and market penetration.”
Mateesco added that, even though Lendery will focus on Asia next, it will not neglect expansion in North America while also potentially keeping Europe as a future target market. •
Note: Some interviews conducted for the story were completed at Invest Korea in Seoul, for which the reporter’s airfare and accommodations were provided by the Korea Trade-Investment Promotion Agency.