In the past month, Wealthsimple has secured two Money Service Business licenses that hint at active, developing ambitions in both the crypto space and in banking. Two subsidiaries were recently incorporated for these purposes, Wealthsimple Digital Assets and Wealthsimple Payments.
A Money Service Business (MSB) license is one way consumer fintechs operate in Canada and get access to the electronic funds transfer network. Local startup Koho, British invaders Revolut and TransferWise all have an MSB license. The license also allows dealing in forex conversions. For example, through this license, Revolut is able to issue Visa debit cards to Canadians and allow them to hold and convert balances in multiple currencies. Koho, in addition, piggybacks on the deposit-taking license of the People’s Trust Company to offer an even closer approximation of a bank account. The main disadvantage of an MSB license, as far as I can tell, is the inability to deal with cheques. The main advantage is that it’s super easy to get licensed. The regulator is FINTRAC, whose primary concern is Anti Money Laundering.
This is the opening salvo in Wealthsimple competing with bank-like services. That new subsidiary is called Wealthsimple Payments and is licensed both for money transfers and forex. My prediction is that they are working on a multi-currency debit card product. It’s a perfect fit with their target segment of wealthy, internationally-mobile millennial baristas. How can a design-oriented, psychology-savvy firm like Wealthsimple resist the trend towards cool debit/credit cards (like Apple’s white card or Koho’s metal card)? Koho charges $159 for its metal card - a financially astute move for clients, no doubt. Every time you use your card, you are thinking of the issuer and engaging with the brand. (Well, not if it’s Manulife, but if it’s Apple or Wealthsimple, it reinforces your positive feelings towards the brand).
This news confirms a lot of my previously stated beliefs: 1) That it’s all about the race to be the One Financial Bundle to Rule Over Money. 2) That given the urgency of bundling, the UK and US markets are after-thoughts for Wealthsimple. 3) That Wealthsimple and Koho, both strongly backed by Power, are on a collision course. Both are in customer acquisition mode, their specific suite of services is evolving. The only meaningful distinction between them is that Koho’s CEO doesn’t sit on Wealthsimple’s board.
Separately, an MSB license will also be necessary as of June 2020 to deal in virtual currencies (aka cryptocurrencies) and Wealthsimple has obtained a license in advance of that through an entity called Wealthsimple Digital Assets. Wealthsimple’s apparent interest in cryptocurrency is more signs of Mike Katchen moving the company beyond his roots as a self-described “boring investor”. Many in Wealthsimple’s target audience are fond of cryptocurrencies and I am guessing it’s a great customer acquisition strategy.
I only learned about this development around 10PM on Christmas Day. Given the media’s interest in all things Wealthsimple, I apologize to the hardest working PR team in financial services for any disruption. The new subsidiaries list this contact phone number: (647) 746-8776. Feel free to ring them up if you are curious to know more. Don’t worry about the Holidays, it’s a cell phone.