Behind the Brand®

[00:00:35] Jeff: Welcome to Behind the Brand presented by Neo. We take an inside look at the leaders behind today's most influential brands. I'm your host, Jeff Adamson. As co-founder of Neo Financial and SkipTheDishes, I'm fascinated by what it takes to build great companies. On this podcast, we'll learn from leaders that are reimagining, transforming, and innovating in the financial and retail industries across Canada. Let's get going!

Today, I'm excited to speak with none other than Hanna Zaidi, the Chief Compliance Officer at Wealthsimple. With an impressive background working for a range of financial institutions, from banks to early-stage startups, Hanna brings a wealth of experience to the table. Her expertise in compliance and go to market strategies has made her a highly sought after advisor for early-stage fintechs.

At Wealthsimple, Hanna's visionary leadership has played a pivotal role in the successful launch of groundbreaking products, including Wealthsimple Cash and Wealthsimple Crypto. Through her innovative approach to compliance in the digital era, Wealthsimple has emerged as a trailblazer, becoming one of the first securities dealers to join Payments Canada. Welcome to the show, Hanna!

We met at the Bankers Summit back in May, shout out to Gary Schwartz for putting on a great event, and I thought you did a great job on stage with Koho and my colleague from Neo, James Nauss. One question that may be on the mind of our listeners that I just want to get out is you work for Wealthsimple. I work for Neo. Many would call us competitors. Why did you say yes to coming on the podcast?

[00:02:02] Hanna Zaidi: Yeah, thanks so much for having me, Jeff. I'm actually a really, really big fan of the work that Neo is doing in the Canadian ecosystem. And we talked about this in our conversation, but I see Neo, Koho, Wealthsimple, EQ Bank, and a few others as challengers that are really doing interesting and innovative things in the Canadian landscape. We're filling real gaps in the ecosystem, you know, really trying to address challenges that underserved communities are experiencing, particularly segments in the Canadian market that incumbents aren't and we, some might call us competitors, but really what we're doing is we're trying to address those underserved markets, but also we're chipping away at a really, really highly concentrated sector that lacks competition. In whatever capacity that we can work together, whether it's from a public policy advocacy perspective or even partner from a commercial standpoint to pursue these things for the benefit of Canadians, I think is a really good thing.

[00:03:13] Jeff: Yeah and it seems like it's more of a Canadian thing to kind of look at the pie as being fixed. Do you get a sense of that when people talk about competition? They always seem to think that, hey in order for you to do well it means you're taking something from me and when I think about banking in general or either wealth management investments, it is such a big business in Canada and it's so concentrated with the big five and so whenever people talk about Wealthsimple or Koho like, and especially in the early days that we would get that question a lot of like “Okay, how are you guys different than Koho? How are you different than Wealthsimple?” And obviously there are tons of differences but the tone behind the question is always around, “Hey you're out to kind of get these guys. You're out to get Koho and Wealthsimple.” And I always surprised people when I said “I actually am a huge fan of what they're doing. I actually think they have beautiful products, they have great teams, and they're fighting the same fight we are.” And people are always taken aback by that because they're like, shouldn't you be like saying something bad about them? [laughing] And I just don't see that being the case at all.

[00:04:10] Hanna: Yeah, no, I completely echo that statement. I agree with this concept that there's this sort of notion that there is like a fixed pie of what's left. We're competing for the scraps of what's remaining and not served by, you know, the incumbents. And maybe to contextualize that point a little bit, I'll throw in some stats.

I think the Canadian financial landscape is pretty unique. Like we have 37 million people and there's 35 banks, but only the big six hold more than 93% of total assets. So if you look at the US in comparison, prior to the SBV crisis, the top four banks only hold about 44%. So this really paints like the level of concentration when it comes to consumer choice, competition, and innovation. And I think there's a huge opportunity here in the Canadian context for us to really chip away at that.

Whether it's partnering, like a lot of times that we do as fintechs, with our partner banks or it's competing in some areas. And so we definitely are starting to see different junctures of this tension manifesting, whether it's from a commercial perspective or regulatory perspective. I don't think we've seen this level of innovation and challengers in the market than ever before, so i think it's a really interesting time.

[00:05:36] Jeff: Yeah, it's certainly the first time i can think of where there's challenge coming from a different angle. Even when you think about what banks have started in Canada in the last 30 years, you've got ING Direct which eventually became Tangerine but there really hasn't been any really tech-enabled challengers kind of starting from scratch, this real kind of grass roots, bottoms up, building a product that Canadians want to use for a really, really long time.

I mean, we love our our monopolies in Canada. If you look at grocery, I think it's three companies own about 60 to 80 percent of the market between Loblaws and Metro and Empire group. Telco, same thing, we've got Rogers, Bell, TELUS. And then in the banks, you've got the top 5 or top 6 that own 93%.

And I don't think they, that Canadians can fully comprehend price that they're paying for not having, you know, true competition in terms of like keeping one another honest. Like how do you see the cost that Canadians are bearing in the form of that lack of competition? Like how do you think it manifests itself?

[00:06:49] Hanna: And this is something that I spend a lot of time in different forms with policymakers, regulators, and just sort of in terms of like the public advocacy that I do. I think it manifests in a few ways, but the most acute and obvious way is actually something that you posted just a few weeks ago. It was a really disturbing statistic, but it was that over half of Canadians stand just $200 shy of failing to meet their bills.

And so we're in this time period right now with escalated living costs, [the] highest cost of living, and our regulated sectors, like you mentioned, financial services, telco, energy, really are, you know, groceries are at a vice grip. And the lack of competition in these spaces, when escalating living costs is at an all time high and Canadians are being squeezed, you know, we're at a time period right now where policymakers are in this position where with these increasing living costs, really being able to enable competition to bring these costs lower so Canadians have more choice.

Better services is incredibly important. And I think that we kind of experienced this inertia where, like you mentioned, we love our monopolies. I think it's a sort of not really knowing any better. Like we, unless you're someone who's lived in another country, another part of the world, and you've really seen what competition and financial services could look like and how it could potentially serve you a lot better, most people are like, “Well, this is what we have and it works, I guess. So, you know, I guess this is the best that we can do.” And so I think, you know, this is kind of like a bit of a tangent, but I think that there's two areas of opportunity in financial services that I see right now for policymakers.

You know, we have this like standstill right now with payment modernization and the real-time rails. We have a bit of a standstill right now with lack of open banking, and I'm happy to kind of go deeper in what those two things are, but like just taking the real-time rail as an example. This is something that we've been talking about since 2015. It's this payment rail that allows for 24/7/365 settlement ensuring instant access to your funds. It's really sidestepping the traditional multi-day wait. Incumbents make a lot of money around settlement taking long, around overdraft fees, not sufficient funds in your account fees, and things of that nature, but that all goes away when you have something like instant settlement.

And then you'll add things like data-rich transactions, which makes it really hard to lose your money, basically because there's so much tracking involved. And we've seen over the years, you know, the big banks have lost huge transactions of people moving money from one bank to another within the country.

And so, you know, like, why does this matter to the average Canadian? Well, the example that I use is actually Wise or TransferWise and how they leverage the UK's real-time payment system. They actually almost overnight, as soon as they got access, reduced the cost of cross-border transactions by 20%. And the settlement time for that transaction went from days to 15 seconds.

So, like, imagine the financial relief for immigrants in Canada if they were transferring money without the exorbitant fees. Having it, having those funds, you know, arrive almost instantly. So like these are the things that we're missing out on, but again, like we haven't experienced them, so how do you miss something that you don't know?

[00:10:38] Jeff: Help people understand just how do payments work in Canada today? So I know the Payments Canada clears about well over 400 billion dollars every single day. But what is that like? Most people kind of click a button and you know, obviously in Canada, you wait a couple days and then the money will kind of move from place to place. We have eTransfer, but even just give us the Payments 101 of how does money currently move around in Canada, whether it's person-to-person or bank-to_bank?

[00:11:05] Hanna: Right, so at a super high level, currently the payment system that we are operating in is called the ACSS system. That is a pretty old system.

[00:11:19] Jeff: How old are we talking here?

[00:11:20] Hanna: I don't have the exact, like we're looking at at least like 40, 50 years old at this point, but don't exactly quote me on that. I'll have to look it up, but it's quite old and it is built on, you know, a coding language that, COBOL, which you know, you don't have a lot of engineers that are still alive…

[00:11:39] Jeff: Yeah, they're retired or dead.

[00:11:39] Hanna: And so what we've been doing over the last 15 years or so is we've been adding, you know, at the big banks and in other financial corners of financial services, we've been adding like frontend to really pretty it up, make it so it's functional, but the backend is still this really, really archaic solution that we're struggling to support. So we need to have, we need to modernize our payment system because not only is it not sustainable for a longer period of time going forward, our needs as Canadians are becoming more and more complex and the rest of the world is already 15 years ahead.

But in terms of answering your question of how the current payment system works is there's a couple of components to it that juxtapose it with the promise of what the real-time rail is. And so the current payment system is based on batching payments. Again, is based on this really old sort of, archaic technology and settlement time, like I mentioned earlier, can take multiple days. So what happens is let's just take the traditional funding your Neo Financial account through a bank transfer, you have your bank account linked. Typically that transaction, using that rail, could take up to anywhere from like one to five days, depending on a variety of things, but it could take one to five days because what happens is at the end of the day, you submit a manual bank file, which is literally like the equivalent of an Excel file. Somebody goes in and they reconcile it with the other transactions, and then they push the funds to whatever account that you said you wanted to go to.

[00:13:27] Jeff: So, hold on. Let me ask a question there. So, just so I'm understanding that right. When people are moving money, it's literally kind of waiting to the end of the day, it's getting put into a batch, it's getting put into a file and then it's like literally manually being pushed.

[00:13:42] Hanna: Yeah, no, you can imagine what could go wrong with that, right?

[00:13:46] Jeff: [Laughing] It just seems to me like…

[00:13:52] Hanna: Like, I'm surprised! [Laughing]

[00:13:53] Jeff: Yeah, exactly! Like, it's to me, just blows my mind. Like, and I don't even know. Certainly Canadians aren't aware of this, but just if there was an understanding and I can understand why they don't understand because they're kind of like, “Hey, it kind of works.”

But at the same time, if people knew that everyone's financial livelihood, $420 billion a day are currently being processed by a coding language that was created in the 1950s, that really no one alive knows really how to code in anymore. We've been working on kind of modernizing this for like the last 15 years, and it's still not done, and politicians continue to delay this.

Like to me, it just seems wild that the process is so archaic, so manual. And it's so critical [to] the functioning of our democracy and our country. I don't know why this isn't something that isn't spoken about more. Again, payment modernization isn't sexy, but guess what, like keeping your money safe, having your money accessible instantly, like why the heck should it take one to five days for like zeros and ones to move from one ledger to another?

[00:14:57] Hanna: I 100 percent agree with you. I think it's to your point, right? There's, you know, this idea that payment modernization isn't sexy. It's not considered an electable issue, right? Like the average constituent for the average politician isn’t going to raise this as a concern because no one really articulates what's at stake here.

And to your point, like, if all of a sudden things stopped working, and I'm not suggesting we're at that stage. I think we've, you know, we've done a lot to maintain the current system, but I think the issue is it could be so much better, right? We're already seeing this in other markets where you have Pix in Brazil, which is their instant payment system, and they launched it during COVID.

Brazil obviously has a very different demographic, a very large population of underbanked or unbanked people. But what it did was it took a very heavily, like the payment is largely a cash-based economy but also largely uses credit cards. And the Brazilian Central Bank made the difficult decision against a lot of political will and commercial interests in the country of the banks and the payment networks, credit cards specifically, and said that you know what, this is for the best interest of Brazilians to be able to basically tap into like the modern financial system.

I don't remember the exact stats, but it was something crazy like within a year, I think it was like 60 plus percent of payment volume went to this new system, the Pix system, and completely transformed society, like almost overnight with how people were transacting, the type of like new financial services that were now available to everyday Brazilians. And it's now seen as, you know, they've also done this with open banking, they did all of this within a very short period of time during COVID.

[00:16:59] Jeff: Well, I think it was in Ukraine as well. Like they actually launched a kind of like, almost like a government super app where people have like all of their, their kind of personal information, government servicesl, it's kind of all done in one central place. And I don't know what it is about in Canada, like we somehow are okay being okay, you know what I mean? Like we're…

[00:17:20] Hanna: Well yeah, you nailed it. You nailed it! [Laughing] We’re okay with being okay.

[00:17:22] Jeff: Like, you want to go and do something with the government? Yeah, it works, but like, why can't we start demanding that things be great? Whether it's booking a campsite, whether it's submitting your taxes, whether it's getting government services of any type, like, why can't we say, “Hey, like, what's stopping us from actually making this great right now?” Is it will? Is it, like, money? Why aren't we seeing this, people, like, saying, like, “Hey, for what I'm providing the government, why am I not getting a higher quality back?”

[00:17:57] Hanna: Yeah, no, I think it's, I think part of it is a huge amount of complacency. Part of it is a lack of political will. Part of it is, you know, there's a lot of invested interest in maintaining the status quo. I'll put it this way, things like payment modernization, for instance, a few public policy objectives of the upcoming real-time rail payment system has is this concept around like level playing field pricing The current payment system right now is volume-based So the bigger you are, like you pay pennies to process a payment. With the real-time rails, everybody pays the same price.

So you could be Wealthsimple, you could be a really big bank, you could be a credit union. Everybody pays the same amount. And what does that mean when it comes to passing down those cost-savings to consumers? Experience that you might experience with your credit union, maybe they'll charge you fees for those transactions to recoup the costs that they're having to pay to actually move money. And maybe the services that they're able to provide isn't up to par with the same services you might get at a big bank because they don't have to pay as much to process that transaction. So that's one example.

[00:19:14] Jeff: It just seems to me like when you're moving kind of literally just data around, like if I send an email, imagine if every email costs 50 cents [laughs], like, it just seems wild to me to think that if I need to move money from one person to the other, like why should there be a significant cost to doing that?

[00:19:44] Hanna: No, I think you captured the sentiment really well. It's this idea that if even you as an end consumer, if you don't see, “Well, I'm not really having to pay this like $1”, you're paying it somewhere, right? Because I think the challenge is that these costs are passed down to consumers in some shape or form, and they could absolutely be reduced and better services could be offered if we had the infrastructure that's available, that’s equitably available to all players in the ecosystem like we've seen in other markets, right?

We've seen a ton of benefit. I use the example of the UK because that's the closest, you know, equivalent system and structure that we have. And so when the UK introduced their faster payment rules where they amended it, so certain types of fintechs could apply for payment license to access their real-time rail payment system. And so you had companies like TransferWise and Revolut that were born in the UK and they're like monster goliath global fintechs. And they were able to do that because they had the regulatory environment in their homebase to be able to do that and to innovate in a way that incumbents weren't. Whether it was through really, really competitive pricing, much better products and services where they're leveraging the actual infrastructure and it took incumbents, still are, like a much longer time period to come up with comparable products and it really forced the race to the bottom in a good way when it came to pricing as well. So it gave consumers way more choice. And we've seen examples of this happen in other markets time and time again. So we know it would happen if, you know, we had a similar situation in Canada.

[00:21:42] Jeff: So for those that maybe haven’t heard of Revolut, they’re a fintech, based in the UK but they’re also all across Europe. I think last funding round they were valued at around 33 billion.

TransferWise, which is now called Wise, I'm not sure of their current market cap, but they're [a] multi-billion dollar company. And even just one example of with Wise, I remember my wife was trying to get money to Ukraine to her family and in the past, she had been using, I think, Western Union or something and super expensive, super clunky and then we actually share an investor with Wise and so I kind of asked if she had heard of it before and she hadn't. So she tried it out and like literally, she just like could not believe how much easier, way more efficient it was.

And then it's like, a lot of these companies would not have existed without kind of changing regulatory environment in certain countries and so it's often I felt like in Canada we have a hard time imagining what the world is going to be like when we make a change that may kind of at first glance appear to introduce risk and so it's like well there's also a risk in not changing anything at all. Like what do you see the risks being in, kind of, keeping things the way they are? Not really rapidly moving into into payments modernization or open banking?

[00:22:52] Hanna: Yeah, another great question that, you know, this is something that we try to articulate in a lot of our public policy efforts and maybe before I get into that, one interesting tangent is Revolut actually did try to set up shop in Canada a couple years ago and then exited the Canadian market because the regulatory and commercial environment was too difficult. They have not left any other market in the world except for Canada. So I thought that was a very interesting piece of insight.

But to answer your question on like the risk aversion of like not doing something, this is something that we tried for a long time, and we still do really to articulate what are the, what are the risks of us actually not moving forward on things like payment modernization and open banking? And I think it's really, you know, we're the only G7 country left that doesn't have a real-time payment system or an open banking framework.

And so you can imagine how incredibly left behind we already are. And when you look at the world becoming more globalized, more interconnected, when you look at payment systems that will eventually become more interconnected to enable better cross-border transactions, when you look at something like open banking, where maybe we want to become more interconnected with certain countries with information sharing or whatever it is, you can't do that. Like, we literally can't do that because those things don't exist.

So, the risk of us being left behind already has happened. I think the issue is that is not a productive conversation we found has been effective. And the experience that I've seen is the risk of allowing more competition, enabling new entrants, the risk around security, privacy, fraud, anti-money laundering, and risk management overall, are the things that will always be prioritized greater. I think the issue I have with that conversation is that to me, a lot of them are red herrings, right? I think there's no single financial services company in Canada that I could possibly think of that would be like, “We're absolutely okay with, you know, introducing risk to Canadians and their privacy and security and AML and etc.”

If you tell these companies what it is that you need them to do, this is the framework, these are the requirements, they will meet them. And if they don't, then they can't participate, right? It's not that complicated. We've seen it in other markets where what we don't do well in Canada is this concept called regulatory sandboxes, where what certain regulators do around the world is if there's an area of consumer interest or like financial services innovation, and regulators aren't really sure like how to regulate it, what they'll do is they'll have something called a sandbox where they'll allow companies to experiment and iterate. They know companies won't get it the first time, and they also know that they can't draft regulations around something they can’t understand. They need to kind of see it in action.

So they'll timebox it, they'll say maybe this is the limited amount of money you can move. Maybe this is the limited amount of clients you can service. Maybe this is the limited amount of services and products. Like, you need to add parameters to basically have it to be a contained and safe experiment. And then what regulators do is they work really closely with these companies and they try to understand, like, what are the issues? What are the challenges? What are the risks? And then they draft rules accordingly.

And so this has obviously been a really effective way in a lot of countries. We've seen this in Singapore. We've seen this in the UK, done really well. And regulators and policymakers are held accountable to not do an endless amount of sandboxing, and eventually you solidify laws and you open it up to everybody else. But it's been a really great way to actually innovate and sort of challenge this idea of risk aversion. I think my issue here is, you know, we sort of articulate at a very high level, these vague concerns that we have, but then we don't really give any opportunity to address them.

[00:27:09] Jeff: Yeah, and it's almost like, especially when it comes to modernization and open banking, I feel like somewhere along the line, people will start talking about 2008. And then they'll start using fear and they'll say, well, listen, if you want another 2008, then go ahead with open banking. Basically kind of saying that you can't have both a modern, efficient banking system and also a safe one. They're saying it's either like, we either keep it the way it is and it'll keep working and it'll be safe or you change it, you know, maybe it's better, but you're going to potentially have a catastrophic failure. That seems to be the narrative that plays out within the bureaucracies of both the big banks and and potentially within the government. And I don't think that's the case. I feel like there's there's certainly ways that you can actually make it even safer than it is now. What are some of those ways that actually introducing payments modernization and open banking will increase the safety of the financial system?

[00:28:14] Hanna: I think your point on open banking having a marketing issue is definitely that, I think the survey was conducted by the Financial Consumer Agency of Canada. And it said that only 9 percent of Canadians have heard of open banking. And then after having the explanation given to them, 52 percent would say that they wouldn't use it and 29 percent would be uncertain.

So I think that was pretty problematic. You know, we heard it, you know, we have a good relationship with the FCAC and I think they've been working pretty hard and partnering with the industry, but I think this was one of those things where maybe when it comes to survey design or whatever the intention was, I think the challenge here is that ordinary people don't know what open banking is. It's not groundswell for consumers.

The term open banking itself is incredibly problematic because the average person, when they hear it, I was actually trying to explain, I used the term open banking with my mom and immediately she was like, “I don't want to give away my password and my account number to strangers”. And I'm like, “Well, mom, technically you already are with screen scraping”, which currently exists in the absence of open banking framework existing, but which again is something that average consumers aren't educated on.

But you know, the idea of open banking and how I kind of explain it is, you know, we'll call it consumer-directed finance, even though that's a bit of a mouthful as well. But the concept is basically that you as a consumer own your financial data and you are able to direct it to whom and where you want to.

Right, because right now, you know, banks own your data and when you're connecting your bank account to whether it's your Wealthsimple account or your Neo Financial account or whatever, like third-party fintech that you're working with, technically, you're violating your terms and conditions by doing that.

No one's gonna actually pursue it because everybody's doing it, including the banks at this point. But that's in the absence of having an open banking framework existing. And so really, what we're doing here is we're actually creating a data right for consumers to be able to direct their data how they want, to remove authorization in accessing that data at any point in time.

And the analogy that I used to explain open banking is, if you think about the time that, you know, maybe it was like 15 years ago with wireless phone number portability, phone companies, telcos fought tooth and nail to prevent you to be able to port over your phone number to another service provider because it made you way less sticky. Being able to port over your phone number to another service provider meant that now there is more competition and that you could shop around for better data plans, better phone plans, service coverage, whatever features and function you're looking for, and it also gave way for new entrants as well.

Of course, like, I'm not saying that, telco is another area that requires a lot more competition and better pricing in Canada but that sort of logic, now imagine applying that to your financial services data, right? Imagine how much competition you'd see having incumbents actually compete for your service.

The other, you know, sort of analogy that I use when it comes to asking the average person if they want open banking without actually explaining what the benefits and outcomes would be is like, you know, imagine asking somebody in 1995 if they wanted the Internet and explaining what the Internet could do, like that would be absolutely terrifying, no one would want that. But now we can't imagine a society without it, right? It's the equivalent of that.

Like, I think instead, you should ask, like, would you want to remove all your FX fees? Would you want, you know, like a hundred times higher yield on your deposits? Do you want to save 50 hours in reconciling your company books? I think most people would say yes.

[00:33:23] Jeff: I remember, and for listeners that maybe don't remember this, the time when if you wanted to change phone networks, you had to text all of your contacts and then have all those contacts, you basically text them, “Hey, here's my new number”, and then they would have to go into, say you have 200 contacts, all 200 people would have to go in and like update your contact in their phone and the same thing with banking.

Like if you have a bad experience with the bank, you have so much integrated with them, all your payments, your direct deposit, everything is so tied up with them that for you to change, you're going to have to go and switch all your payments over, switch your direct deposit over, anything else, your investments, maybe you have to move over, your mortgage might be there too. Versus a world where, you know, if the banks know that they're one click away from you switching over to another bank, I feel like they would start treating you a little bit differently. Like, I feel like they would know that hey, like this customer is one click away from switching so we better make sure that we're making them happy. We better make sure that that we are working so that they do love us. And that's just not the case in Canada.

They feel like it's like, listen, what are you going to do? You're going to leave us. You're not going to leave us. You've got too much, you've got too much stuck with us right now for you to make any switch, too much friction. And that's what I think is open banking or consumer led finance, the promise that it has is just yeah like it's like the internet it literally will make everything better for consumers and when we're thinking about it, it just comes down to, do you want to save more money? Do you want to make more money? Do you want to have more time in your day? Do you want to have better quality of service from every single financial touchpoint in your life? That is the promise that it has and people just don't seem to understand really what they're missing out because no one really knows how much greener the grass actually is.

[00:34:55] Hanna: No, it's it's exactly that, right. It's even as simple as something as simple as when you're switching financial service providers or banks, for instance, like the billers that you have listed under your bill pay. Being able to like port that over, like we are hearing from our clients where it's like, “That's a lot of work, you know, I've already set it up. It was such a pain to set up to begin with. Same with my eTransfer contacts.” Like, is that data that the bank needs to own about you or is that something that can actually move, right? For your convenience.

So it's things like these that even like these small things that add up and accumulate as points of friction and make people really sticky, to your point, right. It's like you know, again going back to the phone number portability example, it's like yeah having to change your number on your business cards having to let all your friends and family know like it's just too much work, you know i'll pay the extra thirty bucks a month and not have to deal with that.

[00:36:13] Jeff: I want to give us a few minutes here to touch on just compliance in general. I would love to hear your perspective on A) what is the value of compliance within a business? And then number two, for anyone who is working in compliance, how do you integrate compliance into the company while making sure that the company can remain kind of agile, nimble, and innovative?

[00:36:50] Hanna: Yeah, I mean, I'm going to give you a bit of a cowboy response as opposed to what a typical Chief Compliance Officer should give you. On a personal level, I see compliance rules, requirements, constraints, really as a huge opportunity for creativity and innovation. So if you're someone who like really deeply understands business strategy, regulatory requirements, and you don't take ‘no’ for an answer, you're someone who can really unlock product opportunity, cost savings, and more. Speaking from personal experience at Wealthsimple, I'm part of the team who had like the first FinTech to become a member of payments Canada through our securities dealer, access the payment rails directly. We also were the first in the country to have a settlement account for the upcoming real-time real payment system at the Bank of Canada. Like this type of regulatory arbitrage of really understanding like how compliance, the regulatory requirements, and business strategy all intersect, it can be used as a superpower.

I'm really biased and sort of like thinking about, rather than it being just a checkbox exercise, like, you can really use this as a huge strategic advantage in how you operate. And I think the other piece of it is like regulators want to support innovation to some extent, but their mandate is to protect consumers. So you have to really demonstrate how you're going to engage in, like, proper risk management, anti-money laundering, security, privacy, data integrity, etc. if you want to be at the table and innovate within these constraints.

So to answer your question on, like, how do you embed that in your business, like, you have to obviously embed it in a way that makes sense for your user experience and is going to satisfy the principles of the requirements. But at the same time, like, my push is, you know, we're in this position and in this space where we can do things differently than what incumbents do, because we have the opportunity to reimagine it. That goes for compliance as well. You can absolutely satisfy requirements while still creating the experience that you want.

And I think that one of the push that I give to, you know, people on my team, anybody that we hire, whoever we're partnering with, is that laws are binary. There's a benefit to going deep and understanding how the rules actually work and this is how you can unlock things for your roadmap.

[00:39:16] Jeff: And when it comes to just the kind of safety side of things, Hanna I'm curious, like a lot of people will look at, you know, fintechs as being, you know, potentially have this perception that, “Hey, they're new, maybe they are riskier.” But when it comes to kind of compliance, like how is, how are fintechs in some ways actually safer than traditional banks?

[00:39:23] Hanna: Yeah, no, it's a really good question and something that we've also spent a lot of time talking to like regulators and policymakers on, which is like that 2 part, where it's like really building like client trust around, like, for instance taking data protection seriously, you know, really leading with transparency, engaging folks internally and externally to understand, like, best practices. And so, like, I think that the challenge here is, although we're, you know, we're not as new as we used to be, but compared to the incumbents, we're still relatively quite new, so building client trust and regular regulator trust is incredibly, incredibly important for us to continue to be able to do the things that we do.

So I think what the really interesting thing though we did, we had conversations with our clients in a client panel. And one of the things that sort of resonated to me was this changing idea and concept around what constitutes trust now. With some of the newer generations of clients. And, you know, this idea of weighing into one of the things that we care about is sort of the traditional ways in which clients find, you know, trustworthiness. So giving example of our triple CDIC coverage, that we were able to achieve for our Wealthsimple Cash product, where we partnered with three banks where we distribute your deposits across three banks if it's over 100K threshold up to 300,000 in coverage, which is something that is not offered in the Canadian ecosystem, and it's not something you can do if you're a bank, right? So that's something unique that we've been able to innovate in a way that other institutions can't.

So that's sort of like the traditional realm, but the interesting changing sort of trend that I'm seeing based on conversations with clients is user experience plays a huge part in building client trust now with sort of the younger demographics, like younger millennials and Gen Z. Which is, you know, this idea where if I can find something quickly, or if the experience looks and feels good, that adds to my trust and being able to use you and continue to sort of deepen my relationship as opposed to with incumbents where I have to go in person, I have to talk to 50 different people. I can't find the thing that I need. It's buried. There's so much fine print. That's eroding at this traditional idea of what constitutes client trust for some of the younger demographics, which is super interesting to me and obviously something that we're all leaning into as as challengers.

So there's this like changing in guard of what constitutes trust. Something that we do because we have a pretty broad client base as we lean into both aspects of sort of the traditional markers of, you know, the things that constitute client trust that incumbents do as well as, you know, this sort of changing guard of what constitutes client trust the experience and sort of the features and functionality that younger people want.

[00:42:45] Jeff: Yeah, no, it's so true, like the, I think people will look at the experience and say, like, “Can I really trust this company? Because they, if the experience is so bad, like, what else what else is going on that I just actually can't see?”

We're going to have to end it here but before we do, I just want to say, Hanna, super grateful for you coming on and sharing some of your experience and perspective on what I think are extremely relevant issues of our time. Is there any, any key messages that you want to get out to our listeners, whether about your own experience, your role, or even just Wealthsimple in general?

[00:43:13] Hanna: For me, I often joke that I've been like perennially lost and jumping between industries, pivoting professions, and even second guessing my academic choices. But I think the one thing I've constantly pursued is curiosity. And so I think that's really come together in my current role at Wealthsimple, where I've been really fortunate to be able to launch products in the payment space and the crypto space and a bunch of other things and sort of advocate for really interesting, important things for Canadians on like the public policy front.

So, I would say, you know, to whoever's listening, if they're feeling lost or stuck, really just go really deep in something that you're curious about and that's something that I think will yield good outcomes for you.

[00:43:56] Jeff: Amazing. Thank you so much, Hanna!

[00:43:59] Hanna: Awesome, thanks so much for having me!

[00:44:06] Jeff: Thank you for tuning into Behind the Brand. If you enjoyed today's show, please subscribe and leave a review on your preferred podcast platform. If you’re interested in learning more about Neo Financial, visit us at neofinancial.com.

Behind the Brand is a production of Neo Financial and MediaLab YYC. Hosted by Jeff Adamson. Strategy, research, and production by Keegan Sharp, Alana Tefledzuk, and Kyle Marshall.