There is more to investment than Trump and taxes.
Those things matter, for sure. The chief executives of Royal Bank of Canada and Bank of Montreal say they are watching capital flee to the U.S., where executives can be certain they will avoid the U.S. president’s penchant for import tariffs, while taking advantage of his recent tax cuts.
But neither Donald Trump nor any of his policies came up when I talked to Harinder Takhar, who runs the Canadian unit of Paytm, India’s largest mobile payments company.
Paytm, a tech unicorn that’s said to be worth around $10 billion, chose Toronto in 2014 for its first major foray abroad because the city was thick with young experts in machine learning. It appears to have no plans to leave. Paytm Labs now has about 70 employees. Last year, the company created a mobile app for Canada that allows users to pay their bills instantly in one place. This week, it added a rewards program to lure more customers.
“We have more data scientists working out of this office than any other office in our company,” Takhar said during a telephone interview on April 10. “It is a serious competitive advantage to have access to so much skill. The fact that Canada has a good financial sector and a lot of universities all in one concentrated area, this is very rare. This was almost like a discovery for us.”
There is lots for Prime Minister Justin Trudeau’s government to like in that statement.
Notice that a leader of one of Asia’s most promising tech firms described Toronto’s potential as a fintech hub as something of a discovery. It’s a reminder that Canada isn’t top of mind as an investment destination, which is why Trade Minister François-Philippe Champagne launched Invest in Canada, an agency whose mandate is to ensure Canada isn’t an afterthought for executives like Takhar.
Paytm arrived when Trudeau was leading the third party in Parliament; still, the prime minister surely will appreciate a break from hearing that his tax policies are driving entrepreneurs out of the country. He might even like evidence that at least one prominent Indian firm is sticking with Canada, despite the negativity that pervaded his trip to that emerging economic power in February.
I was somewhat surprised when Takhar said he had few complaints about Canada’s regulatory system. At a conference at the Rotman School of Management last month, there was lots of talk about cryptocurrencies and fintech, and the overwhelming opinion was that Canadian authorities were failing to keep up with the pace of change in the financial industry.
Paytm so far only does payments, so maybe Takhar is spared the frustrations of those upstarts who want to take deposits, lend, or trade. He said he found that regulators were conscious of not getting too hung up on rules designed for another era. He said he needed the approval of only “one or two” authorities to launch his app in Canada, whereas in the U.S. he would have had to seek more than 40 separate licenses.
“Canada is a very good testing ground,” Takhar said.
He did have one negative thing to say about his new home: Takhar is “appalled” that in 2018 he can’t risk going out in Toronto without cash in his pocket.
You might expect the senior executive of a digital payments company to dislike Canada’s stubborn refusal to give up its shiny coins and its pretty polymer notes.
In Mumbai, for example, a shopper can use the Paytm app almost everywhere; the company’s logo is about as pervasive as Mastercard and Visa stickers are here. But in Toronto, plenty of sellers don’t even accept credit cards. The Bank of Canada reports that Canadians show no sign of quitting cash, which is one of the reasons policy makers feel little pressure to make a decision on whether they need to involve themselves with things such as cryptocurrencies.
At that Rotman conference, Tiff Macklem, the school’s dean and the former No. 2 at Canada’s central bank, warned that authorities might not have as much time as they think to decide on digital finance. Platforms such as Airbnb and Uber were adopted astonishingly quickly. A company with a similarly good service or business plan could disrupt Canadian finance just as fast, Macklem said.
Paytm, with all its experience and financial muscle, looks like it will be in the vanguard of those that try.
Canada originally was meant to be a research hub. Then executives noticed that no one was trying to make it easier to pay bills. So they decided to build an app for Canada and see if an Indian fintech company could make money in North America. The rewards program is a bet that Canadians actually are attached to their points, not cash and credit cards.
If the strategy works here, Paytm may try the U.S., although that’s not a near-term goal. Takhar said his primary focus is Canada.
“If I don’t carry cash in my pocket in downtown Toronto, I think we will have done a very good job for this country and its people,” he said.
And when might that occur? “My personal goal, less than two years,” he said. “In 2019, I should not carry cash in Toronto.”
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