National Bank of Canada will take a majority stake in Montreal-based financial-data platform Flinks, a bet on data-sharing in financial services as Canada prepares to introduce an open banking system.

Canada’s sixth-largest bank disclosed in its quarterly earnings report Wednesday morning that it agreed to pay $103 million to increase its share of the company from 28 per cent to 80 per cent, with $30 million of the investment going toward new capital for Flinks. The deal, dated July 9, is expected to close in September, according to National Bank.

“Flinks provides services to a wide North American fintech ecosystem and offers attractive data-technology solutions,” National Bank said in a statement included in the earnings report. “The transaction strategically positions the bank in a high-growth market to continue to enhance customer experiences and benefit from future technology-driven innovations.”

The company’s software acts as a bridge between banks and third-party financial-services apps, allowing them to build new products that make use of customer data. Its customers include Wealthsimple and PayBright, two of Canada’s most prominent fintechs.

Flinks was founded in 2016 and had roughly 100 employees as of earlier this year, according to data from PitchBook. National Bank’s venture arm, NAventures, led its seed and Series A financing rounds, part of the roughly US$14 million Flinks had raised prior to this deal from investors including Luge Capital, Panache Ventures and Intact Ventures.

In a statement to The Logic, Flinks co-founder and CEO Yves-Gabriel Leboeuf said the cash will allow the company to expand even more rapidly in the United States, with the goal of growing its reach across the entire North American market. On its website, Flinks says it currently has coverage of more than 10,000 financial institutions in the U.S. and Canada.

“This investment could not come at a better time for our company,” Leboeuf said. “Our business model is proven and our products (analytics, enrichment) are in high demand.”

In expanding, Flinks will face competition from rival firms such as Plaid, a San Francisco-based fintech that was most recently valued at more than US$13 billion, according to PitchBook. In addition to the U.S., Plaid has been active in Canada recently, expanding its presence and increasing its engagement with fintechs and financial institutions, the company told The Logic in an email this month.

A bigger stake in Flinks could give National Bank a greater foothold in the growing fintech ecosystem in Canada, and represents a bet that financial products offered by tech companies, rather than by banks, will play an increasingly important role in consumers’ financial lives. 

In particular, the rollout of an open-banking system in Canada in the coming years is expected to significantly increase the amount of data that banks share with third parties, a boon for data providers like Flinks. Proposals by a federal advisory committee on open banking, released publicly this month as part of its extensive report to government, would see all federally regulated banks required to let customers share their banking data with outside firms.

National Bank’s majority stake in Flinks is likely an effort to get ahead of the open-banking curve prior to the system’s launch in Canada, said Alex Johnson, research director at Arizona-based banking consulting firm Cornerstone Advisors.

“Canada is on the precipice of regulation that will require banking data to be shared,” Johnson said. “This acquisition is, in a lot of ways, just getting ahead of that and being prepared to compete in a market where open banking is the default.”

A suggested timeline in the open banking report said the system should be operational by January 2023. Still, the federal government hasn’t committed to any of the recommendations, leaving some fintech companies unsure of what to expect regarding its implementation.

Through NAVentures, National Bank has been an active investor in the sector, with stakes in Koho, Moka and Borrowell, according to PitchBook. Fintech venture capital investment in Canada reached US$4.8 billion in the first half of 2021, already surpassing the previous record in 2017, according to an August report from KPMG. 

National Bank’s competitors have also been investing in tech companies as established banks face competition in virtually every aspect of their businesses, from buy-now, pay-later products and money transfers to stock trading. RBC, for example, has backed fintechs such as London-based data provider Fidel.

In addition, banks have been rolling out new product offerings to match those provided by fintechs. Earlier this week, National Bank announced it was eliminating fees on its stock-trading product, the first of Canada’s major banks to do so, amid competition from no-fee brokerages like Wealthsimple.