Toronto FinTech targets enterprise accounts as it waits for open banking.
Toronto FinTech startup Loop is launching a new product that allows businesses to more easily link banking data with accounting apps.
“This is unlocking…what open banking was always set to unlock in Canada.”
The company released its direct application programming interface (API) connectivity today, which can sync its clients’ global banking data with accounting tools like Xero, Wave, and QuickBooks, without relying on the risky practice known as “screen-scraping.”
The new feature will help customers contend with what has been an imperfect data-sharing system, which relies on “scraping” banking data, frequently malfunctions, and often requires users to re-authenticate. It also aims to give clients more control over their financial data, which is a key tenet of the long-anticipated open banking system in Canada that would require financial institutions to make customers’ data accessible to third parties if they request it.
“This is unlocking…what open banking was always set to unlock in Canada, which is the ability for businesses to seamlessly have their data be transferred into their accounting platform,” Loop CEO and co-founder Cato Pastoll told BetaKit last week.
Screen-scraping is a method of financial data collection that allows consumers, and businesses, to plug their bank account information into third-party apps so they can use FinTech services, such as a budgeting tool.
Loop’s business clients previously had to resort to the practice to link their Loop data with their accounting app, which the company said was inconvenient and prone to malfunctions. Pastoll claimed that Loop is the first business banking platform in Canada to connect accounting data to its tech through an API.
“One of the biggest pain points and pieces of friction is getting bank transaction data into accounting systems,” Pastoll said.
Loop is seeking to give its customers more control over their data sharing while it waits for an open banking system to come into effect. Canadian FinTech leaders have been calling for a consumer-directed finance system for years, a measure they say will improve financial service competition, lower prices for consumers, and ostensibly eliminate the need for screen-scraping. This fall, the government took steps to legislate the rest of the Consumer-Driven Banking Act, which would bring the system into reality.
Other Canadian startups, like Montréal-based Flinks (acquired by National Bank in 2021) have developed APIs to connect financial data securely.
Originally founded in 2014 as Lending Loop, the startup offered a peer-to-peer lending platform for Canadian small businesses. When the COVID-19 pandemic hit, the startup pivoted away from lending into a cross-border banking platform.
Loop offers financial products like multi-currency accounts, corporate credit cards, and other business banking services. It currently serves just over 4,000 clients in Canada, which are increasingly mid-sized businesses with hundreds of millions in revenue, Pastoll said. Since pivoting, the startup has raised more than $10 million CAD in venture capital from investors, including Luge Capital and Graphite Ventures.
RELATED: The feds might outlaw screen-scraping. Is an outright ban the answer?
While Loop aims to replace screen-scraping with its direct API, it also doesn’t think an outright ban is the answer—though the government appears to be leaving the door open to one. The proposed federal budget bill states it would prohibit companies from using an interface or application to access a consumer’s data using their login information (though the rule is “subject to the regulations” still to come from the Department of Finance, as well as consultations to be held with Canadian ecosystem stakeholders).
Pastoll said that though he understands the rationale behind a potential ban, it may be “too idealistic” to do away with the practice entirely—particularly with the rapid rise in autonomous AI tools. For example, instructing an AI agent to log into an account and make a purchase is similar to screen-scraping.
“I think the better approach is to force all of the banks and financial data providers to make the data available through clean, modern APIs that are safer,” Pastoll said.
Feature image courtesy Graphite VC.
