Vault, an online banking platform serving small-to-medium sized business (SMBs) in Canada, is launching to the public today after raising $3.7 million in seed funding.
Founded in late 2021 by Saud Aziz and Ahmed Shafik (who previously worked at sunday, Revolut and Koho), Toronto, Ontario-based Vault says its mission is to "revolutionize" the banking experience for Canadian entrepreneurs and SMBs by giving them a place "to manage their money more efficiently and effectively while saving on costly banking fees."
Vault touts the ability to sign up customers — in this case entrepreneurs and business owners — "quickly," or in less than five minutes.
While startups offering banking services to SMBs abound in the U.S, they are far less common in Canada, Shafik told journalist. His and Aziz’s parents were small business owners, so the pair saw firsthand the challenges they faced when it came to managing their finances.
"In Canada, there are five big banks, so many business owners have to deal with antiquated processes such as going to a branch to make a $50,000 wire transfer, plus paying an exorbitant amount of fees," he added. "What you have on the U.S. side with Mercury, Brex and Ramp — it just doesn’t exist here. People are used to going to the branch, calling a branch manager just to deal with daily banking operations."
Shafik acknowledges there are products that exist for specific use cases. For example, Canadians have access to TransferWise to make transfers, or credit unions if they want to take out a credit card or a loan. But for banking in general, the options are limited.
"It took us about a week and a half just to open our business account," said Shafik. "In Canada, we’re probably three to five years behind."
Vault’s customers, the startup claims, pay no monthly or annual fees and don’t have to carry minimum balances. Features include the ability to have local accounts in CAD, USD, GBP and EUR to hold, send and receive funds; a real-time currency exchange that it claims is "10x cheaper" than the big banks; a multi-currency Mastercard corporate card with 1% cashback; spend management for employees; free domestic and international bank transfers to 180 countries and accounting integrations "to automate bookkeeping."
Vault also announced the ability to purchase investment products, including GICs (guaranteed investment certificates) that it says will earn up to 5.00%. Its goal is to expand its offerings to include lending, savings products, payment automation and more complex FX products later this year.
Gradient Ventures and Fin Capital co-led Vault’s US$3.7 million seed raise, which closed last year and included participation from The Fintech Fund, Exponent Capital and Thirdbase Capital. Angel investors in the company include founders and executives of companies such as PayPal, Google Pay, Affirm, BNY Mellon, Airbnb, Coinbase, Revolut and Robinhood.
Vault says it partners with regulated financial institutions and that its customers can see which financial institution is holding their funds via their accounts page. Its Mastercard card is issued by Peoples Trust Company.
Shafik said that Vault spent its first year just building out the infrastructure for the card transfers and account products in house.
"Infrastructure for fintech is essentially nonexistent here [in Canada]," he told journalist. "We don’t have products to build on top of. You have to build the infrastructure in house, do the diligence with banking partners to come up with compliance programs and launch from scratch."
Vault targets all industries, Shafik said, and conducted a pilot initially with about 25 companies. Now, he said, the startup is "growing into the 100s per month." Companies ranging from two employees up to 100 are users, he said with the company’s sweet spot so far being in the "up to 100 employee mark."
When it comes to revenue, Vault says it makes money off interchange and transaction fees.
"We’re excited honestly to come out of the gate with a product that is ready to replace your entire stack from day one, rather than come up with just one product and build over time," Shafik said. "The reception from Canadian companies has been great, where they’re either using us as a primary account or at least trying us for a vertical."
Zach Bratun-Glennon, founder and general partner at Gradient Ventures, believes that Canada "is a market with unique financial service and technology needs."
He wrote via email: "It has a high volume of cross-border transactions, a large number of multinational and distributed employee bases, and is a growing hub for innovation."
Despite the opportunity, Bratun-Glennon also notes that Canadian financial services have been slow to adopt new technologies, compared to larger markets like the U.S. and the EU.
"Most businesses rely on traditional banks or a few niche fintech solutions. Vault’s platform can replace a business’ entire financial stack," he added. "One of Vault’s standout features is its multi-currency functionality. This allows businesses to make and receive payments in multiple currencies, without having to worry about high foreign exchange rates or excessive transfer fees."
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