Five Questions with Inovatec CEO Vladimir Kovacevic

Inovatec is a Vancouver-based technology company who builds software tools to help lenders grow their business and deliver streamlined services to customers. 

Inovatec Founder and CEO Vladimir Kovacevic recently sat down with CCI President Benjamin Bergen to talk about how they see the Canadian finance landscape, and how smart public policy can improve things.

This transcript has been edited for length and clarity.

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Benjamin Bergen: Thanks for making time for this conversation, Vladimir! We were talking a few months ago, and I thought your story at Inovatec was really interesting. So just to start out with the basics, can you tell me a little bit of the backstory of the company? What do you guys do, and what gets you excited?

Vladimir Kovacevic: Yeah, so Inovatec is a technology company that focuses on helping lenders be better lenders.

So our customers would be financial services companies — you know, banks, credit unions, private finance companies. And probably the easiest way to describe what we focus on is anything that's not mortgages or credit cards. So if you're thinking about getting a car loan, if you're going to finance, a motorcycle, a hot tub —  anything out there that you might need a line of credit or a financial arrangement — our technology helps banks and credit unions to sort of streamline that process so it feels easy to the end consumer. 

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BB: How did you know about that problem? As a leader and an innovator, you guys are often trying to solve an issue or challenge? How did this reveal itself as an issue?

VK: So, it’s a lot about timing and background. Originally I was in manufacturing; I came from a super highly automated, very quality sensitive type of manufacturing — making medical devices. That industry has been around for a while, so it’s had a lot of time to evolve in a way that resulted in something that is both highly automated, but also highly compliant and quality-focused. 

When Danijela and I first moved to Canada, in 2006, I didn't want to go look for a full time job, so I was like, let's just do some consulting. And my very first client was an auto finance company. It became immediately obvious to me that they were not treating this like manufacturing. They were treating it more like an art than a science. And therefore, if you took some of those manufacturing principles, and applied it to finance, there was an opportunity.

It seemed like, why wouldn't it be possible in personal lending? Think about it: high volume of transactions, high sensitivity to quality, a lot of customer impact if you get something wrong. And so my first advice to the client was: you need to buy some better software. And they were like, well, there is no better software. 

I started to do a bit of research, and then I'm like, Okay, there's an opportunity here, and you know, one thing led to another.

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BB: It’s an interesting time to be talking about lending, because it’s been pretty dynamic recently. Interest rates have risen by a lot; money’s no longer free. What does that mean for your business directly, but also what are your thoughts on what it means for the wider economy? I’m sure you’re seeing lots of consumer data, and I’m wondering if any interesting insights are coming out of that?

VK: I've had the benefit of going through some of the previous economic cycles. Every crisis is different.

What’s unique about the most recent cycle is the fact that there was this period during Covid of not just free money in the sense of low interest rates, but the government literally giving you money all across the economy. And on the whole, that led to everybody’s credit score going up. And then a year later the government subsidies go away and consumer behaviour starts to return to baseline. 

So from a lending perspective what that means is, there were a lot of very tricky, complex timing and data problems to navigate. Is that customer really who their credit score says they are, or is it a short-term effect? And obviously now interest rates are going up at the same time. It's not just the fact that interest rates are high. The underlying data that you lean on is shifting on you and moving.

It’s almost like navigating a ship in a storm. But the north star has moved a bit, and you're like, you still have to go north, but the North Star is now a little bit to the left.

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BB: That's, that's a great way of putting it. 

The other thing that's also happening is we're seeing banking and financing revolutions happening everywhere. We’re seeing fascinating things happening around the world with open banking, and new services like Venmo and fintech providers. Where's Canada at in this?

VK: Unfortunately, we're still a little bit behind. Or maybe not behind, but maybe it’s better to say that we’re a bit conservative in how we view data access and sharing of the data. 

I get it. Like, it is sensitive data. It is important. You don't want to just be willy nilly allowing anybody to have access to my financial information. 

But this stuff has been around long enough and has been present in other countries. There are ways to do it right. In Canada we are now probably at least four or five years late. And the risk here is that we are unable to innovate and make the financial system more transparent for the consumer.

Let me give you a simple example — something as trivial as income verification. Let’s say that I need to buy a car and the lender is saying that they can give me a much better deal if they can verify my income. If I don't know what your income is, and I'm just relying on the fact that you're telling me you're making a certain amount each month, I have to deal with the fact that some people lie, and some people don’t lie. So I have to put you in a bucket with everyone else and charge you a little bit more, in case you’re lying.

Versus if I have easy access to your banking data that can be shared securely with a click of a button, then they can verify your income and give a lower interest rate. And now I don’t have to try to phone your employer and bug them, go through all this stuff.

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BB: And I'm sure we're all ingesting higher cost because this is more cumbersome. Someone's got to pay the piper at the end. And sadly, it's, it's you and me. 

So we've talked about lending from a consumer perspective and a company perspective. At CCI, we kind of zoom out and say, what does it mean for the macro perspective?

So my question to you is, what does it mean for Canada if we don’t have innovative firms in finance? What happens if Canadians see all these great products south of the border and elsewhere? Do consumers begin demanding those? And what’s the risk if we don’t have our own domestic innovators who are leading in this area? 

I view it not as Canadian banks versus Canadian fintechs. But it actually should be Canada versus the world in terms of thinking about our financial systemWhat are your thoughts of that framing or that narrative?

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VK: So, it's a difficult question, and maybe not even just a story about financial technology.

The typical path of Canadian startups, if you look at it, it’s striking how early they sell and how quickly they exit. It’s a lot earlier and sooner than their U.S. counterparts. And the startups that do end up becoming successful typically have managed to transition their business to operate in the U.S. and other jurisdictions.

So I think it’s a very real problem, because it does lead to entrepreneurs and brain power leaking out of the country. What’s worse is that we’re not getting an influx of the right people. It’s hard to put numbers on it, and that’s why I say it’s a difficult question; it’s more of a gut feel answer to me. 

When you’re less protectionist and more open it actually creates more opportunities and yields better results for everybody. Yes, it has to be done the right way. You have to be careful and I think Canada has traditionally been careful. We’re definitely not as out there as some countries are. A bit more entrepreneurialism and openness from the government, and smart people will make the right decisions.