The Montreal fintech trying to take on Canada's mortgage giants
Nesto wants to rewire the way Canadians get mortgages, starting with the software. The Montreal-based fintech lender is part of a cohort of online lenders and brokerages such as Pine and Homewise that are taking a digital-first approach to streamline the mortgage experience, promising faster approvals, lower rates and less red tape.
Founded in 2018 as a mortgage broker, Nesto shifted to full-scale lending in 2021. Since then, it's been building a platform designed to simplify one of the most complex financial decisions Canadians face: cutting out paperwork, compressing timelines and offering what it calls 'unbiased' digital guidance.
After moving into lending, the company quickly recognized that its platform could be an asset for more traditional lenders such as the Big Six financial institutions, says Malik Yacoubi, Nesto's co-founder and chief executive officer.
'We realized that our technology is really powerful and unique in the Canadian market,' Mr. Yacoubi says. 'We [saw] an opportunity to diversify and launch a B2B [business-to-business] line of business.'
Alongside its online lending vertical, the Nesto Mortgage Cloud solution supports every step of the mortgage process, from online borrowing applications to supporting financial institutions as they underwrite the loans. Since 2022, Nesto has onboarded financial institutions such as IG Wealth Management, Canada Life and Equitable Bank.
Nesto is currently in discussions with most major financial institutions, but it has yet to convince one of the Big Six to adopt its Mortgage Cloud solution.
'For us, it's about creating efficiencies,' Mr. Yacoubi says.
The mortgage application process can be tedious, involving uploading, securing and verifying documents such as employment records and taxes, collecting data on applicant credit ratings and evaluating property prices.
It can also be emotionally charged. According to a recent TD Bank survey, nearly half (45 per cent) of Canadians feel stress, and 38 per cent feel anxiety surrounding the homebuying journey. That anxiety is further compounded by record levels of household debt and interest rate uncertainty as policymakers take a wait-and-see approach to the tariff impact.
For some, shopping for low rates online helps relieve that pressure. According to a CMHC survey, half of Canadians are comfortable doing the entire homebuying process online.
'Banks are recognizing this and have significantly embraced online lending, whether it be consumer lending or up the chain through to business and commercial lending,' says Stephanie Owen, a partner in KPMG's management consulting practice, who's been supporting the financial services sector with digital transformation for 13 years.
However, she says there are barriers for the Big Six when adopting a digital-first approach to mortgages.
'They primarily still use homegrown legacy systems, many of which don't have that scalable architecture to really support the additional digital capabilities they're looking to build out,' Ms. Owen says. 'It limits their internal agility.'
With Bank of Canada data showing 60 per cent of all outstanding mortgages in Canada are coming up for renewal this year or next, Nesto is positioning itself as both an online alternative to the Big Six banks and a partner for these institutions to capture online mortgage seekers.
Andrew Hamer, a partner and co-lead of Deloitte's Digital Lending group, says that while online lenders may face some demographic challenges with older generations more predisposed to non-digital challenges, the adoption hurdles are mostly embedded in how the mortgage process currently works.
He says many Canadians choose their mortgage based on a recommendation from a realtor, friend, family member or financial advisor.
'These tend to be human-to-human referral relationships vs. institutional or platform relationships,' Mr. Hamer says. 'So, there is power in incumbency and many prospective borrowers who, perhaps, would be comfortable dealing with a digital lender, build trust with capable brokers and advisors.'
Then there's the challenge of shadow labour, Mr. Hamer adds.
'Some digital mortgage experiences effectively - and certainly inadvertently - transfer the labour of the lender and broker or admin to the client,' he says.
Mr. Hamer says digital lenders such as Nesto need to balance the borrower's desire to self-serve while still guiding them through the process.
In 2024, Nesto acquired CMLS Group, one of Canada's largest mortgage financing companies, growing its combined team to more than 1,000 with offices in 10 cities across the country. With the purchase, Nesto currently manages around $70-billion in residential and commercial mortgages, up from $10-billion in mortgages in 2022.
The next challenge is to woo one of the Big Six banks to use its platform.
Francois Lafortune, CEO and co-founder of Diagram Ventures, which has invested in and helped develop the idea for Nesto since the beginning, believes it's just a matter of time.
'All the banks are looking at better mortgage systems… there's no off-the-shelf solution,' Mr. Lafortune says, adding that their options are to rebuild their system or invest in a solution such as Nesto Mortgage Cloud.
'The issue with rebuilding it [for large] financial institutions is it's always more costly and takes longer… by that time, the world keeps shifting," Mr. Lafortune says.
Mr. Yacoubi says Nesto went from becoming the digital mortgage disruptor to looking to build a new mortgage ecosystem for the Canadian market.
'There's still a lot of work to be done,' he says, 'but we see the opportunity.'
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