Challenger banks are gaining momentum. Even with the conservatism of the Canadian banking industry, the need for increased competition and modern offerings is being recognized. The existing handful of such banks include: Tangerine, Koho, Stack, Mogo, Impak, Motusbank, and ATB Brightside. There is another one coming you need to know about.
Neo Financial will initially launch in Calgary in the first half of 2020, with plans to expand across Canada later this year. The bank was founded by two of the co-founders of SkipTheDishes, Andrew Chau and Jeff Adamson. Given their track record with SkipTheDishes, we have high hopes for this company. You can join the waitlist like thousands of others have.
Neo will offer:
- no-annual-fee credit-card
- a high-interest savings account with now minimum balance and no annual fee
- instant rewards from partner brands, with relevant personalized offers from local merchants
- financial tools to help create excellent habits for saving and spending, including a budgeting tool and proactive alerts
As of yet, they have not shared which Canadian bank they will partner with to support their banking offers.
What Has Contributed to The Rise of Challenger Banks?
Fintech offerings and the rise of challenger banks, including “digital first” banks, have been enabled by:
Changes in Consumer Behaviours
- The rise of technology in banking has expanded consumers banking choices from their local bank, to national and multinational offerings
- Over time, consumers are increasingly trusting tech companies to handle their banking as some of the trust in traditional banks has been eroded
- Regulation hurdles can be overcome by through partnering with an established bank
- “Entry-level” charters enable faster entry to market
The rise of cloud technologies
- It is easier and cheaper to start a compliant and scalable bank with shareable technologies (open source)
- Big banks tend to default towards more time extensive and costly internal builds
- Machine learning and big data processing are improving efforts to quantify risk and price banking products in more customized ways
Challenger banks will continue to grow in number and adapt faster to changing technology than the traditional banks. Their lower cost of creation, ease of use for consumers, and ability to customize offerings based on personal data guarantee that we will continue to see more players arriving in this space for years to come.