Non-traditional financial services institution trying to take on Canada’s big banks

A new form of online-based banks are changing the face of finance. Tyler Barrow reports.

As online banking takes off, virtual financial service companies are taking a bite out of big, traditional brick-and-mortar banks.

Wealthsimple, Neo Financial and EQ Bank are all getting more attention from Canadians looking to cut fees and increase their savings.

At the same time, these newcomers to the sector are creating jobs in Calgary and across the province.

“We are not trying to be a bank,” said Wealthsimple chief commercial officer Paul Teshima.

“We actually don’t think Canadians need another bank, they want something different, and we believe we do that by providing low-cost fees and access to wealth building techniques, products that typical Canadians don’t have access to.”

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Wealthsimple launched in 2014, but now has nearly 500,000 customers in Alberta, just under 10 per cent of the population.

The company has also hired nearly 100 Albertans and in May it opened a co-working space on Stephen Avenue.

“We are a modern financial institution,” said Teshima.

“We don’t have some of the legacy burdens and cost structures that the banks have. We can do things more cost-effectively. We don’t have branches that cost money to staff. The idea is that we can, instead of passing all those costs on to the client, give clients lower fees.”

Wealthsimple offers a chequing account with no monthly fees earning up to 2.75 per cent in interest.

The company hopes services like that will lure people away from Canada’s big six banks: Royal Bank of Canada (RBC), TD Bank, Scotiabank, the Bank of Montreal (BMO), the Canadian Imperial Bank of Commerce (CIBC) and National Bank.

According to the Canadian Bankers Association of Canada, digital banking is on the rise as four in 10 people say their use of apps and online banking has been increasing in recent years.

Meanwhile, actual bank buildings have been seeing less traffic. The average number of reported visits to a bank branch per month dropped from 1.8 in 2021 to 1.3 in 2024.

Marius Zoican, professor of finance at the University of Calgary, says a big draw for the non-traditional financial services companies are their user-friendly apps.

“I think a lot of people, especially millennials, Gen Z, they appreciate being able to manage their investments and their accounts from the comfort of their homes or from their mobile phones,” said Zoican.

“The (big) banks have usually some brokerages, but those brokerages ... they’re usually separated, they’re different contact points, different advisers, different apps even, and it’s much harder to move money from one part to the other.”

Calgary benefits with job growth

Other financial services institutions are also seeing their clientele grow.

In April, EQ Bank opened a new office in Calgary, employing more than 85 people.

The digital bank clientele base in Alberta is over 80,000. Similar to Wealthsimple, they offer a no fees, interest-earning chequing account.

“There’s opportunity to really disrupt what’s happening in Canada; there’s a lot more need for competition,” said the head of EQ Bank Dan Broten.

Neo Financial, headquartered in Calgary, has nearly 900 employees and is growing.

It focuses on credit and lending, and interest-earning savings accounts along with no-fee chequing accounts.

“Something you normally go into a branch for—maybe you’re opening a new product, it could be something like applying for a new mortgage—Neo has the technology to make that seamless and quick and online and so that really differentiates us in terms of experience,” said Neo Financial co-founder and CTO Kris Read.

For people looking to switch, Zoican says the big six offer an “element of trust” being established with the clients able to meet financial advisers in person.

He banks with Wealthsimple and CIBC, suggesting customers don’t need to go all-in with one or the other.

“It’s good and wise for people to be able to sort of split their money between traditional and neo banks.”

RBC, TD, BMO, CIBC, Scotiabank and National Bank control more than 90 per cent of bank assets under management.