Challenger banks in Canada: who’s who and what’s their tech
With Open Banking coming to Canada and the appetite for digital innovation, the country’s challenger banking market is poised for growth.
FinTech Futures has put together a list of the current challenger banks and banking services in Canada and the tech they are using.
We’ll be revisiting and updating this list on a regular basis. If you have any additions to the list, please get in touch with our editorial team.
Last updated: 22 June 2020
An all-digital, mobile-first bank set up by ATB Financial, targeting consumers. “We’ve been listening to Albertans and we are hearing there is a growing need to offer a new type of digital banking experience”, says Curtis Stange, ATB president and CEO.
In addition, following its March 2020 launch it plans to have occasional pop-up branches for sales promotions (e.g. at a mall during holidays or at a weekend festival).
In terms of technology, ATB itself is a broad user of SAP for Banking solutions, but for Brightside, it ran a competitive tender and contracted Technisys, to build an entirely new tech stack for the new bank. Technisys will supply its Cyberbank Core and Cyberbank Digital solutions on the hosted (cloud) basis. This is the first Canadian win for the Central American banking tech vendor.
Brightside will also use other vendors including Plaid for connectivity to third party solutions, Zendesk for customer service and Mixpanel for detailed customer analytics (i.e. what a customer clicked on, how long they spend on a page, what they read and what they don’t etc).
The bank has about 125 staff, based in Alberta, which includes a team from Technisys.
EQ Bank, a new pure-play digital bank in Canada, has opened its virtual doors in early 2016. It is a subsidiary of Equitable Bank.
Its main product is a high-interest savings account.
The operations are underpinned by the front-to-back office software from Temenos – T24 Transact (core banking), Temenos Connect/Infinity (front-end channels), and Insight BI (business intelligence and analytics). The bank opted for the Microsoft stack, and the software is hosted by HP.
The implementation project was carried out with the help of Deloitte, which also helped overall set-up of the bank, including the design and recruitment. The project was completed in 18 months.
Quebec-based Impak is building the marketplace for socially responsible businesses. It also has its own coin, impak coin, which it describes as money designed to create social impact.
In 2017, it went crowdfunding with Canadian investor platform FrontFundr to fund the creation of Canada’s first ethical bank. It raised more than $1 million within two weeks, not including private investment.
Co-founder Paul Allard (president and chief ecosystem officer), with ten other bankers, entrepreneurs and financiers in Montreal, Toronto, and Paris, want to “restore more sense and responsibility to the financial system”. Impak Finance will invest in firms if they have a “positive social and environmental impact”.
Impak says it takes a “triple bottom line” approach: people, planet and profits.
KOHO describes itself as an alternative banking platform and says it’s on a mission to “restore financial balance” of all Canadians. It offers full-service individual and joint banking accounts. These come with a prepaid Visa card, which is issued by Peoples Trust Company.
KOHO uses Galileo Processing as its payment processor.
KOHO was founded in 2014 and is based in Toronto. By spring 2019, it had 120,000+ accounts, over $500 million in annualised transactions, and KOHO card used every four seconds, according to the firm.
In May 2019, it closed a $42 million fundraising round led by Portag3 Ventures, including Greyhound Capital and other strategic investors. Prior to that, it raised $8 million from Portag3 in the Series A funding round.
Vancouver-based Mogo Finance Technology was set up in 2003 and had an IPO on the Toronto Stock Exchange in 2015. It has around 800,000 members and a team of 250+ across Canada. It says it’s on a mission to help Canadians take control of their financial health with solutions that are “easy to use, transparent, and unconventionally fun”.
“By leveraging technology and design we are transforming the way Canadians manage their finances,” Mogo states.
It offers a digital banking account with a Visa prepaid card, personal loans and mortgages, a crypto trading app, an identity fraud protection solution, and credit score viewing through Equifax.
In April 2019, Mogo announced its merger with Difference Capital Financial, a Toronto-based investment and advisory services firm. The deal is expected to close in H2 2019 and the merged entity will operate under the Mogo brand.
The combination will give Mogo immediate access to nearly $10 million in cash, which reflects proceeds from Difference’s two recent funding rounds. It will also have control of Difference’s portfolio of investments, including Hootsuite and Vision Critical, which collectively have an estimated market value of around $24 million.
Ontario-based Meridian Credit Union received regulatory approval for its new digital entity, Motusbank, in early 2019. It opened for business later in spring.
Meridian has been working on this project since 2016. The credit union’s CEO, Bill Maurin, says Motusbank could take on the country’s “Big Five” players – TD Bank, RBC, Scotiabank, CIBC and BMO.
All of Motusbank’s services are online and mobile, with access to no-fee savings and chequing accounts, loans and lines of credit, investments, and mortgages.
It provides member support through its call centre and access to its no-fee ATM networks.
Motusbank partnered with US-based fintech MX to introduce the latter’s new, self-guided financial wellness tool, Pulse, to its customers (the tool is also available to Meridian’s clients). The project is part of Meridian’s larger strategy to leverage digital technology to promote financial wellness.
This start-up is wholly owned by RBC, and has launched its free banking offering for children and teenagers aged 8-18. The fintech was co-founded by Faria Rahman and Gaurav Kapoor at the bank’s start-up venture arm, RBC Ventures.
The initial offering lets parents sign up and invite their kids who get a virtual smart card which can be pushed to a digital wallet such as Apple Pay.
Because the app moves money around, it will eventually need its own identity verification systems if it wants to offer the service to non-RBC customers, as currently it leans on RBC credentials to verify customers.
The app has a social element to its payments, allowing parents to react to their kids’ spending with different emojis – be that a frown, a question mark, or a thumbs up.
The start-up will continue to build on its product to incorporate a gamified financial literacy element called ‘Mydoh Play’.
Founded by two of the co-founders of food courier service SkipTheDishes, Neo Financial offers a no-annual-fee credit card and savings account while also giving Neo members access to “instant rewards” from partner brands.
The brand is a portfolio company under venture builder Harvest, set up to support start-ups in the Canadian Prairies region.
Initially planning to launch in Calgary before rolling across wider Canada, the bank has partnered with a as-yet unnamed Canadian bank to provide access to a savings account
The firm claims that thousands of people have joined its wait-list and that hundreds of brands and local stores have signed up for its initial launch.
Mobile-first API-based challenger NorthOne focuses on start-ups and small businesses.
In collaboration with Boston community bank Radius and development partner Treasury Prime, the neobank was able to design its own API technology to streamline account opening and management.
US-based but with one of its offices headquartered in Toronto, the challenger offers other apps, such as Incorporate in Canada, Business Bank Account Hero and Startup Financial Health Checklist which its team has created for business owners.
The bank also developed a ‘Free Invoice app‘ last year for SMEs, giving business owners the ability to create and send an invoice from their mobile phone in “less than two minutes”.
Canada’s online brokerage Questrade, which allows people to invest with lower fees, announced its application for a banking licence in November 2019 to incorporate ‘Quest Bank’ into its armoury.
Currently the Toronto-based firm, founded in 1999, allows users to buy and sell their own investments with stocks totaling one Canadian cent per share or more. Alternatively, users can get a pre-built portfolio with management fees starting at 0.25%.
The Office of the Superintendent of Financial Institutions (OSFI) is now reviewing Questrade’s application.
European banking challenger Revolut, which provides digital banking services to consumers and businesses, has a waiting list for Canada.
Revolut says its account is “for global fee-free spending, free international money transfers and instant payment notifications”.
In spring 2018, Revolut raised $250 million in a Series C funding round, followed by another $500 million in a Series D round later that year. The new capital will be used to expand Revolut worldwide, including Canada.
Revolut aims to onboard 100 million customers in the next four years. As of spring 2019, it claimed over four million customers and processed over 350 million transactions, with the total value of $5 billion+.
For its technology, Revolut relies on its own in-house processing and card issuing platforms. In early 2019, it signed a deal with start-up ClauseMatch to adopt its regtech to streamline management of internal policies, controls and regulatory compliance.
Toronto-based Stack (founded in 2016) offers a mobile financial services app with a prepaid Mastercard card and zero fees. The app includes automated savings, instant rewards and social sharing.
Stack claims to be “the fastest growing challenger bank in Canada”.
In 2019, it teamed up with a domestic payment solutions provider, Payment Source, to target the millennial population. “Stack knows that for today’s working class in the service industry and gig economy, cash is the only currency that carries,” the firm explains. “Delivering a solution to answer the need to use cash digitally, Stack members can now instantly load cash into their prepaid Mastercard” at over 10,000 locations nationwide, including at all of 6,000 Canada Post locations, Mobil, and Hasty Market.
The bank was originally known as ING Direct, when it launched in 1997. Following its acquisition by Scotiabank in 2012 it was rebranded as Tangerine. It is based in Toronto.
Tangerine has over two million clients, close to CA$38 billion ($29.4 billion) in assets and over 1,000 employees. Its presence extends beyond digital to its café and pop-up locations, kiosks and 24×7 contact centres.
For its core banking tech, it is on the user lists of FIS’s Profile and PortfolioPlus from Strategic Information Technology (SIT), a long-standing Canadian banking tech supplier.
In 2016, Tangerine set out to revamp its digital client experience. As part of this project, it partnered with Meniga, an Icelandic personal finance management (PFM) solutions provider (becoming Meniga’s first known client in Canada).
Want to know more about challenger banks in other countries around the world? Check out our free and comprehensive guides here.