Another niche group with specific banking needs is small business owners—and there’s a service for them, too. Benji is a “free business operating account that combines your deposits, bookkeeping and spend management—all-in-one,” with “no branch visits or headaches required,” according to its website.
“We’re focusing on an extremely overlooked niche within the small business world which is, ironically, the largest segment of small businesses in Canada—companies with 10 employees or less,” says Benji CEO Mohammed Asaduallah, adding, “Our goal is to help Canadian entrepreneurs build resilient businesses.”
How? By solving the problems they naturally face, says Asaduallah. “Whether that’s by streamlining your accounting so you spend less time on your books, managing and matching your business receipts, establishing sub-accounts to set aside funds for taxes and payroll, or automating manual tasks in your account, at Benji, we’ve identified the pain points small businesses experience and mainstream banks don’t resolve well.”
How do I know my money is secure in a neobank?
One of the essential reasons we use banks is to keep our money safe and secure. But if you’re banking with a digital entity, how do you know that your account won’t be hacked and that your money won’t get stolen? Or that a fintech startup company won’t go bankrupt or shut down operations? Check if your financial institution is insured by the Canada Deposit Insurance Corporation (CDIC) before you join up. This means that if your financial institution goes bankrupt, at least $100,000 of the money you hold in chequing, savings and GIC accounts is covered. (For more information on CDIC insurance, read this explainer.)
What’s on the horizon for neobanks
“If Canadian neobanks really want to shift the fintech landscape in Canada,” says startup advisor and investor Sanjeev Arora, they need to focus on “building a truly competitive and innovative product offering.” Arora’s examples include credit cards with interest rates of 4% or 5% per year, versus the 19%-plus offered by most issuers; banking products that help low-income customers grow their net worth over time; and real-time credit score mechanisms powered by consumers’ financial and behavioural data.
Banks have a long and storied history in Canada, but a new chapter is being written as new technologies—high-speed internet and mobile—increasingly free people from the traditional bank visit. Challengers and innovators are positioning themselves to provide better service, faster integration and a greater user focus, and competition for key markets continues to drive innovation. Today’s new crop of smaller, more agile fintech ventures brings a well-thought-out approach to tackling customer needs, and that can only improve the banking experience for all customers.
New financial products to watch
Developed by a Toronto-based fintech company, this financial app consists of a hybrid spending, savings and credit account. The Koho account has competitive features like no fees, a minimum 0.5% cash back on all purchases and 1.2% interest earned on direct deposits.
- Annual fee: $0
- Welcome offer: None
- Earn Rate: Earn 0.5% cash back with the Koho account. (You can also get 2% cash back on transportation, groceries and restaurants with the Koho Premium account, which has an $84 annual fee.)
- Perks: Earn 1.2% interest on the money in your spending and savings accounts. Koho also has a feature called RoundUps, which rounds up each purchase to the nearest $1, $2, $5 or $10 (your choice) and transfers the difference into your savings account. You can also use the Early Payroll feature to access $100 of your next paycheque up to three days before it’s deposited.
A digital bank founded in Calgary by a co-founder of Skip The Dishes, Neo Financial offers a no-annual-fee credit card and a high-interest savings account. It also focuses on offering cash back when you spend at select national and local businesses.
- Annual fee: $0
- Welcome offer: Earn 15% cash back on your first purchase at most Neo partners
- Earn rate: It’s based on the types of purchases, but it averages 4% cash back for its standard plan, with a minimum 1% earned.
- Perks: This card has no over-limit or inactivity fees, and it offers unique rewards from partners, like earning a free morning coffee at your local café or getting 20% off a yoga class. You also can freeze (and unfreeze) your card instantly in the Neo Financial app.
Wealthsimple is best known for its robo-advisor, but it recently launched WealthSimple Cash, a hybrid chequing and high-interest savings account (HISA). It incorporates elements of all basic banking products, including a cash card. For instance, you would have unlimited transactions, Interac e-Transfers and deposits; 0.90% interest on deposits; and a Visa-Debit, which works like a prepaid credit card.
- Annual fee: $0
- Welcome offer: None
- Earn rate: Earn 0.90% on all deposits.
- Perks: Unlimited transactions, Interac e-Transfers and deposits.
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