As it launches savings accounts, Koho looks to increase “appeal and utility” as challenger bank


Challenger bank Koho is launching the newest evolution of its FinTech product line as it looks to increase its appeal to a broader swathe of Canadians.

Toronto-based Koho is set to launch a new savings account next month, adding to its existing spending offerings. The startup is also working to launch a credit rebuilding product later this year.

“I think the traditional resistance to Koho always kind of landed in this world of savings accounts.”

The decision to expand beyond its spending roots points to Koho’s next evolution in the race to attract more Canadians to alternative financial offerings.

In a recent interview, founder and CEO Daniel Eberhard said Koho was built on the idea that the most important part of the customer relationship was the primary spending account.

“But [Koho] also completely recognized that there is a massive portion of the Canadian market that we were not a great product for,” the CEO admitted.

“[The savings account] is really about expanding the appeal and the utility of Koho,” he said. “I think the traditional resistance to Koho always kind of landed in this world of savings accounts and these kinds of things.”

Eberhard added that creating a savings account product was always in the playbook for Koho.

Koho has been actively working to expand its product line of late. Earlier this year, it launched an early payroll service and at the end of 2019 released a metal card – following a trend set by other large challenger banks.

koho founder
Koho founder and CEO Daniel Eberhard circa 2017 Koho launched in 2015 with the goal of disrupting the Canadian banking system

Koho is set to launch the savings account in beta in October, with a public launch at the beginning of November. It is offering an interest rate of 1.2 percent on all deposits made into the account.

The startup had been ready to launch its savings offering earlier this year, but was delayed due to COVID-19. A drop in interest rates by the Bank of Canada at the onset of the pandemic led to Koho deciding to delay its savings account launch in order to be able to provide what the company called a sustainable and competitive rate.

Koho’s move into the savings accounts space puts it in direct competition with other FinTech startups, including the newly created (but yet to launch) Neo Financial, led by two SkipTheDishes founders. Koho, which has 54.4 percent of its equity interest owned by Power Financial subsidiaries, is also coming up against fellow Power-backed companies Wealthsimple and Borrowell, which both offer savings products.

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When asked about concerns around competition from fellow Canadian FinTechs in the savings space, Eberhard stated that Koho welcomes it.

“[Koho has] gone from basically a place to send money … in Q2, and by Q4 we’ll have a great savings rate and product, we’ll have two credit products around early payroll, and the ability to rebuild credit in a simple transparent way,” said Eberhard. “So, I feel like we’ve put some real stakes in the ground. And we know competition is coming, but we’re really excited about the products we have and really excited about 2021, where I think we’ll even further create that distinction.”

“The nice thing about a savings account is, conceptually, it fits within the model of what Canadians expect the bank to look like.”

Canadian challenger bank-style FinTech companies, like Koho, have traditionally been competing for what is currently a smaller portion of the consumer base. Most Canadians still opt to use incumbent financial institutions for their banking needs. While reports from 2019 found that FinTech adoption in Canada had increased significantly, it still lags behind the global average.

However, rather than focusing on pulling attention from its fellow FinTechs, Eberhard pointed to Koho’s intention to draw from the Big Five and Big Six banks in Canada, and change the overall narrative around financial products.

“It is the Koho mission to change the expectations of Canadian consumers,” Eberhard told BetaKit. “And that’s going to take a lot of FinTechs to do that and, certainly, we are not going to be able to do it alone.”

With its savings account, Koho is touting that same narrative – offering something different than incumbent banks.

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“The big change … is, the traditional model [is where] you would have a chequing account and a savings account, and savings is where you would accumulate interest in and chequing is where you would spend money, but that’s absolutely false dichotomy,” Eberhard argued. “What you just want is a great interest rate on the place you spend your money,”

“[Koho’s account] kind of does away with that traditional dichotomy and just offers people a great rate,” he stated.

Even as it looks to position itself as a challenger, offering a savings account also serves to help Koho appear more like a traditional financial institution.

“I think the nice thing about a savings account is, conceptually, it fits within the model of what Canadians expect the bank to look like,” said Eberhard. “It makes that story … cleaner.”

The CEO called Koho’s savings and future credit rebuilding offerings essential to the narrative of showing Canadians there are alternatives to the Big Five or Big Six banks.

“It’s really core to the Koho mission that we offer something and accelerate the value for these Canadians who have traditionally been left behind by the Big Banks,” Eberhard said.

Image source Koho via website

Meagan Simpson

Meagan Simpson

Meagan is the Senior Editor for BetaKit. A tech writer that is super proud to showcase the Canadian tech scene. Background in almost every type of journalism from sports to politics. Podcast and Harry Potter nerd, photographer and crazy cat lady.

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