Neo Financial launches secured credit card to help Canadians build credit

The product launch comes as Neo navigates a tough consumer-banking market.

Neo Financial has launched a secured credit card designed to help Canadians build a history of borrowing and boost their credit scores.

According to the Calgary and Winnipeg-based FinTech firm, Neo Secured Credit offers unlimited cashback and rewards that are usually reserved only “for top-tier, annual fee credit cards.”

Secured credit cards can help folks facing difficulty accessing credit build and improve their credit scores.

Secured credit cards typically require users to make a cash deposit when they open the account. This deposit serves as collateral when cardholders make purchases. These cards can help folks facing difficulty accessing credit, looking to boost their credit score or simply to spend within their means, build and improve their credit.

In a statement, Neo co-founder and CEO Andrew Chau argued that Neo Secured Credit’s features and rewards, which are available to users regardless of their credit history, separate it from other secured credit cards on the market.

The launch of Neo Secured Credit, Neo’s latest consumer product, takes place amid a tough consumer-banking market fuelled by high inflation and interest rates—one that has seen Canadian consumer debt reach an all-time high. It also comes as Neo has reportedly struggled to grow its consumer-facing business.

Neo Secured Credit cards are issued by ATB Financial, pursuant to a licence from Mastercard. According to Neo, no credit history is required, approval is guaranteed—provided applicants are Canadian residents, the age of majority, and make a cash deposit equal to the credit limit they are seeking—and accounts can be opened in just a few minutes.

Unlike traditional prepaid cards, which must be reloaded once spent, Neo Secured Credit cards contribute towards users’ credit history and continue to function after they are paid off on a monthly basis, with the deposit simply serving as a payment guarantee.

RELATED: Neo Financial bets on embedded finance, D2C combo amid tough consumer banking market

Per Neo, these cards come with no monthly or annual fees, monthly credit reporting, an average of five percent instant cashback at over 10,000 rewards partners with no cap to the cash back, dining, gas, grocery, and travel perks, and Mastercard Zero Liability protection against unauthorized transactions. The purchase credit rate on Neo Secured Credit cards is between 19.99 and 26.99 percent, while its cash advance rate is 22.99 to 28.99 percent.

Neo is not the only FinTech startup to foray into the secured credit-card space—firms like Chime, Varo, and GO2bank have previously launched similar offerings.

Founded in 2019 by the co-founders of SkipTheDishes with the goal of re-imagining everyday banking products for consumers, Neo partners with financial institutions to provide Canadians with spending, saving, investing, and mortgage options. The startup also offers embedded finance solutions on a business-to-business basis, working with firms like Intuit TurboTax, Hudson’s Bay, and Tim Hortons.

To date, Neo has raised a total of nearly $300 million CAD from a group that includes Peter Thiel-backed Valar Ventures, Altos Ventures, Maple VC, Golden Ventures, Tribe Capital, Blank Ventures, Gaingels, and Knollwood Advisory, among others.

RELATED: Neo Financial joins Canada’s unicorns as Peter Thiel’s Valar triples down with $185-million round

Most recently, Neo closed a $185-million Series C round in May 2022 at a more than $1-billion valuation.

Earlier this year, however, The Logic reported that Neo has faced difficulties growing its consumer-facing business and retaining customers. According to The Logic, Neo users are reaching for the firm’s flagship credit card less often than anticipated, despite Neo announcing last year that it had one million customers.

Amid these conditions, Neo has bet on a combination of embedded finance and direct-to-consumer products. In an April interview with BetaKit, CEO Andrew Chau emphasized that the startup views both as equally important.

Feature image courtesy Neo Financial.

Josh Scott

Josh Scott

Josh Scott is a BetaKit reporter focused on telling in-depth Canadian tech stories and breaking news. His coverage is more complete than his moustache.

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