Neo Financial, the new Canadian FinTech startup focused on challenging the status quo in banking, has begun rolling out its services in Western Canada.
Neo Financial is a Prairies-based startup created by SkipTheDishes founders Andrew Chau and Jeff Adamson, alongside Kris Read. It is the newest challenger bank entrant into the Canadian financial market and is on a mission to re-imagine everyday banking.
After spending the first year and a half of its existence building out its tech and banking infrastructure, Neo has officially brought its financial services offering to market.
“What we’re building is a foundation for a bank that can compete with the Big Five.”
– Andrew Chau, Neo Financial
Over the last couple of weeks, Neo began offering its savings account, Mastercard, and merchant rewards program to a select number of individuals on its 30,000-plus waitlist. With a current focus on Western Canada, Neo hopes to have its products available across Canada later this year.
Chau, Neo’s CEO, recently spoke to BetaKit about the startup’s go-to-market strategy and its goal of shaking up the Canadian financial services market.
The startup, which has garnered a team of approximately 100 employees already, is backed with seed financing. Chau, however, declined to share details of the round with BetaKit, and the only investor that has been disclosed is Golden Ventures, which was an early backer of SkipTheDishes.
Neo also has the support of Harvest Builders, which was launched last year by fellow SkipTheDishes co-founder Chris Simair to grow Prairie startups. Neo was the first venture undertaken as part of the organization.
Calgary-based Neo is entering the Canadian challenger bank market, which itself can be broken down into different categories, including neobanks, new banks, and beta banks. Neo would, as its name suggests, be classified as a neobank, which by definition don’t have banking licenses but offer financial services through a partner financial institution that does. Existing Canadian neobanks include the likes of Koho, Wealthsimple, Mogo, and NorthOne.
Despite a growing number of challengers, the majority of Canadians continue to use traditional financial institutions rather than FinTechs. Reports from 2019 show that while FinTech adoption in Canada has increased significantly, it still lags behind that of other countries. Chau himself noted that the Big Five Bank oligarchy in Canada still holds around 90 percent market share.
These conditions have left challenger banks, like Neo, to fight for a smaller share of the consumer base. But, similarly to Koho CEO and founder Dan Eberhard, Chau argues that the important narrative for Neo is changing how people view and use traditional financial services.
The Neo CEO argued that a key differentiator for the startup is its offerings: a savings account, which has a 1.7 percent interest rate and offers CDIC insurance; its Mastercard, launching as a full-fledged credit card rather than prepaid; and its rewards program.
“What made us successful as SkipTheDishes was focusing on Canada, and really focusing on adding value back to the consumers, but also back to businesses too,” said Chau regarding the rewards program. “So, with Neo what we wanted to do was create a consumer experience that leveraged not only technology to help drive that, but also leveraged partners too.”
He added that Neo’s ambition is “to build a platform that plays a part in every single financial touchpoint a Canadian has.” The company’s goal is to one day offer a full range of traditional financial services, spanning saving, spending, investing, and mortgages.
Neo’s hope to create a full-fledged, digital-first banking experience for Canadians is not unique, however. The likes of Koho, Wealthsimple, and Borrowell (all Power Financial-backed companies) have also been expanding services of late as they look to grab the attention of Canadians away from incumbents. Even large Canadian tech companies like Wave and Shopify have pushed into the banking space this year, both launching accounts and spending offerings.
Chau argued that having built its own tech and banking infrastructure “from the ground up” gives Neo a leg up on its competitors and other financial institutions.
“When we think about other challengers in FinTech, it’s a good thing that we all are driving towards acclamation into the Candian ecosystem,” Chau stated. “One of key pieces [Neo] has is not just building a fancy app, [but] what we’re building is a foundation for a bank that can compete with the Big Five.”
“Through our strategic partnerships with financial institutions, we’re building a platform that challenges Canada’s traditional banking system,” he added. “Because of our unique partnerships and how we’ve built our technology from the ground up, we’re able to grow faster and innovate without the same limitations others face in the industry.”
While Neo is currently partnering with financial institutions, the CEO pointed to his startup’s openness to potentially obtaining its own banking license – a process that is difficult to navigate within Canada.
Obtaining a banking license in Canada is an arduous process, and FinTech startups are required to find financial institution partners to launch products like saving and spending accounts. Neo is currently working with Mastercard, ATB Financial, and Concentra. Chau noted that the startup plans to provide more details on those partnerships in the near future.
Image source Neo Financial via Twitter