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Thanks to the advent of digital technology, consumers can use their computers and mobile devices to do just about anything, including their banking. 

In the world of banking, ‘challenger banks’ are making use of technology to connect consumers to their banking products to make money management as hassle-free and convenient as possible.

Today, there are several challenger banks for Canadians to choose from, each offering its own set of banking products that can be managed remotely from any internet-connected device.

What Are Challenger Banks?

A challenger bank is a smaller financial institution that is designed to offer consumers an online-only banking experience. By interacting on a digital platform, consumers can do much of their banking online via a laptop or smartphone.

Challenger banks were given this name because they challenge traditional banks in terms of the services offered. Consumers are given more options to manage their money with a challenger bank rather than having to visit a physical branch. 

These “fintech” banks are changing the banking industry. Conventional banks face more competition thanks to the presence of challenger banks as they compete for clients. Anyone looking for a more convenient way to do their banking may find a challenger bank a viable option to consider.

Neo Financial

challenger banks

Another newer online-only bank in Canada is Neo Financial, which offers digital banking products to make banking as easy and convenient as possible. The banking entity was developed by the co-founders of food delivery service SkipTheDishes and offers a couple of banking products, including the following:

  • High-interest savings account 
  • Credit cards
  • Prepaid credit card

EQ Bank

EQ Bank Logo

EQ Bank is an online-only bank and a trademark of Equitable Bank, a Canadian Schedule I Bank established about 50 years ago. They are an entirely online platform that offers a variety of personal banking services including a:

  • Savings Plus Account
  • Joint Savings Plus Account
  • TSFA Savings Account
  • RSP Savings Account
  • GICs
  • Money Transfer Services

No matter what your saving goals are, EQ Bank can help you reach them with any one of their savings accounts. With no fees, no minimum balance requirements and one of the highest interest rates (Earn 4.00%* interest on everyday banking (2.50% plus an additional 1.50% when you set up direct deposit for your paycheque), you can get the most out of your money.

*Interest is paid monthly and calculated daily on the total closing balance. Rates are subject to change without notice

Motusbank

Motusbank is one of Canada’s newest online-only banks, having been established by Ontario-based Meridian Credit Union in 2019. The bank offers a full suite of banking products that can be accessed entirely online, with no physical branches available. 

Considering the fact that Motusbank is a new player in town with no brick-and-mortar locations, its list of products is rather impressive and includes the following:

  • High-interest savings accounts
  • TFSA savings account
  • RRSP savings account
  • No-fee chequing account
  • GIC Accounts:
  • Home equity line of credit (HELOC)
  • Mortgages

Tangerine

Tangerine chequing account

Tangerine is one of the original digital banks in Canada and among the most well-known. The firm was founded on the basis of providing Canadians with an alternative to traditional banking and initially operated under the name ING DIRECT. Eventually, the company was acquired by Scotiabank, with a name change to follow. 

Tangerine offers a full suite of banking products that you’d see at any traditional bank, making it one of the few online banks to do so. Consumers can access the following products at Tangerine:

  • Savings accounts (including TFSA, RSP, USD, and RIF accounts)
  • Chequing accounts
  • Credit cards
  • GICs
  • Business accounts
  • Investment funds
  • Mortgages
  • Home equity line of credit (HELOC)
  • RRSP loans
  • Line of credit

Brightside By ATB

Brightside

Brightside is the online arm of ATB Financial, an Alberta-based baking firm that serves Albertans. As an online-only banking app, Brightside was only recently established in 2020 as a means for ATB to deliver a digital banking experience to its customers. 

Right now, Brightside offers the following banking products:

  • Spending account
  • Credit card
challenger banks

KOHO

KOHO was established to help Canadians get a better handle on their spending and finances while making money management more convenient. KOHO offers three accounts that come with a prepaid Mastercard to help consumers work toward getting a handle on their credit card balances, save money, and avoid sky-high interest rates that typically accompany traditional credit cards.

Depending on the account you open, you’ll gain access to various benefits such as: 

  • Cash Back – You can earn up to 2% cash back on purchases and up to 5% extra cash back when you shop with KOHO partners.
  • Savings Interest – You can earn up to 5% interest on your entire KOHO account balance, depending on your account type and balance amount.
  • Credit Building Tool – When you open a KOHO account, you’ll have access to their two Credit Building Programs.
  • Free Credit Score – Get your credit score for free in the app with one of the paid accounts. You can also try a free 30 trial of one of the paid accounts to see your credit score for free.

Advantages Of Challenger Banks

There are several reasons why more and more Canadians are making the switch to challenger banks:

  • Easy Access. Since everything is taken care of online, there’s no need to visit a physical branch to do your banking. 
  • Fast Application. Just type in a few pieces of information online and you’ll be all set to do your banking online.
  • Low Fees. Most challenger banks charge minimal fees on their products because of the low overhead that comes with not having any physical locations.
  • Innovative. Challenger banks use the most up-to-date technology to make digital banking as easy and convenient as possible. 

Disadvantages Of Challenger Banks 

While there may be a few perks that come with banking through a challenger bank, there are a handful of drawbacks to consider as well:

  • Credit Checks Are Still Required. Challenger banks are still required to have a banking licence to operate, and as such, they still have to conduct credit checks when you apply for an account. 
  • No Physical Branches. While the idea is to avoid visiting a bank in person, some consumers may still want to speak face-to-face with a bank representative. In this case, a challenger bank won’t be able to help.
  • Limited ATMs. Some challenger banks team up with a traditional bank to have their ATMs used for clients to avoid fees. But many others do not have such affiliations, in which case consumers have no ATM machines available that allow them to withdraw cash without having to pay a fee.

Final Thoughts: Should You Bank With A Challenger Bank?

Challenger banks have changed the way we do our banking and have challenged traditional banks to keep up with their digital offerings. These days, Canadians have several challenger banks to choose from, each one offering its own set of banking products. If you’re more prone to doing your banking predominantly online, then perhaps making the switch to a challenger bank may make sense. 

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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