The Little Banks That Can

TORONTO — In a world where long-established brands often reign supreme, some challenger banks are turning the tables and giving the big Canadian banks a run for their money. We take a closer look at some new and exciting developments in the banking landscape and ask the question on everyone's mind: Can these plucky challengers unseat the giants of the banking world?

There's no denying that the big five banks in Canada — TD, RBC, Scotiabank, CIBC, and BMO — hold a significant share of the market. But for consumers, more competition means more choice, and that can be a powerful thing. Challengers like EQ Bank and Wealthsimple have been making waves in the financial sector, rolling out new and innovative offerings that are not only more affordable but also straightforward and easy to use.

The old guard has every reason to be worried — the challengers, as they are known in the industry, are doing everything they can to woo new customers. Cheaper offerings and the promise of better service are strong draws, particularly for younger consumers who are eager to put their money where their values are. Young Canadians, too, are particularly savvy when it comes to mobile banking and expect an intuitive, user-friendly experience from their financial institutions. Challengers are working to cash in on their reputation for lower fees and seamless online transactions.

Not all have hailed the new entrants to the financial landscape, with some expressing concerns that challengers have simply bitten off more than they can chew. Tougher regulations and fast-moving technology all mean that competition is getting more fierce all the time, and some worry that consumers may be caught in the crossfire if financial instability strikes. Never mind that — the upstarts say it's now or never to capitalize on consumer dissatisfaction with existing banks and an increasing appetite for an alternative to the same old bank offerings. How successful they'll be in making inroads with this strategy is yet to be seen, of course — but as more and more new challengers continue to pop up and an upward trend emerges in consumer adoption of new banking services, it may be a case of when, not if, these small players manage to shake up the banking hierarchy for good.

One big draw for consumers is undoubtedly the cheap and cheerful element, with costs far lower than those offered by existing players. Some have described fees charged by Canada's long-established financial institutions as nothing short of 'rapacious', and, not surprising given the sentiment, Canadians are hungry for something different. Price matters, and for young, low-income Canadians struggling to meet their expenses, or for individuals seeking savings on credit card transactions, price-sensitive offerings are sometimes an almost guaranteed win.

And what isn't to be overlooked is the added value the tech-savvy companies have introduced, perhaps having made that leap of faith when it comes to bringing their services online that many other banks seemingly have yet to take. Services from these newer companies have something of a tech feel, often putting digital innovation front and centre, from streamlined onboarding to apps that make managing your money as simple and intuitive as pie. There is also a level of engagement, too, with savvy advertising and a growing social media presence not typical of established Canadian bank counterparts.

Still, the key ingredient for their ability to secure the market would come from having no less than their unique approach — driven neither more, nor less so than by the perceived need of consumers demanding new experiences, services that make managing their financials far less complicated than once it was, regardless how onerous the existing banking providers' approach was before. It may be a high-wire balancing act but as these innovators expand their offerings to meet demand it might be more hard for Canada's dominant large-slow moving financial Goliaths looking on to resist that consumer choice pull for long.

"Challenger banks are in demand and looking at increasing that consumer's expectations for getting experience around those real pain points — a customer would never return if you did meet at offering these simple experiences based, we actually say, experience-based not only focusing on giving access. They want something that engages the core experience.