Challenger banks can’t compete on lower fees alone, say leaders at Canada’s digital banks. They need to create value with products that are easy to understand and features that clients want.
A quarter (24%) of Canadian residents said they opened a financial account with an institution other than their existing bank in the previous 12 months, according to a 2025 Environics Research survey. More than a quarter (27%) said they did so to reduce fees.
But the advantages digital banks have enjoyed on fees is shrinking. The federal government placed a $10 cap on non-sufficient-fund (NSF) fees on Thursday. And in December, the Financial Consumer Agency of Canada announced that 14 federally regulated financial institutions are offering bank accounts costing no more than $4 per month.
“If a challenger bank’s proposition relies on fees … versus creating more value, I think that they’re going to be in a really tough spot,” Daniel Eberhard, CEO of digital bank Koho, said in an interview.
Some financial institutions offer to pay client transfer fees, provided they transfer a minimum amount of registered account funds. That can be expensive though.
“In fintech, some folks are just eating it,” Eberhard said. “It puts the pressure on fintechs and makes their cost to acquire [customers] higher.”
Budget 2025 proposed legislation to prohibit investment and registered account transfer fees, which currently cost about $150 per account.
Canada can’t regulate its way to lower fees, Eberhard said. Digital banks need to provide consumers the right features to spur competition in Canada’s banking industry, he said.
‘Nonexistent savings’
Canadians’ financial lives are plagued by “nonexistent savings rates” and “credit systems that can’t read their actual financial trajectory,” Jeff Adamson, chief commercial officer and co-founder of Neo Financial, said in an email.
“That’s where we’re focused. We’re building out chequing, savings, expanding credit access and launching co-brand products that actually compete on value,” Adamson continued.
Neo Financial is offering secured credit cards to help clients build their credit score and is working to include rent payments in reports to credit bureaus.
Koho offers high-interest savings in its chequing accounts. “Just earn money on your money. Why create like this critical construct with savings and chequing accounts? It doesn’t make any sense,” Eberhard added.
Swifties
Wealthsimple recently became the first Canadian digital bank to join Swift for international payments.
“Wires are expensive. It’s like anywhere from $35 to $50 and then $15 to receive a wire. This whole process is extremely painful. To create a better experience for clients, we needed to become a Swift member,” Hanna Zaidi, chief commercial officer and vice-president of payment strategy at Wealthsimple, said in an interview.
Being a Swift member means Wealthsimple can let clients track their wire transfer and have some international transactions land in under an hour.
Since its inception, Wealthsimple had become an Interac member, credit card issuer and opened a settlement account with the Bank of Canada to participate in real-time payments when it becomes available to the public, Zaidi added.
“It’s part of moving over your everyday banking,” Zaidi said. “We want to become a one-stop shop for all our clients to send and receive money, whether it’s internationally or domestically.”