Earlier this month, Wealthsimple became Canada’s first fintech to join the Swift network, allowing clients to track their fund transfers from end to end.
It’s all part of Wealthsimple’s wider strategy to be clients’ one-stop shop for all payments needs, Hanna Zaidi, chief commercial officer and vice-president of payment strategy at Wealthsimple, said in an interview.
But Neo Financial and Koho don’t have plans to join Swift, the digital banks confirmed to Investment Executive separately. They’re not competing for Wealthsimple’s clients and optimizing other payment methods are meeting their customer’s needs.
Different clients, different needs
Wealthsimple sees Swift as a great way for its clients to send a receive large sums of cash, such as closing on a foreign property or funding a foreign brokerage account, where institutions require wire transfers, Zaidi said.
However, Neo and Koho are geared towards everyday saving and spending — a different customer segment.
“We don’t have a lot of a lot of overlap with people who are making large international investments or [buying] foreign real estate,” Shane Parkhill, head of payments at Koho, said in an interview.
The situation is similar at Neo.
“Swift isn’t currently on our roadmap,” Jeff Adamson, chief commercial officer and co-founder of Neo, said in an email. “Swift becomes a relevant question when you’re serving clients with significant cross-border financial activity. That’s not the gap we’re solving right now.”
Alternative payment methods are just as good
But for these mass market fintechs, other payment methods work just as well for what their clients need.
For newcomers and first-generation Canadians looking to send smaller amounts of money to family abroad on a regular basis, Swift isn’t optimal as the fees can be higher, Parkhill said. The transactions are “frequent, … known, and to a specific location. And Swift isn’t actually additive in that use case.”
Instead, Koho aggregates payment volumes with partner banks, which sometimes have subsidiaries in several countries, to save on fees, Parkhill added.
Clients can transfer funds in less an hour with Swift in some cases, but Koho can also compete on speed with liquidity arrangements.
Koho has a pre-funded wallet in some countries so international transactions can go through right away, Parkhill said. “Even if the funds haven’t necessarily flowed through the system, we can still, in most cases, achieve the fund availability objectives for customers, without having the dollars actually flow through within an hour.”
And for locations where there isn’t a liquidity arrangement, a day or two delay on a regular, monthly transaction isn’t a big deal for customers, Parkhill said.
And as challenger banks ramp up the heat on big banks by competing on providing valuable services to customers, it’s important for fintechs not to cannibalize each other.
Where over 90% of Canadian customers’ deposits sit with the Big Six, “we try not to waste our time competing with other fintechs,” Parkhill said. “From an industry perspective, I love news like this.”
And Neo’s Adamson agrees.
“It’s genuinely good to see financial infrastructure like Swift becoming more accessible to a broader set of institutions,” Adamson said. “More access, more competition, more options for Canadians — that’s the direction things should be moving and is a strong signal of legitimacy for fintechs.”