Big banks dominate in Canada as challengers look to make inroads
It’s not easy going up against Canada’s banking oligopoly, but some are trying.
Challengers like EQ Bank and Wealthsimple are rolling out new and cheaper offerings, growing their base and gaining brand recognition. But experts say that rather than creating a disruptive threat to the big banks, mid-sized players are more likely to be bought up by the majors.
“The banking market in Canada is not known to be very competitive. It’s not going to improve,” said Claire Célérier, Canada Research Chair in household finance at the University of Toronto’s Rotman School of Management, who expects more consolidation ahead.
The outlook comes after RBC closed its $13.5-billion takeover of HSBC Canada in March, while National Bank is in the midst of buying Canadian Western Bank in a $5-billion deal.
Fee competition
The loss of the two mid-sized players in what was already a small pool of competitors to the Big Six banks leaves few others with enough scale to even distract the majors.
Wealthsimple is emerging as one, after reporting this past week that it has more than $50 billion in assets, more than double from last year and more than seven times what it had five years ago.
The growth seen with the firm’s business model has led chief executive Michael Katchen to declare that Wealthsimple is the “first and only credible alternative to the big banks in Canada.”
The fintech company’s low fees are a central draw, offering no-commission trading and low investment management rates as part of a growing suite of products as it tries to fill a void of competition.
“When you take out the mid-range players, you make it even more less competitive, and I think the way that shows up is Canadians suffer when it comes to fees,” said Katchen.
The big
Read more on globalnews.ca
