Neo Financial is a recent entrant to the Canadian fintech scene. It was founded in 2019 and competes with Canadian fintech startups like Koho, Stack, and Mogo. Its main selling points are its high-interest savings account and its credit card. It’s rare for a neobank to offer a credit card because it’s easier to issue prepaid debit cards. But there are a few neobanks that offer credit cards these days. Financially savvy people mainly use credit cards to take advantage of their reward programs, so it’s worth comparing the Neo Financial reward program to the reward programs at other Canadian neobanks.
Card Rewards Program Comparison
The Neo Financial credit card is a rewards credit card. It offers 4 percent cash back on purchases at Neo Financial’s partners, but it doesn’t offer rewards if you make a purchase from a merchant that isn’t in the neobank’s network. The premium version of this service, which costs around $10 per month, offers 6 percent cash back at partner stores and 1 percent cash back from other merchants.
That’s worthwhile if you shop at Neo Financial’s partner stores, which include the Hudson Bay department store. This neobank scored a major win recently by getting the contract to manage Hudson Bay’s store credit card program. It would be like a US fintech startup getting selected to run the store credit card program for Macy’s, TJ Maxx, or Kohl’s. Hudson Bay has 2 million customers signed up for its credit card already. And the Hudson Bay credit card provides cashback rewards when it’s used at other stores in Neo Financial’s network, so it’s better than a normal department store credit card.
Competitor Mogo, on the other hand, offers 2 percent cashback on all purchases. It also pays out the cashback rewards in bitcoin and the fintech buys carbon credits when people use its prepaid debit card. Mogo doesn’t offer credit cards.
Stack offers discounts at several high-end retailers. Some of these discounts are as high as 50 percent. But you don’t earn rewards from merchants that aren’t Stack’s partners, and it doesn’t have that many partners.
Koho offers 0.5 percent cashback as a basic feature. If you pay $9 per month for the premium service you get 2 percent cashback on food and transportation expenses. And Koho partners also offer larger cashback rewards if you shop at their stores.
In my opinion, Mogo’s rewards program is better than the programs run by the other Canadian neobanks. Its 2 percent cash back reward on any purchase is more useful than a rewards program that only works at specific stores.
Currency Conversion Fees Comparison
The Neo Financial credit card has a 2.5 percent currency conversion fee. It also uses the exchange rate set by MasterCard. This means that the rate includes a spread and isn’t the mid-market exchange rate.
Mogo has a 2.5 percent currency conversion fee as well. It issues Visa cards through its partnership with Peoples Trust Company (its partner bank) so it’s likely that Visa sets the exchange rate.
Stack doesn’t charge any currency conversion fee. Additionally, it has a rewards program just for travelers called Stack Travel that offers 20 percent cashback on stays at certain hotels. This appears to be one of the neobanks designed for young and wealthy travelers. It even has a social network called World Stream where its users can show off their purchases. Stack also uses MasterCard’s exchange rate.
Koho charges a 1.5 percent currency conversion fee on its basic accounts, but premium account holders don’t have to pay this fee. Koho’s also partnered with Peoples Trust and Visa.
Stack is the winner here because it doesn’t require its users to pay $9 per month to avoid currency conversion fees.
Deposit Account Interest
Neo Financial offers 1.3 percent interest on its savings account. This neobank doesn’t offer checking accounts but the savings account doesn’t limit transactions so it functions like an interest-paying checking account. The savings accounts are managed by Concentra, a Canadian bank that primarily serves credit unions.
Koho pays 1.2 percent interest. Once a user sets up direct deposit and signs up for Koho Save, Koho pays interest on the entire account balance. The Koho Save program is managed by ShareOwner Investments Inc, a subsidiary of WealthSimple. And WealthSimple is often considered a competitor to Canadian neobanks because it offers similar services, although it’s primarily a roboadvisor.
Mogo and Stack don’t say anything about their deposit accounts paying interest on their websites.
Neo Financial is the winner in this category. It not only pays the highest interest rate, it doesn’t add any conditions to qualify for the offer.
Credit Building Services
Neobanks often market their services toward underbanked people who don’t have bank accounts already. These customers may have poor or nonexistent credit. And some neobanks offer services that help their customers establish credit histories so they can take out other loans.
Neo Financial may not approve credit cards for applicants who have poor credit. The neobank also checks a borrower’s credit when it sets the interest rate and the borrowing limit. Its Hudson’s Bay credit cards work the same way. And Neo Financial’s credit cards replaced the old department store credit cards, so Hudson’s Bay customers will have to submit new applications to the neobank.
Mogo doesn’t offer credit cards but it does offer fixed-term personal loans. The financial institutions that provide loans through its platform include Lendful and easyfinancial.
Stack doesn’t loan money to its users, it just offers travel debit cards.
Koho offers a credit building service that costs $7 per month. This service doesn’t require a hard credit check and is available to customers with poor credit.
Koho is the leader in this category. If you don’t qualify for loans from other Canadian banks you can build up a credit history with this fintech.
Neo Financial Is Best for Savings But Not Other Services
Neo Financial offers a better savings account than the other Canadian neobanks and is the clear winner in that category. It also pays much more interest on savings accounts than traditional banks in Canada, although Koho can say the same thing. And it offers a credit card, unlike other Canadian neobanks, which may be useful in emergencies.
But there wasn’t an overall winner in this comparison between fintech startups. Each of the Canadian neobanks performed the best in one specific service area. Stack offers the best Canadian travel card and Mogo has the best rewards program. And Koho offers a credit building service. So if you’re considering any of these Canadian neobanks, it’s important to decide which feature matters most to you.