Neo Financial: What You Need To Know About Neo

Neo Financial Mastercard

Neo Financial (legal name: Neo Financial Technologies Inc.) has emerged onto the scene with a fresh take on consumer financial services, squarely aimed at millennials. Read on for Mr. Thrifty’s take on this new player.

How old is Neo Financial?

The company was founded in 2018 and launched in September 2020, positioning itself as a FinTech startup that intends to disrupt the sector with a vision to “reimagine financial services for all Canadians”. 

Where is Neo Financial based?

Headquarters are in Calgary, a somewhat unorthodox choice for a financial services company. While still under the radar as a tech centre, Calgary has a strong and growing tech ecosystem with fellow FinTech companies like Solium Financial and Helcim, along with standouts like Parvus Therapeutics in life sciences and Attabotics in robotics. It’s also home to Providence Therapeutics, an early-stage company which focuses on mRNA vaccines and is currently developing one to fight Covid-19.

Neo opened a second office in Winnipeg in August 2021, in the former office space of SkipTheDishes. In November 2021, the company received a $1.6 million grant from the Manitoba government to support the training of its future Winnipeg-based employees, sufficient to support 300 new positions.

Who owns Neo Financial?

Neo Financial’s Crunchbase entry lists Andrew Chau, Jeff Adamson, and Kris Read as the founders. Chau and Adamson are best known as part of the founding group of SkipTheDishes, a Canadian online food delivery service that was acquired in late 2016 by British company Just East plc for $110 million.

According to Crunchbase, in December 2020 Neo Financial raised $50 million in a combined $25 million Series A equity and $25 million debt offering. 

The equity investor group was led by Valar Ventures, a New York based fund specializing in the FinTech sector. Amongst a number of other institutional investors, one notable individual participant was Tobias Lütke, the founder of Shopify. 

The debt component was provided by ATB Financial, which is also one of their business partners — ATB is the issuer of Neo Financial’s Mastercard product.

Neo Financial raised a $64 million Series B in September 2021, also led by Valar Ventures.

What services does Neo Financial offer? 

Neo Financial offers five products at the moment:

  • Neo Money™ – a High Interest Savings Account with one of the highest regular daily interest rates in Canada that also offers free Interac e-transfers, no monthly fees or minimum balances, and unlimited free transactions. More details are on their site here.
  • Neo Card™ – a no annual or monthly fee Mastercard with a credit limit of up to $8,000 which features cash-back rewards with a network of Canadian merchants. As a customer, you can choose the level of cashback rewards to some extent, by subscribing to a monthly plan. Depending on the plan you choose, there may be a monthly fee. Details are on their site here.
  • Neo Card™ (Secured) – all the features of the Neo Card™ with no credit check, for those just starting out or rebuilding their credit. You can obtain a credit limit between $50 and $10,000 which must be fully offset by cash deposits in your Neo Money™ account. More details are on their site here.
  • Neo Mortgage™ – a flexible mortgage that offers a 120-day rate lock, portability, and a 5% minimum downpayment. It’s basically a mortgage broker, as the actual funds come from one of their funding partners such as Home Trust, CMLS Financial, Canadian Western Bank, Strive, and RFA. More details here. More details are on their site here.
  • Neo Invest™ – a robo-advisor platform powered by OneVest that invests in ETFs based on your self-assessed risk profile. The ETFs cover a wide range of asset classes including fixed income, public equities, real assets, digital assets, and alternative asset classes. You can invest through your TFSA, RRSP, or a straight cash account. More details are on their site here.

Where does Neo Financial fit into the Canadian financial services landscape?

Consumer banking in Canada remains dominated by the Big 5 banks, which have about a 90% market share.

According to an interview in BetaKit, Neo’s ambition is “to build a platform that plays a part in every single financial touchpoint a Canadian has.” The company’s goal is to one day offer a full range of traditional financial services, spanning saving, spending, investing, and mortgages. 

Their key differentiating factor appears to be their rewards program, through which they intend to build customer loyalty. They partner with both local businesses like restaurants and coffee shops, as well as brands and retailers. Their website doesn’t show a master directory of their network of participating merchants so you’ll have to take it on faith that their merchants are relevant to you. Chances are that you’ll find some, as their network numbers over 10,000 merchants. You can download their app and browse their cashback network before signing up for one of their products. Some of their larger partners that are known publicly include Netflix, Spotify, DoorDash, Second Cup, Hudson’s Bay Company, Earls, Harry Rosen, Pet Planet, Frank and Oak, and Well.ca.

Their first major product partnership is a co-branded Mastercard with Hudson’s Bay which is currently offering 15% cashback on first-day purchases, plus a 15%-off welcome offer on your first day’s purchases at Hudson’s Bay or thebay.com. More details of the offer here.

The core strategy seems to be to build an audience through their Neo Card™ rewards app and cross-sell other financial services through partnerships, such that Neo Financial serves as the front end, essentially as an introduction service to the underlying funders or asset managers.

Within the FinTech sector, Neo Financial competes with companies like Koho, Mogo, NorthOne, and Wealthsimple.

How big is Neo Financial? 

The most recent public report of employee numbers in its Calgary office (as of December 2021) was roughly 400, up dramatically from the 130 reported in December 2020. They plan to hire 300 for the Winnipeg office.

Is Neo Financial safe?

The company’s Neo Money™ account is provided by Concentra Bank, a Canadian chartered bank and CDIC member. Your savings would be covered under CDIC for up to $100,000. One thing to note is that, in the unlikely event that you’re already a customer of Concentra Bank, your deposits at both Concentra and Neo Financial would be pooled towards the $100,000 deposit insurance limit, as it’s applied per category, per depositor. For more on deposit insurance, please refer to our Primer on Deposit Insurance post.

For those who haven’t heard of it before, Concentra Bank is a Saskatchewan-based bank that received its Schedule I charter in 2017. It describes itself as “… Canada’s number-one provider of wholesale banking and trust solutions to credit unions.” According to Concentra Bank’s website, the company employs over 300 people, serves 227 credit unions, and has $8.9 billion in total assets. The most recent DBRS Morningstar credit rating on Concentra Bank was confirmed on April 1, 2021 in which DBRS assessed long-term ratings at A (low) and short-term ratings at R-1 (low). The trend on all ratings remained Negative. See press release here.

Concentra operates its own consumer-facing unit called Wyth Financial, which offers HISAs, GICs, and mortgages.

On February 7th, 2022, it was announced that Equitable Group had agreed to acquire Concentra for $470 million through its Equitable Bank subsidiary. Equitable Group also controls EQ Bank, one of the leading challenger banks that offers very competitive HISA and mortgage products, including a US Dollar HISA. The transaction is expected to close in the 2nd half of 2022. It’s unclear whether this will have any impact on Neo’s relationship with Concentra. Mr. Thrifty speculates that it will not. Rather, the direct implications are more likely to be for Wyth and EQ Bank, as it would seem logical for them to merge their operations and brands.

What do customers say about Neo Financial?

To date, Neo Financial has acquired over 1 million users. Looking at the online sentiment about Neo Financial on Twitter, Trustpilot and Reddit, there is very little feedback about the company from its customers. You can also get a sense of customer satisfaction from the reviews of their app on Apple’s App Store and Google Play.

Summary – The Mr. Thrifty Take

Should you do business with Neo Financial? We think so.

The interest rate they offer on their Savings Account is currently one of the most competitive in Canada and it benefits from being CDIC insured. It’s not a time-limited, promotional rate but could change at any time (as could any HISA rate).

However, it’s not a substitute for a full-service bank since it doesn’t offer an ATM card nor chequing.

And Mr. Thrifty himself was prevented from opening an account as they don’t accept Google Voice numbers.

But for our readers, Mr. Thrifty is excited to see how this new FinTech player will develop over the coming years as it rolls out new financial services. 

Click here to open an account at Neo Financial


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