Daniel Eberhard, founder and CEO of Koho Financial Inc., speaks during the Canada Fintech Forum in Montreal Sept. 22, 2025. Koho’s leaner size and cost structure – it only has 250 employees – will allow it to provide more affordable and valuable services than its big competitors, Mr. Eberhard says.Bloomberg/Getty Images
Online bank challenger Koho Financial Inc. is buttressing its bid to become a federally regulated bank with a $130-million financing round to build its capital base and product suite.
The financing amounts to “the last piece of the puzzle” in its bid to secure a Schedule 1 bank license, which would allow Koho to accept customer deposits, chief executive officer Daniel Eberhard said in an interview. That could come as early as this year, and would allow the financial technology company to provide lower-cost products and fill gaps in its banking services, he added.
The financing also substantially increases Koho’s valuation, to $1.33-billion including the money raised, from about $760-million in 2024 when it raised $40-million in equity. That makes Koho the latest private Canadian fintech to surpass a $1-billion valuation, joining Wealthsimple Financial Corp. and Nesto Inc. Koho has raised $507-million in equity to date.
Abu Dhabi sovereign wealth fund Mubadala Investment Co. and Baltimore-based Savano Capital Partners led the most recent round, backed by existing investors including Power Corp. of Canada’s Portage Ventures (an investor in Wealthsimple and Nesto), Drive Capital, BDC Capital, Healthcare of Ontario Pension Plan and Eldridge. Shopify Inc. CEO Tobi Lütke and Affirm Holdings Inc. chief operating officer Michael Linford also joined as new investors. Koho is still more than 50-per cent owned by Canadians, Mr. Eberhard said.
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Koho has focused to date on building its business around digital debit cards. It offers customers cash back on purchases of groceries, transportation and dining expenses at more than 1,000 merchants. Account fees range from free to $18 a month, with pricier offerings including access to free foreign wire transfers and tools for building credit scores. Koho partners with other institutions including People’s Trust, a charter bank, and Propel Holdings to offer high-interest savings products and lines of credit.
Koho chairman Chris Olsen said by leveraging debit cards and offering cheaper alternatives to what have been high margin products for banks, the company has generated “the best unit economics of any fintech” that he knows.
“Customers retain for longer, use the products more frequently and refer Koho to their friends more infectiously,” said Mr. Olsen, who is also a partner with Drive in Columbus, OH.
Koho has 2.5 million members and generates more than $200-million in annual revenue, up 50 per cent year-over-year.
Adam Felesky, CEO of the global fintech private investment platform Portage, said Koho “has done an excellent job” thus far. “But it will only accelerate with a full bank charter.”
The proceeds from the new financing provide Koho with the initial capital base required to meet the regulatory conditions to operate as a federally regulated bank. The license will allow Koho to hold customer deposits, providing it with a cheaper source of funding – 70 per cent below its current cost of capital – and putting it on equal footing with Canada’s big banks, Mr. Eberhard said.
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Mr. Olsen said the company hopes to use those savings to pay higher interest rates and “offer an array of other financial products we couldn’t otherwise afford” such as car or home loans.
A banking license would also provide more confidence to potential customers who are skeptical of newer financial services players. Canadian banks must maintain high regulatory and capital requirements to prevent failures and safeguard their clients’ savings and investments.
Koho applied for a bank license in 2021, launching a three-phase regulatory process which typically takes several years. In early 2024, Koho moved into the second phase. That year it raised $190-million in equity and debt to help boost its loan book. In May, Koho became one of the first non-banks to join Interac Corp.’s payments system and use its e-Transfer service.
Mr. Eberhard said Koho’s leaner size and cost structure – it only has 250 employees – will allow it to provide more affordable and valuable services than its big competitors.
“If you do your job well, you can translate that cost structure into better outcomes for users,” Mr. Eberhard said. “That should mean that we will pay the highest savings rates in the country. It should mean that we will move a lot faster.”
Canada’s banking regulator recently launched a pilot project aimed at taking years off the application process to become a bank. The Office of the Superintendent of Financial Institutions is making the changes in an effort to introduce more competitors into the market.
The application process is lengthy, costly and cumbersome for upstarts including fintechs; many, including Wealthsimple, have opted out, choosing to build outside the federally regulated system.
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A key part of the shift is overhauling OSFI’s culture and overhauling the regulator’s approach to bank failures. The regulator has historically been focused on ensuring that banks could not fail.
OSFI superintendent Peter Routledge has said that regulation and supervision should reduce the risk of failure, but financial institutions should be able to conduct business in a competitive environment. That could mean they experience challenges that lead to failure.
Mr. Eberhard said this is the critical change needed at OSFI to introduce more competition in the banking sector.
Mr. Routledge “recognizes the conditions that have been created and how detrimental that’s been to the average Canadian,” Mr. Eberhard said. “These folks at OSFI are really enthusiastic and encouraged by the new direction.”