Wealthsimple also unveiled an upgrade to its zero-fee chequing account and the company’s first unlimited cash-back credit card.Giordano Ciampini/The Canadian Press
Wealthsimple Technologies Inc. is promising Uber-like delivery of cash to customers’ doors and paperless cheques as part of its next push to become a serious digital challenger to Canada’s big banks – even as it relies on them to guarantee and hold its customers’ deposits.
The Toronto-based online financial services provider unveiled the two banking products Wednesday along with an upgrade to its zero-fee chequing account. Wealthsimple said it will add home cash delivery to its chequing account services – in both Canadian and U.S. dollars – and the option to write and send paperless cheques, bank drafts and wire transfers all from a mobile phone.
Chief executive Michael Katchen also revealed the company’s first unlimited cash-back credit card – with no tap limits – and a secured line of credit that will be instantly approved against assets held by customers.
“We are putting the bank in your pocket – your phone is the new branch,” Mr. Katchen said in an interview. “Banks make you work for them. You give them your money for free, they pay 0-per-cent interest and they make money on that deposit. Then they charge you for that benefit.”
Mobile bank drafts, domestic wire transfers and the new credit card are all available to customers now, while the other products are set to debut some time this year.
Mr. Katchen said Wealthsimple is “reinventing” the bank experience to be frictionless and free. Customers will be able to send cash by wire transfer domestically at no cost until the end of August. However, after that, the company will charge customers $20 for each transfer they send. There will be no cost to receive one. International wire transfers will roll out later this year.
“It is a step change in terms of the value proposition in Canadian banking,” he said.
The idea for cash delivery came to Mr. Katchen during a 2022 trip to Mexico, where the service is offered through mobile app Rappi. Wealthsimple declined to provide details on how the new feature will work in Canada but hinted that it could be similar to Rappi, which allows clients to request cash be withdrawn at an ATM by a rideshare driver. The company then charges a 5-per-cent fee and users can tip the driver.
Wealthsimple’s new banking features, announced at an event in Toronto, will propel the company beyond its wealth management focus to become a more fully fledged financial services provider.
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But Wealthsimple is taking a different approach than fintechs Questrade Financial Group Inc. and Koho Financial Inc., which have applied for Schedule 1 banking licences, meaning they would be able to accept deposits. Obtaining a licence is a long, arduous process that requires approval from the Office of the Superintendent of Financial Institutions and finance minister.
Instead, Wealthsimple is relying on partnerships with banks, leveraging their Schedule 1 status in order to offer banking services quicker than its digital rivals. In 2020, the company launched Wealthsimple CASH – a “hybrid” bank account that offered clients a high-interest chequing account – in partnership with two unnamed Canadian banks.
Now, Wealthsimple is partnering with 10 Schedule 1 institutions to hold deposits and provide up to $1-million of Canada Deposit Insurance Corp. (CDIC) insurance – protection offered in case of a bank insolvency. Traditional banks typically offer up to $100,000 an account.
Mr. Katchen, who has criticized banks for lacking transparency, declined to name his Schedule 1 partners, saying the agreements have “strict contractual obligations” that prohibit Wealthsimple from naming the financial institutions used for CDIC.
Meanwhile, Wealthsimple is adding a credit card after it became its most requested product, said senior product director Sam Newman-Bremang. Wealthsimple’s offering comes with unlimited 2-per-cent cash-back, no foreign transaction fees (cards typically charge 2.5 per cent on top of the exchange rate) and is free for clients with $100,000 in holdings or who directly deposit $4,000 a month. Otherwise, the fee is $120 a year.
Wealthsimple plans to make money on the card from a “small spread in the interest rate,” Mr. Katchen said, as well as through interchange fees when people spend money on their cards or line of credit. (The setup is similar to how Wealthsimple makes money on its free trading accounts.)
Banking has been on Mr. Katchen’s roadmap since he launched Wealthsimple in 2014. Known as an early “robo-adviser,” Wealthsimple was seen as a disruptor to financial services with algorithms that could calculate risk profiles for do-it-yourself investors who wanted a bit of hand holding.
The company later expanded to offer digital stock trading, a high-interest savings account, cryptocurrency trading, tax filing services and mortgage products.
Wealthsimple is majority owned by various affiliates of Power Corp. of Canada and serves close to three million clients, one-quarter of whom hold a chequing account.
Assets under management were $73-billion on March 31, up from $31-billion at the end of 2023.