A house listed for sale in Toronto’s west end in July, 2024. Bank drafts, the standard way to make payments to close on a home purchase, are a major source of difficulty for online banks.Sammy Kogan/The Globe and Mail
Earlier this month, I wrote about how I ditched my Big Six bank in favour of an online upstart. It made my banking more streamlined, and I save on fees.
The responses were overwhelmingly positive. Readers chimed in about how they’d done the same and were surprised more people haven’t caught on.
But one e-mail caught my eye. Nancy Robertson, vice-president of sales at Sotheby’s International Realty Canada, said she has seen multiple home sales nearly fall through because a client only had an online account.
She knew of roughly 10 cases in the past year in which an online bank led to issues for people closing on a home because wire transfers took longer, banking staff were difficult to reach or the company had difficulty completing the kind of large transfers required in a real estate deal. (They all managed to close in the end, albeit sometimes with delays.)
“In our experience, it’s been an issue every time,” Ms. Robertson said. “We now ask our clients who they bank with.”
Bank drafts – the standard way to make closing payments on a home purchase – are one major source of difficulty. They’re available instantly at in-person banks but can take multiple days to be couriered by some online banks.
Ms. Robertson said she tells clients with online banks to make alternate arrangements, such as relying on a family member to make a large fund transfer.
I can relate. When I bought my first home a couple of years ago, I had to make a mad dash to my brick-and-mortar bank to get a last-second bank draft.
But considering how infrequent these kinds of big purchases are, I decided switch anyway.
There are also some workarounds.
For example, Simplii Financial is one of the few online banks that can generally provide a rush order for a bank draft within a day. Instead of waiting for it in the mail, clients can pick it up from a CIBC branch. (CIBC owns Simplii and also allows Simplii customers to use its ATMs for free.)
Meanwhile, EQ Bank spokesperson Maggie Hall said the pending introduction of a real-time payment system in Canada should solve this issue.
Real-Time Rail, an instant payment system that will allow funds to be moved seamlessly between institutions 24/7, has been under development for years in Canada. The technology is finally set to begin testing in the fall.
Have you run into unexpected issues as a result of not having a brick-and-mortar bank? Get in touch at sfarooqui@globeandmail.com.
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