The news: Canada-based digital bank Neo Financial raised $185 million CAD ($147.6 million) in a funding round, per PYMNTS.
More on this: In addition to the funding, Neo Financial announced it has reached 1 million users. The digital bank offers cash back, savings, and investment products, and later this year plans to offer mortgages. It also touts a number of partnerships with retailers like Hudson’s Bay, Home Depot, and H&R Block. With these retailers, Neo Financial offers products like co-branded cards and buy now, pay later options.
Trendspotting: Including Neo Financial, Canadian neobanks have raised over $1 billion CAD over the past year and are bringing serious competition to the five Canadian incumbent banks.
The funding seems to align with a shift in banking regulation in Canada. The country’s regulatory framework historically gave precedence to managing systemic risk over engendering a competitive environment, making it difficult for challengers to break through on their own. But the tides are turning.
The big takeaway: In Canada, at least, neobanks are gaining steam, fueled by increased funding. But they still face challenges in a country long dominated by a small group of incumbents.
Additionally, 99% of the Canadian population is banked. Neobanks will need to focus on creative ways to set themselves apart from incumbent banks to attract customers. For example