In recent years, mobile technology has made banking more convenient than ever—or has it? My guest this week would say that while online banking has come a long way, it remains far from seamless. Andrew Chau is the co-founder and CEO of Neo Financial, a technology company that’s creating a fully digital banking experience without the fees and hassles of dealing with a traditional bank. Andrew has a deep background as an entrepreneur. Prior to starting Neo Financial, in 2014, Andrew co-founded, Skip the Dishes, Canada’s leading food ordering and delivery platform. 

 

Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. This episode of the Maple Money Show is brought to you by Willful. Did you know that 57 percent of Canadian adults don’t have a will? Willful has made it more affordable, convenient and easy for Canadians to create a legal will and power of attorney documents online from the comfort of home. In less than 20 minutes, and for a fraction of the price of visiting a lawyer, you can gain peace of mind knowing you put a plan in place to protect your children, pets and loved ones in the event of an emergency. Get started for free at maplemoney.com/willful and use promo code Maple Money Show to save 15 percent. Now, let’s chat with Andrew… 

 

Tom: Hi, Andrew. Welcome to the Maple Money Show. 

 

Andrew: Hi, Tom. Thanks for having me. 

 

Tom: I wanted to have you on because your company, Neo Financial, has been doing some interesting things. It is following a trend I’ve seen over the years. These digital options always seem to offer the best value. There are lower costs, higher interest rates, all these perks. For me, going to a regular bank, I’m just kind of personally tired of it. If I can avoid depositing a check-in person or anything like that, I rather do that. What was your experience early on dealing with banks? And how did that lead to where you are now? 

 

Andrew: In my experience, I’d say I’m usually asked the question, why is it done this way? If you ask anyone on the street, your friends or family, how did you choose your bank, the number one response usually is, “I didn’t really choose my bank. My password just gave me the bank.” And that’s the issue we have these days. There hasn’t really been any choice because you’re talking about branches of big banks that exist today that all sort of look the same. When you take away all colours or logos, they all look the same and have the same products, same pricing, same interest rates—same everything. In my experience, even trying to open up a bank account for Neo—because, obviously, we’re a business so we had to open a bank account as well. Even that experience was pretty interesting. I walked into a bank that will remain unnamed. I had to wait in line and all I wanted to do was set up a bank account. Actually, prior to going to the branch, I tried opening up an account online. I think I submitted most of my information online and it told me to contact support or go into a branch to complete it. I thought, “Great! What a great digital application!” So I went into the branch and waited in line. By the time I got to the front, the teller said, “Hey, what are you looking to do today?” I told her I wanted to open up a business bank account. Then she asked if I had an appointment. And I said, “Oh, I need an appointment to open a bank account?” And she said, “Well, yeah, it’s a really big deal.” So I thought, okay, I’ll get an appointment and asked if I could get a slot in the next half hour or so and she said no, they were booked until next Thursday. And this was on Monday. So my experience has been not the greatest. But that’s really why we’re building Neo Financial. 

 

Tom: Yeah. With me, I didn’t choose my bank because of where my parents opened up an account, but I did pick the bank that had the branch closest to me. And from there became, “Well, I’ve got the checking account here so that’s where I’m going to go for my first mortgage and my credit card.” You go based on location. It’s not always the best option. Now, I’ve probably overcomplicated it where I’ve got what I think is the best option everywhere. I’ve got a high-interest savings account in one place and I’ve got my mortgage somewhere else. But I like that ability. With regular banks and online options, all pieced together, I can kind of find what’s right for me and not just stay with a bank until I die. 

 

Andrew: That’s a great point. 

 

Tom: What has changed with digital banks coming online? One of the things I think is interesting is we’re moving away from checks. Do you really see the need for a separate savings account and separate checking account, the way we would have done five, 10 years ago? 

 

Andrew: If you look at the real reason why there’s a savings and a checking account separately, it really comes down to the old legacy “tech” systems that banks have today. They can charge you different prices depending on how you’re storing your money. But at the end of the day, you’re still putting your money in the same pot. And it’s really just how you split it up and how it gets listed on your statement. That’s one of the reasons why we’ve just decided to combine both together. You can earn interest on all your money, not just what you put into a savings account. But it also gives you that unlimited transaction, the ability to do bill payments, e-transfer, bank-to-bank transfers, all within one account. When you start having two, three, four or five accounts, it just becomes more and more complex to manage your money. 

 

Tom: Yeah, and as complicated as I make mine sometimes, something like checks—it’s the end of checks for me. All I was using them for was when you have to write “void” on one to set it up for a prepayment somewhere. Nowadays with most options, you can just go online and get your “faked-up” void check version. You don’t even need that real cheque anymore to write “void” on. 

 

Andrew: Exactly. 

 

Tom: The other thing I gravitate towards these online options with is lower fees or no fees compared to a lot of the big bank options. It’s hard with traditional means to have a checking account that has no fees unless you have a certain balance in there. And like you said, why would you want to keep a balance in your checking account if you’re not making interest on that? So it’s very messy, the old way. You pay for one and you make money in the other between these two types of accounts. They’re kind of opposite purposes. If you want to get those “no fees”, you have to have a larger balance in there. 

 

Andrew: Yeah. And when you think about all these rules and these fees, when you peel back the onion layer by layer by layer and ask the question, why is it done this way? Does it cost the bank more money? What’s the point of over-limit fee on a credit card that lets me go over a limit? One has to question why banks allow you to go over a limit on your credit card? By allowing you to go over limit, they charge you $39. You start to figure out why they’ve introduced these fees because in reality, it doesn’t actually cost the bank any money to allow that. It’s really just another way to charge more to the consumer and try to justify it at the end of the day. That’s what we’ve really strove to get Neo—how do we create the best experience from a consumer angle that actually makes sense? The good thing is, we don’t have physical branches. We don’t have paper checks because those obviously just cost a lot more. And because of that, we’re able to pass a lot of that savings back to the consumer. Rather than us just trying to introduce online banking, we’re really reimagining the way banking should be. We’re starting with that in mind and then working backwards. 

 

Tom: Yeah, bringing up NSF fees and speaking of two separate accounts reminded me that years ago I had some bills just hit at the wrong time. I got hit with multiple NSF fees. In literally just days of me not watching my account they just hit in order I didn’t expect. Meanwhile, I had money in my savings account, but that didn’t matter. I still got these NSF fees on the checking account side. The other thing I want to ask you about is you brought up how difficult it was for you to sign up at a traditional bank and having to book an appointment and stuff. I know the online options, obviously, make it more convenient. How much more convenient are we talking? Is it a pretty simple process to sign up for an account compared to normal banks? 

 

Andrew: Yeah, with Neo, we’ve come a long way in terms of technology. When you think about the last 20 or 25 years, there’s been a lot of new things that have been invented. The first digital bank was ING Direct. That was back in 1997. Since then there has been social media, mobile phones, the iPhone and a whole lot of other tech advances. Yet, when you think about our banking experiences, those innovations and that experience haven’t necessarily translated over. Our banking apps are still distinctly different. They don’t look and feel like a “Skip the Dishes” or an “Uber” or an Airbnb, so how do we create that seamless experience, starting with the onboarding or at least signing up for four bank accounts? The same way you sign up for Uber, we’re trying to make opening a bank account as easy as that where you can do it in three minutes or less. You obviously need to submit your ID (or take a selfie to match it with your ID). That’s how we avoid going to the branch. And then you’re done. That’s how you can open a bank account. And it’s super simple. We don’t require anyone to go into a branch to verify with a second piece of ID because, again, we built all of our processes and infrastructure predicated on a digital basis. 

 

Tom: For anyone that hasn’t heard the term, fintech, it’s financial technology. It’s something I really like because even though you’re in the financial space, you’re in the technology space too. This is what’s driving all this innovation. Even with the big banks, they’re not as nimble, but they’re going to get there eventually with improvements to their apps and everything. It’s something where I’ve seen so much improvement over the last few years compared to the previous couple of decades of my adult banking life. Like I said, I can’t stand going to a bank just to deposit a check so if I do have a paper check, I love that I can take a picture of it and be done with it. Things like that are just so much more timesaving. Another thing is if a bank categorizes your expenses, especially on a credit card where it shows you where your money is going, these are features that just didn’t exist before. To have it now, I think really helps people in ways they may not even consider. They might just be looking at where they can save some fees. But there are really a lot of extra features that improve the quality of life when it comes to banking. 

 

Andrew: That’s exactly right, Tom. Even when we think about what we’ve built over the last 12, 18 months, from a feature and functionality standpoint, both on our card product but also on our bank account, you’re able to do everything you can do at any other bank. Whether it’s getting money, moving money, paying bills. And, of course, you earn a really high interest rate, but no fees. With the fintech part of things in terms of what we were able to build within the last 18 months compared to what a large bank has been able to do over the 100 years, imagine what Neo will look like 18 months from now, or 24 months—or three years, five years from now. That’s the potential and opportunity we have when it comes to the tech part of fintech. We can truly innovate and help people earn more, save more or just learn more about how they should be handling their money. And that’s really the exciting part for us. 

 

Tom: You mentioned doing all this over the last 18 months. One thing I’m thinking of is this Covid era. Do you think that’s helped with increasing the adoption? I think of people I wouldn’t consider very online savvy who are now banking online even if it’s through their traditional banks. They’re using Zoom calls and everything else. They just weren’t doing that two years ago even. Do you think that’s helped adoption in general? It’s hard to know what the other option would have been without Covid. But do you have a general feel about getting people outside the demographic you wouldn’t have expected when you were first launching? 

 

Andrew: Oh, yeah, absolutely. Even when you think about e-commerce or online banking in general, the adoption rate in the last 18 months was basically the last 10 years in terms of growth. It’s been a huge tailwind for us just as it relates to people not want realizing they can do everything online or through the phone and that they don’t need to go into a branch to do these activities. Generally, it’s life events or different external factors that give us a bit of a nudge to say, “Hey, why am I paying $14.99 a month for my bank account? Shouldn’t I be getting paid for holding money at this bank?” The goal for us is, how do we get that “option set” for all Canadians? How do we create Neo into a household brand? That’s really what we’re working towards. And when you think about the money that’s stored in our bank accounts, they’re all CDIC insured. They’re all backed and supported by federally regulated banks here in Canada. The safety and security is similar to any big bank out there. At the same time, you get the all the benefits of working with a tech company, too. 

 

Tom: There’s certainly online banks out there that are owned by the big banks. Simply and Tangerine look like great options. I’m not hating on them at all. But do you know of anything where you differentiate from them? I always have a corporate mindset with these things. They may be sort of less able to adapt and everything. It feels like being part of a corporation—a big corporation that my slow down the improvements. 

 

Andrew: The products they have are still sort of built off of a slightly newer but still older legacy technology. And when it comes to just innovating across the spectrum, starting with value, even if you look at the value from an interest rate perspective, for example, we’re able to pay significantly more. When they’re part of a bigger organization, one of the big parts is, how do they make sure they’re not cannibalizing the parent company either? And again, what’s exciting for us , even when I talk about our card product to our credit card is the rewards and merchants we partner with as well. We partner with several thousand retail restaurants, cafes, pubs across the country. We’re able to essentially help not only them, but also customers, earn cash back at these merchants to essentially drive more business locally to these businesses we’re partnering with. Those are the types of things we’re able to do for these merchants where these other banks wouldn’t necessarily try to go and sign up several thousand businesses one-by-one or door-to-door. This is really just the angle we’re taking. How do we take a much more localized approach,  a more grassroots approach to building a business?

 

Tom: You mentioned the credit card. I want to dive into that a little bit because that looks quite different too. With most credit cards, they might have the two percent cashback or some kind of travel points rewards, Aeroplan and Air Miles and such. You said you’ve got cashback, but it’s connected to the retail locations. What does that look like? I guess my worry is, is it complicated with the 1,000 plus or do you just kind of find what works for you? Is it in the app? 

 

Andrew: That’s a great question. First and foremost, the reason we built a cashback network instead of a points network was because the number one biggest waste in the world, especially here in Canada, is that 80 percent of points are generally left wasted. People either don’t know what the points balance is or they just never can redeem them. It’s really difficult because there are blackout periods and many different issues with the points in general. What we’ve really focused on is how to create an experience that simple and easy to use. The best way to do that is through cashback. Now, we sort of have two parts to our program. We offer cashback at thousands of merchants across Canada—gas, grocery, retail, restaurant, cafes. And depending on where you live, it depends on your selection. But it’s a pretty robust selection on that front. And on average, you can earn a cashback up between four to six percent on your spend at these partners. One unique part to your point is it isn’t complex. You use the app or log in online to view the cashback merchants we work with. We’re so confident in our network that we actually guarantee you earn one percent cashback on all your spend. So it doesn’t matter if you’re shopping at those merchants or not, we’re going to guarantee that you’re going to earn one percent cashback, which is one of, if not the best, cashback for a no-fee credit card in Canada. 

 

Tom: How does that work? Do you actually top it up to one percent? 

 

Andrew: We do. 

 

Tom: It’s not that they have to call in or something, right? 

 

Andrew: No, no, not at all. It’s all automated. We’re a tech company, Tom. Come on now. 

 

Tom: It didn’t sound like something you’d want to handle. 

 

Andrew: If, for some reason you only earn half a percent that month, we’ll top you up to one percent. That way you don’t need to worry about where you’re shopping or how you’re shopping. But if you want to consistently earn five, six, seven percent… This past weekend I ate at a restaurant here in Calgary and earned 15 percent at one of the restaurant partners we work with. It was a new place I had never tried before. It’s a way to discover some of the different options and places you have in your neighborhood as well, while still supporting local, but also earning cashback at the same time. 

 

Tom: I assume the benefit for these restaurants and stores, joining is kind of a marketing format for them, right? 

 

Andrew: Yeah, exactly. 

 

Tom: And if it’s your favorite store, your favorite restaurant, I think that makes the card all the better. If one of your number one places to shop is included in there, then obviously that’s better than any one or two percent card that has an annual fee. With this card, it’s a true credit card, right? Because there are other cards with similar formats for this retail base reward system. But I believe they’re all prepaid cards. They’re not real credit cards. You have to put the money in. But this one’s an actual credit card? 

 

Andrew: This is an actual credit card. One thing that will be coming out quite shortly is the ability to not have to do a full credit check and make it a more like a secured card. So for those that don’t qualify for credit, you can still get access to our rewards and cashback network and use it as a secured card instead. 

 

Tom: Is that as an option? Or is it only if I were to sign up for the card? 

 

Andrew: It is. Exactly. You can choose. If you don’t want another credit card and just want to leverage your security deposit, you can opt in for that option, too. 

 

Tom: I like the idea of secured cards. Is this part of your plan to better serve those that are underserved, those that do have bad credit? Is this it or do you have any other ideas? It just seems like one of these areas where traditional banks would rather just push them back out the door—sometimes for good reason. They have to weigh the risks and everything. But is this something you’re headed towards more? 

 

Andrew: Yeah, I think for us at Neo, our goal is to create an experience that’s made for all Canadians, regardless of credit score, regardless of age and regardless of income. And when we have that mission in mind, for us, it’s really around how do we keep our costs as low as possible so  we can serve all Canadians? Because of our different structure and tech and that we’ve built everything from scratch, we’re able to offer these products at no fees. We’re able to offer a no-fee bank account. We’re able to offer a no fee credit card. Most secured cards charge you $50 to $75 a year to rebuild your credit. If you’ve just turned 18 and don’t have credit, we can also help you build your credit, too. If you’re new to Canada, we can help you build credit through the secured option. So it’s really a one-stop-shop for all Canadians to get access to credit. But if they don’t want access to credit, again, they can use the secured option to do so. It’s one way to pay. And that’s really our mentality with the card. Rather than it just being one singular, focused piece, that’s the tech we’ve built. You don’t need to hold five different Neo cards. You can have one single card that rules them all. 

 

Tom: Being so technology focused with the adoption increase in the last 18 months compared to the past decade, what do you see in the near future? Whether it’s one year out or five years out, what do you see for the future of banking, if you can get your crystal ball out? 

 

Andrew: The future of banking, which I hope Neo is a part of, and what makes us really excited is that with tech, with phones, with data, we can create these really seamless experiences to truly impact Canadians lives and put more money into our pockets. And what I mean by that is, we can help people buy a home. We can actually imply and say, “You’re currently paying X dollars for rent (because we can see that coming into your bank account). We know what the mortgage rates look like. We can actually help you save towards buying a home. And by the way, you can do that in 18 months because of the way that you’re saving today. And when you do want to get that mortgage, what if we could just help you do it in five clicks or less? Because we already have your name, your phone number, your address. We don’t necessarily need you to fill out 300 more pages of paperwork when you go and apply for a mortgage”, which I’m sure you did already, Tom. 

 

Tom: Yes, I have a few “printed out” mortgages in the past. 

 

Andrew: Exactly. So for us it’s how to create this seamless experience and just help Canadians along the way, regardless of where they are in their financial journey? But along that financial journey, we insert ourselves into the background to be that automated assistant along the way. That’s the opportunity that we have because all the data is there. It’s as simple as, “How much money are you spending? Where are you spending your money?” I think there’s been a lot of evolutions and iterations on that in itself in terms of budgeting and spend insights, all the way going to, “Hey, we can open a mortgage for you in two clicks. And by the way, if you want to start planning for retirement, here’s another up product as well…” It’s not pushing products, it’s more pushing solutions. 

 

Tom: Yeah, I love that. I fully agree with everything you said. As we head more towards these automated options, these online options, it’s just going to get easier and easier where you don’t have to even go into the bank. You don’t have to review a bunch of options because the choices are displayed right in front of you and everything goes a lot smoother. 

 

Andrew: And I think one good example I like to pull from is, you know how Netflix Canada first came to market? The selection was so-so. It was a little bit mediocre but over time it gets better and better and better. And today it’s pretty darn amazing. And then you layer on top of that, the more and more you use Netflix, the more recommendations they have around what your preferences are and so on. Why don’t we have that with banking today? Banking has just remained as a product. A very, very—it’s, here’s a product and that’s all you get. In reality, it should be more personalized like Netflix. And unfortunately, Netflix just came first because people just love TV and movies but we should be thinking that same way when it comes to our finances, too. 

 

Tom: Yeah, yeah. People put more focus on things like Netflix. But you’re right. Obviously, the audience to this podcast is different, but in general, people probably do put more thought into things like what they want to watch on TV and where they want to go for vacation than they do on their finances. As services evolve, I think it’s just going to help out everyone, especially those that have no interest in following any of this. 

 

Andrew: And that’s really our job, right? At Neo, and hopefully other banks and fintech’s out there, I would make it so you don’t have to think about it. Or we make it easier to think about because right now it isn’t very easy to think about. That’s really what we’re driving towards. And, again, that’s the opportunity and the exciting part of what we’re going after. 

 

Tom: We talked about, Neo a lot, naturally, on this episode, but can you let people know more about it officially? Where can they find you guys online? 

 

Andrew: Yeah, absolutely. The best way to find us is on our website. It’s neofinancial.com. You can also download our app on the App Store, both Google and Apple. And we have both the app and the online web you can sign up for. You can check us out, create an account. Today we have our card products. We also have a bank account. But the exciting part is we are quickly launching new products and services in the future. 

 

Tom: Great. I look forward to seeing them. Thanks for being on the show. 

 

Andrew: Right on. Thanks so much, Tom. 

 

Thank you, Andrew, for shining a light on some of the areas where banking needs to be improved for the benefit of all Canadians. You can find the show notes for this episode at maplemoney.com/166. Last but not least, here’s one final reminder to grab you and free tickets to the Canadian Financial Summit, which kicks off on September 22nd. To get your free tickets, head over to maplemoney.com/summit. I’ll be there and I hope you will be, too. Thanks, as always for listening. I really appreciate the community we’re building both on the Facebook Group and the personal messages and reviews I’ve received. I look forward to seeing you back here next week.