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A Guide To Online Banks in Canada (2021)

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As traditional service models continue to transition to digital first, banking is high on the list.

The brick-and-mortar banks are attempting to cater to clients’ increasing appetite to conduct their banking digitally.

Apps of any big bank in Canada are readily available to do online banking, cheque deposits, e-transfers and much more.

But that competition is being subverted by a new breed of banks – ones that are completely digital banks.

With several companies having been formed in recent years with the ability to offer reduced fees compared to their physical counterparts, digital banking is becoming more and more popular.

Here’s a summary of 6 options for Canadians:

 Savings
Accounts
HISA
Rate
Chequing
Accounts
Joint
Accounts
Send
eTransfers
Account FeesGICRRSPTFSAMortgagesLoansLines
of
Credit
EQ BankYes1.70%NoYesYes$0YesYesNoNoNoNo
TangerineYes0.20%YesYesYes$0YesYesYesYesRSP LoanYes
SimpliiYes0.20%YesYesYes$0YesYesYesYesYesYes
MotusbankYes1.30%YesYesYes$0YesYesYesYesNoNo
AlternaYes1.40%YesYesYes$0YesYesYesYesYesNo
OakenYes1.50%NoNoYes$0YesYesFor GICNoNoNo

 

EQ Bank

EQ Bank is owned by Equitable Bank, a Schedule 1 bank that has been in business for over 45 years.

EQ Bank’s long history of service can be an endearing selling point when browsing options.

Currently, EQ Bank offers savings accounts, joint accounts, high interest GICs and international money transfers.

Their interest rate of 1.70% on savings is the highest currently available out of all banks in a high interest savings account (HISA).

Savings accounts can have a maximum balance of $200,000 and joint accounts are allowed $500,000.

 

Tangerine

Tangerine originally came to market as ING Direct in April 1997 and was pretty much the first ‘discount’ bank in Canada.

Scotiabank purchased ING Direct in 2012 and rebranded it to Tangerine by 2013.

Tangerine has a wide product offering, with many different savings accounts, chequing accounts, investment products and lending products.

Their lending offerings include mortgages, home equity lines of credit, credit cards and RSP loans.

Tangerine is the only one on this list that has a few physical locations called cafés, with locations in Toronto, Montreal, Calgary and Vancouver.

With Scotiabank as their parent company, customers can use any Scotiabank Branch ABM to withdraw or deposit for free and any Scotiabank ABM Network machine to withdraw free of charge.

They also offer a Business Savings Account with an interest rate of up to 0.55%, while most other FI’s don’t offer any sort of Business Savings Accounts.

As of December 2019, e-Transfers, which were previously $1 per transfer, have become completely free.

They’ve also introduced Interac e-Transfer, which is the standard that all of the big 5 banks are using, so transfers should now be near instant.

Previous customers will recall that Tangerine’s original Email Money Transfer service would usually take a few hours to a day or two to be received.

 

Simplii

Simplii Financial, a division of CIBC, came to market in 2017.

Originally started as PC Financial in 1996, a joint venture between CIBC and Loblaws owned PC Financial, the two decided to terminate their agreement in 2017.

All consumer banking was transferred to CIBC, and rebranded as Simplii, while PC Financial is still in market with a MasterCard offering.

Similar to Tangerine, Simplii’s product offering is wide, including savings accounts, chequing accounts, investment products and lending products, thanks to it’s CIBC backing.

However, Simplii also offers RRSPs and personal loans compared to Tangerine.

You can use any CIBC ATM free of charge to withdraw and deposit money and you can also use their mobile app to deposit cheques.

 

Motusbank

Motusbank prides itself on the fact that they don’t have any public shareholders.

Launched in 2019, they are actually owned by Meridian Credit Union, and refer to their customers as members.

Motusbank offers banking products as well as lending products, including a fully digital mortgage and boasting a high interest savings account with a 1.30% interest rate at the time of writing.

Use the Motusbank app to deposit cheques in addition to access to a no-fee ATM network called The Exchange Network, including access to your cash globally.

 

Alterna

Alterna Bank is the direct banking section of Alterna Savings, the second oldest credit union in Canada, managing about $8 billion dollars in assets.

Their product offering includes savings and chequing accounts, mortgages and investment products.

Their HISA account currently offers a solid 1.40% interest rate, among the highest of online banks.

They also offer a small business eChequing account with no monthly fee when you maintain a daily closing balance of $3,000.

Alterna has unlimited day-to-day transactions for its online chequing and savings accounts, however these accounts do not give users access to in-branch services.

In addition, the eChequing and eSavings accounts are subject to a $1.90/transaction fee for ATM Interac withdrawals.

 

Oaken

Oaken Financial is another online bank in Canada and happens to be backed by Home Bank, which is owned by Home Trust Company.

The latter happens to be Canada’s largest independent trust company and has been in service since 1987, with a large portfolio of residential mortgages.

Oaken offers flexible GICs with both registered and non-registered options, allowing you to hold them inside RRSPs and TFSAs if you wish.

Depending on the choice of term, these GICs can range in interest rates of 1 to 2.3% and require a minimum $1,000 dollar deposit, with the exception of the RRIF which requires a $10,000 deposit.

On that note, Oaken Financial also offers a high interest savings account with an interest rate of 1.50% as of writing.

Their accounts have zero monthly fees and zero transaction fees.

However, aside from transaction fees, Oaken does charge for paper statements that they can send you (a fee of $2).

Also, there is a dormancy fee of $20 if you do not use your account.

Oaken Financial is very niche, in that it does not offer a chequing account.

They’re mainly focused on GICs as well as mortgages, mainly due to their link with Home Trust.

Although it is possible that they may expand their products to further cater to the demands of clients, they currently do not offer an everyday transaction product.

Without an everyday banking product, Oaken cannot be used as your primary financial institution but may be a good option for investment accounts.

 

What about Wealthsimple?

If you had a chance to read some of the reviews on the products that Wealthsimple offers, you might be wondering why it wasn’t mentioned earlier on this list.

Unlike the other digital banks that were mentioned, Wealthsimple isn’t tied to a previously existing financial institution.

While many of its competitors are tied to one of the big banks or established credit unions, Wealthsimple is completely new.

Yet, it has gained momentum as one of Canada’s top competitors for investing and has since started offering many of the same products that traditional brick-and-mortar banks in Canada offer.

From a daily checking account, to mutual funds, catering to both registered and non-registered investment accounts, to an option for investing in individual stocks, (and eventually cryptocurrencies), Wealthsimple is becoming much more than the robo-advisor it initially set out as.

Their bank-like service offers zero transaction fees across all of its platforms, including the recently introduced chequing account via Wealthsimple Cash and the soon to be released ‘debit card’ which will work similarly to a Visa debit card.

Although they do not have physical locations to do transactions, they’re working on providing ATM access via several companies across Canada.

The short-term savings account offers a lower interest rate of 0.9% compared to some of the other banks mentioned above.

However, holistically, they offer a strong suite of financial products that come at zero fees including the ability to automate the investment process.

 

What’s the process like to open an account

So what’s it like to open an online bank account?

Generally, opening an account with any digital bank involves verifying your identity, sharing employment details, and for most, transferring funds from an existing brick-and-mortar bank.

Keep in mind that your identify is usually verified by the bank doing a credit check on you as they can validate your SIN and other details with TransUnion or Equifax.

What does that look like?

Let’s use EQ Bank’s signup process as an example.

 

EQ Bank Link Accounts

 

EQ Bank Sign Up Details

 

EQ Bank Sign Up Details 2

 

EQ Bank has a simple and clear signup process.

No complications.

In addition to their encrypted security (we’ll get to that a little later), your security is personalized with security questions you are required to set up.

 

EQ Bank Set Up

 

EQ Bank Verify Email

 

EQ Bank Sign Up Success

 

Once you’ve created your account and linked to an existing bank account, you can decide how you’d like to fund it.

 

EQ Bank Dashboard

 

Pros and Cons of Moving to a Digital Bank

Moving to a digital bank can provide savings in three forms:

1. Lower or no fees
2. Higher interest rate on savings
3. Lower interest rate on borrowing

By not being heavily tied to a brick and mortar presence, many of these digital banks can operate with lower expenses, and you as a consumer gain the advantage of these higher / lower interest rates.

In discussing digital banks with others, the number one ‘complaint’ I hear is the fear of these institutions disappearing or going bankrupt and the consumer having no ability to get their funds.

They mainly feel this way as there are no physical locations, so their comfort level isn’t as high if there was a moment when they needed to move all of their funds to another institution.

Fortunately, the digital banks, like their brick and mortar counterparts, are also backed by the Canadian Deposit Insurance Corporation.

In this way, your funds are just as protected by the Canadian government as they would be in any of the traditional banks.

 

How to Choose a Digital Bank That’s Right For You

From the list of digital banking options, it can be overwhelming to decide which bank to choose to take your first step.

Start with a needs analysis to surface what your primary requirements are.

Review the institutions that meet these needs.

Are you only looking for a savings account? EQ Bank might suffice.

Are you saving up a down payment and will need a mortgage shortly? You’ll want to think a little further and pick a bank that also offers lending products.

Compare rates and some of the added benefits.

And you may even consider starting relationships with more than one bank.

If you plan to use this new digital bank for the long-run, be sure that it fits your needs and works for you.

If you happen to be affiliated with a bank that you appreciate which also has a digital bank, ( i.e. Simplii and CIBC), it’s fair to use that as a starting point for your foray into digital banks.

In addition, you may have noticed that most of the banks mentioned in this article only offer a partial amount of services compared to what a traditional bank offers.

Certain banks, like Oaken Financial only offer GIC-based products that are un-registered for example.

If you’re looking to make tax-savings on your investments, Oaken would likely not be your top choice.

Similarly, if you were aiming to maximize your interest rate but still want to invest in tax-free accounts, EQ Bank might be the one you lean towards.

 

Wrapping Up

With people wanting to further move away from transaction fees and other costs that seem unnecessary with a brick and mortar bank, online banking has many benefits, albeit with some drawbacks.

If you can’t remember the last time you walked into a branch, the time might be right to reap the rewards of moving to a digital bank.

 

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Yusuf Ahmed

I'm just your average guy, trying to make my money work for me. I love to save and I love to write! I spend my free time digging into the stock market and checking out tools.