Canadian banks definitely could use the competition. But I wish we nurtured markets with many smaller competitors in this country instead of big oligopolies.
this post was submitted on 11 Jan 2024
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There are quite a few competitors in retail banking, like EQ Bank, Alterna Bank, motus, ....
But none of them have achieved a critical size IMO, especially when compared to WS.
The concern is doing that and then ending up like the US, where regular bank failures are a thing.
I'm fine with four or five big banks, but they should be heavily taxed and even more heavily regulated.
Right, I understand that point of view. Canada has fewer banks compared to the US which has both big and many smaller banks. Whereas the US has had over 500 bank failures in the last 20 years, Canada has had zero.
There is actually a split in interpretation as to why Canada has fewer bank failures. The more economically conservative interpretation is that it’s because Canada has fewer more powerful more concentrated banks. These people say it has little to do with good regulation (regulation bad!). We should just continue to give more power to the most powerful players. The more economically progressive interpretation is that it’s because Canada has stricter banking regulation that doesn’t allow for as much reckless risk taking. And this is empirically true. Canadian banks are more diversified and well capitalized due to regulations.
For my part, the conservative interpretation seems obviously false. Many very large banks have failed in the US, including SVB and Signature recently, and, famously, Washington Mutual in 2008, which was a huge bank. in fact, the conservative interpretation is kind of hilarious to me given that US bank failures lead to the creation of the expression “too big to fail“.
The concern is doing that and then ending up like the US, where regular bank failures are a thing.
There's zero concern of ending up like the US, it's a level of fuckedupness impossible to replicate at this point
The article is behind a paywall but...
Wealthsimple isn't even a bank, let alone the next big bank. They are not a deposit taking institution. Their 'savings account' is just an agreement with a number of actual banks to accept deposits from Wealthsimple on behalf of their clients. Wealthsimple is merely acting as an intermediary.
Being a true deposit taking institution comes with a lot more regulation and institutional sophistication. Never mind the fact that deposit taking is only one side of what truly defines banking: aggregating demand deposits to enable lending. I'm sure Wealthsimple is looking to get into that game, but since they aren't deposit taking I'm sure it will just be a pretty wrapper around another actual bank just like their 'savings accounts'.
Is Horizons ETFs the next big bank because of their CASH.TO ETF? Horizons is doing a very similar thing through a different vehicle.
Having said, Wealthsimple has clearly created a competitive product suite. But their ability to offer these products fundamentally relies on other organizations (e.g., Mastercard, Big 5 banks) to do the heavy lifting. Wealthsimple's competitive advantage is in product design and advertising.
It's why Laurentian bank is still looking for a buyer. Wealth Simple could have at least some banking assets already and simply build out their web presence. That they didn't means power Corp didn't want to get into the banking business.
Oh, that's really sad for the banks, then, because WS's product design is decidedly mid, at best.
Please do start, the only thing Weathsimple is missing right now for me is credit score building. It can even stay pre-paid, I don't care.
Having to maintain a separate credit card just to play the 30% game every month is the biggest banking pain in my life.
Personally, I'd like a solution to have more cash accounts, and especially joint ones and maybe kids accounts.
A real interact debit card would also be great, but that I can more easily deal with.
I was forced to use wealthsimple through my employers rrsp contributions and it was a nightmare. Wasn't entirely the fault of wealth simple as my employer made multiple mistakes but wealthsimple did not make it easy. Took a long time to get shit sorted since most of it had to be done over email.