Calgary’s Neo Financial has raised C$185 million led by billionaire Peter Thiel’s Valar Ventures—launching the challenger bank into (Canadian dollar) unicorn status, or a valuation of over $1 billion.
Neo is part of a wave of challenger banks (including Wealthsimple and Koho) that target customers they view as underserved by Canada’s Big Five banks, including millennials and small businesses.
- Challenger banks are not technically banks by regulatory standards but offer bank-like products, often digital-focused and packaged in approachable branding.
- Neo offers a variety of products, including cash-back rewards, savings, a private wealth management product, and plans a mortgage offering for later this year.
Since its 2021 launch, Neo has welcomed over one million customers and has nearly doubled its employee count to 650. Andre Charoo from Maple VC told TechCrunch that Neo is the “fastest-growing company he’s seen in Canada.”
Why it matters: Challenger banks like Neo are a fast-growing presence in Canada’s $550B banking sector, but they’re limited by banking regulations that prevent them from offering the most lucrative financial products (like lending) without partnering with a traditional bank.
Still, they continue to quickly build new products and features that have opened up options in a market that has historically been dominated by five banks (who own ~90% of the country’s market share)—and Canadians are buying in.
