BMO is doing mo’ to take on challenger banks.
What happened: BMO said that it will soon be the first of Canada’s Big Five banks to offer stock, options, and ETF trading without commission fees through its BMO InvestorLine product — a play to attract younger clients who are increasingly driving investment growth.
Why it’s happening: Zero-commission trading is a top offering from Canada’s challenger banks and digital brokerages, helping them win younger customers and become staples of the financial services sector. BMO, reading the tea leaves, said ‘two can play at that game.’
Why it matters: This move could mark the beginning of the end of the first-mover advantage Canadian fintechs have enjoyed over legacy lenders. In combining their capital advantages with new-school offerings, banks could crush what has become a real thorn in their sides.
Per Environics Research, the Big Five accounted for 42% of new retail account openings last year, compared to 26% for digital-first institutions. However, they also accounted for 62% of lost customers, while digital institutions accounted for just 12%, hinting at a landscape where many consumers have a secondary digital provider.
Zoom out: In other challenger bank news from this week, Scotiabank subsidiary Tangerine divulged plans to revamp its offerings to better compete with the likes of Wealthsimple. Meanwhile, Neo Financial laid off 10% of its workforce, with CEO Andrew Chau saying on LinkedIn, “We’re going to build fewer things faster, and build them exceptionally well.”—QH
