The UK-based neobank is ending its operations in Canada after rolling out a beta version of its app locally a year and a half ago, per BetaKit. Revolut had plans to provide its full-fledged products and services in the country, but never officially launched, so it’s unclear how many users the app actually had. It will wind down beginning on March 29, and customers who do not use their remaining balance by May 15 will be reimbursed in full.
Revolut’s retreat highlights the difficulty of competing against Canada’s well-established incumbents. The country’s five largest banks—Scotiabank, CIBC, TD Bank, BMO, and RBC—dominate the sector. Digital banking penetration in Canada is forecast to spike from 69.7% in 2019 to 76.5% by the end of 2021, but most digital-only account holders are concentrated between two incumbent-owned digital banks, Tangerine and Simplii. The country’s current regulatory framework gives precedence to managing systemic risk over engendering a competitive environment, making it difficult for challengers to break through on their own. In fact, most fintechs need to rely on partnerships with the very incumbents they are looking to disrupt in order to offer new digital banking products to their limited customer base.
Despite Canada’s tough competitive landscape, digital challengers are still eager to expand in the market. Here are two reasons why:
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