Key Takeaways:
- Wealthsimple Technologies Inc. is partnering with Canada Post to allow customers to deposit cash at over 5,500 post office locations across Canada.
- The service is part of Wealthsimple’s efforts to replace branch-based banking and provide financial access to rural and remote communities.
- The partnership may also provide a boost to the national postal service, which has been struggling financially.
- Experts say the initiative has the potential to improve financial inclusion for low-income households that rely heavily on cash.
- Wealthsimple’s approach differs from other fintechs, as it has partnered with Schedule I institutions to hold deposits and provide insurance coverage.
Introduction to Wealthsimple’s Partnership with Canada Post
Wealthsimple Technologies Inc., a Toronto-based financial services provider, has announced a partnership with Canada Post to allow customers to deposit cash at over 5,500 post office locations across Canada. This move is part of the company’s efforts to address gaps in digital banking services and provide customers with more options for managing their finances. The partnership is expected to be available to all Wealthsimple customers in a few weeks, after a testing phase with a select group of customers.
The Need for Alternative Banking Services
Wealthsimple’s customers had previously limited options for depositing cash, often relying on other major banks for transfers. The company’s director of product, Danish Ajmeri, noted that as a digital-first product, Wealthsimple does not have an extensive network of branches and ATMs like traditional banks. To address this, the company has been working to find alternative solutions, including the introduction of one-to-two-day delivery of physical bank drafts and Uber-like cash delivery to customers’ doors.
How the Cash Deposit Service Works
Eligible customers can make a deposit using a QR code, which a Canada Post clerk would scan to initiate the transfer after validating a government-issued photo ID. There is no fee for depositing the funds, making it a convenient option for customers. The service is part of Wealthsimple’s efforts to replace branch-based banking and provide financial access to rural and remote communities.
Wealthsimple’s Approach to Digital Banking
Wealthsimple’s approach to digital banking differs from other fintechs, such as Questrade Financial Group Inc., which is applying for a Schedule I banking licence to accept deposits. Instead, Wealthsimple has partnered with undisclosed Schedule I institutions to hold deposits and provide up to $1-million in coverage from Canada Deposit Insurance Corp. This approach allows Wealthsimple to focus on providing digital banking services without the need for a physical branch network.
The Impact on Rural and Remote Communities
The partnership between Wealthsimple and Canada Post may have a significant impact on rural and remote communities, where access to physical banking is declining. Data from the Canadian Bankers Association shows that the number of bank branches per 100,000 adults fell 15% between 2012 and 2021, with rural communities disproportionately affected. The average travel distance to the nearest bank branch nearly doubles for rural residents who lose their last local branch, making it difficult for them to access financial services.
The Potential for Improved Financial Inclusion
Experts, such as Jerry Buckland, a professor of economics and international development studies, believe that the partnership between Wealthsimple and Canada Post has the potential to improve financial inclusion for low-income households. These households often rely heavily on cash and have limited access to digital banking services. The partnership may provide them with a more convenient and affordable way to manage their finances, reducing their dependence on lower-quality financial services.
The Potential Boost to the National Postal Service
The partnership between Wealthsimple and Canada Post may also provide a boost to the national postal service, which has been struggling financially. The Canadian Union of Postal Workers has long advocated for the creation of postal banking, citing examples such as Japan Post Bank and postal banking services in India, China, and Portugal. While the success of postal banking initiatives is not guaranteed, the partnership between Wealthsimple and Canada Post may be a step in the right direction for improving financial access and supporting rural and remote communities.
