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Office towers in Toronto's Financial District are seen from the 43rd floor (looking south) of the Sheraton Hotel on August 31 2015.Fred Lum/The Globe and Mail

Mogo Finance Technology Inc. has had a rough ride since its initial public offering in June. But even though its share price has fallen by more than 50 per cent, the online lender has not been swayed in its belief that it poses a big threat to traditional banks.

"Ultimately, our goal is to build the largest digital financial brand in Canada, which we believe could one day be larger than even the banks," said Dave Feller, Mogo's chief executive officer, suggesting that the company could have more customer accounts than Royal Bank of Canada within the next five to 10 years.

That's a little hard to imagine today. Even National Bank of Canada, the smallest of the Big Six, is 17 times larger than Mogo in terms of retail customers; 170 times larger in terms of market capitalization; and 2,250 times larger in terms of assets.

But clearly these are early days for Mogo. Longer term, Mr. Feller believes that the company's potential as a disruptive element can be compared with the likes of Amazon.com Inc., Netflix Inc. and Uber – three companies that have defined what it means to cause havoc in staid old industries.

Has Mogo got what it takes to join their ranks? The company provides short-term loans of up to $35,000 that are aimed at millennials, with an online application that is quick and easy and free from human interaction. It is also launching a prepaid credit card later this year, and can see a fuller slate of financial products, such as mortgages, down the road.

Its ambitions spring from its slim operating costs – it doesn't have to maintain costly branches, for example – and the massive size of Canada's loan market: There are a total of $278-billion in retail instalment loans, unsecured revolving loans and credit card balances, according to the Bank of Canada. But Mogo's appeal to tech-savvy younger Canadians is what it hopes will set it apart from established players.

"We think there is no bank in Canada that any millennial can relate to," said Mr. Feller, who is 47. "I'm not a millennial, but I don't relate to the RBC guy with a bowler hat or the CIBC penguin."

The big banks have recognized that new competitors are emerging as financial technology firms – or fintech upstarts – aim to nibble away at their significant market share with innovative approaches to financial services. The banks believe, though, that their own financial innovation and a reputation based on trust and stability will see them through.

Mr. Feller believes that's not enough. "If you take a look at any industry that has been disrupted, there has never been one example that I know of where an existing player became the dominant player in the new world," he said. "Although the banks have a certain degree of trust and credibility, that's also a negative: Consumers today, especially millennials, trust that a new technology-driven company that doesn't have a legacy business that they're trying to protect will deliver a relevant, valuable experience, more so than a traditional financial institution."

Mogo's struggling share price suggests that the market needs more convincing. Fintechs are sprouting up by the thousands around the world, each with grand plans to disrupt the financial industry, creating an environment in which many disruptors will themselves be disrupted.

As well, established banks have made no qualms about working with the right fintechs, potentially heading off threats. Last week, Canadian Imperial Bank of Commerce said that it was teaming up with a Canadian online small business lender and another company that handles online remittances.

For all his bluster about taking on the banks, Mr. Feller won't rule out partnerships of his own.

"We've had discussions with the banks. There are opportunities for certain types of partnerships that we will continue to have discussions around," he said. "But although we are having conversations, we are very much focused on building our brand and business model, versus proactively trying to partner with the banks."

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 23/02/24 3:57pm EST.

SymbolName% changeLast
AMZN-Q
Amazon.com Inc
+0.23%174.99
CM-N
Canadian Imperial Bank of Commerce
+0.38%46.95
CM-T
Canadian Imperial Bank of Commerce
+0.48%63.38
M-N
Macy's Inc
+1.99%19.5
MOGO-T
Mogo Inc
-5.65%2.17
NA-T
National Bank of Canada
-0.26%104.67
NFLX-Q
Netflix Inc
-0.83%583.56
RY-N
Royal Bank of Canada
+0.53%98.66
RY-T
Royal Bank of Canada
+0.7%133.22

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