Tangerine Bank has announced it will launch its first credit card as the online bank takes a significant step toward offering a fuller slate of financial services to compete with traditional banks and other direct banks.
"Our customers, and Canadians who aren't our customers, have said: 'In order to have a relationship with Tangerine, I need you to have more products and services because there are only so many banks I'd like to have in my life,'" said Peter Aceto, chief executive officer.
The MasterCard credit card is designed to fit with the bank's simple, no-fee brand: There is no annual fee and it offers money-back rewards that are deposited automatically into a savings account.
The card will be previewed by selected existing clients prior to a broader launch early next year.
President's Choice Financial, the online bank that is a joint venture between Loblaw Cos. Ltd. and Canadian Imperial Bank of Commerce, has long offered a MasterCard to its customers.
Canadian banks have been ramping up their exposure to credit cards in recent years. As higher-yielding assets, they look particularly attractive in an environment where interest rates are low. As well, cards are seen as important tools for attracting new clients and selling them additional services.
Toronto-Dominion Bank has expanded its offerings with recent deals with Aimia Inc. and Nordstrom Inc. Bank of Nova Scotia, the parent of Tangerine, has expanded its card offerings in Panama and Costa Rica, through a deal to acquire Citigroup's retail and commercial operations in both countries.
Mr. Aceto said that the Tangerine card initially would be targeted toward existing customers of the bank, which number about two million, but would not say how many cardholders he expects to attract with the new offering.
However, he's upbeat about the prospect of attracting new customers over the longer term, pointing to a study suggesting that as many as 15 million Canadians are now "direct ready" – meaning that they are willing to buy financial products from direct or branchless banks.
"That group of people is growing very rapidly," Mr. Aceto said. "That informs our strategy of providing the products and services you need so that you can move your primary relationship to us."
Tangerine sprang from ING Direct after Scotiabank bought the Canadian arm of Dutch bank ING Groep NV in 2012, for $3.1-billion.
Tangerine and PC Financial are likely gaining increased scrutiny from the big banks as consumers rapidly shift toward online and mobile banking for their day-to-day transactions and technology companies look for ways to disrupt traditional banking.
"Tangerine might very well be our disruptor," Brian Porter, Scotiabank's chief executive officer, said at the Scotiabank Financials Summit last month. "You've got a direct bank. You've got a great technology platform."
Mr. Aceto said that Tangerine would continue to offer additional financial products after its credit card rolls out, though he wouldn't provide details on what is being developed.
"Having more products gives us a lot more leeway to have a clearer impact on people's lives and to be more disruptive to our competitors," he said, pointing primarily to full-service banks.
"They're the ones that still maintain most of the market share in most of the retail banking categories. For the right consumer, we're trying to wake those people up to take action and make a move."