Canada’s first fintech-issued credit card targets unspent rewards

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Brim Financial has launched Canada’s first non-FI-issued credit cards with a bold claim that the Toronto-based fintech will disrupt Canada’s C$470 billion credit card market with a focus on streamlining reward redemption.

The Canadian credit card market is dominated by the top five banks, with smaller banks and credit unions also offering credit cards, in some cases through a principal issuer. Unlike the U.S., monoline issuers have a small share.

Brim Financial is the only non-bank or credit union to have an issuer license from Mastercard Canada, along with its own BINs; no non-FI has an issuer license from Visa Canada. Unlike other countries, Canadian banking regulations don’t require credit card issuers to have bank licenses or bank sponsors, but they must have an issuer license from a card network.

According to Visa Canada and Mastercard Canada statistics collated by the Canadian Bankers Association, in 2017 there were 74.3 million Visa and Mastercard credit cards in issue in Canada, with net retail volume of C$470 billion, not including cash advances. The data comprises information from all Canada’s Visa and Mastercard principal issuers, with affiliate issuers included in the principal issuers’ data.

A rocky rollout
Brim used its website and social media to pre-register applicants for its Brim Mastercard, which is fee-free, and for its Brim World Mastercard and Brim World Elite Mastercard, both of which have annual fees. The company said it received thousands of applications.

However, a five-month delay in Brim launching its credit cards, which were finally introduced in July, led to consumer criticism on social media sites such as Reddit, Canadian broadcaster CTV reported.

There was criticism about the delay in mailing the credit cards and about the fact that Brim had asked several applicants to supply proof of their identity, such as a utility bill and, in some cases, proof of their identity by a lawyer or doctor.

Normally, under Canada’s FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) rules, provided an applicant has at least six months credit history with a Canadian credit bureau, there is no requirement to supply proof of identity when applying for a credit card. However, people with six months to three years’ worth of credit history have to supply a utility bill.

“Brim’s offer is quite interesting, but I wonder whether millennials will take to offerings from start-ups in big numbers,” said Christie Christelis, president of Canadian consultancy Technology Strategies International. He added that the negative publicity about the issuer’s delayed launch and lack of response to card applications would not have helped Brim’s marketing.

Rasha Katabi, Brim’s CEO and founder, said that around 1 percent of applicants were asked for additional information because they had under six months of Canadian credit card history.

“Going forward, we won’t accept applications from this segment of consumers, because of the extra processing involved,” she said. “As for the delays in issuance, we prioritized mailing cards to applicants in the order in which they applied for a card.”

Cardholders can redeem their reward points as cashback or against purchases at merchants participating in Brim’s Marketplace. Purchases from Brim Marketplace merchants generate extra reward points.

“I think Brim’s rewards program and mobile card management app will spur the larger issuers to improve their offerings,” Christelis said. The Brim app includes spending management features and allows cardmembers to temporarily block their card or block online purchases or specific types of merchants

RBC, Canada’s largest bank, has introduced credit card controls in its mobile banking app, to allow cardholders who have misplaced their credit cards to place or remove a temporary lock on their cards.

Several other Canadian credit card issuers also offer zero percent FX transactions, such as Home Trust, a specialist mortgage lender. “We try to be the most complete card platform, so we offer 0 percent FX fees, embedded free wi-fi with Boingo, installment plans, unlimited rewards and cutting-edge technology,” said Katabi.

Although Brim has increased the annual fee for its World Elite Mastercard from C$120 a year to C$199, the card’s benefits are meant to be more comprehensive than benefits from credit cards charging C$399 to C$799 per year, Katabi said. Early applicants will not pay the higher annual fee.

Building Brim
Katabi spent 20 years in the banking industry at TD Bank and Bank of America Merrill Lynch before founding Brim in 2016.

Brim’s business registration documents disclose that its board members include Christian Lassonde, a venture investor who has backed startups such as Wealthsimple; and John Reucassel, a former analyst at investment firm BMO Nesbitt Burns, a subsidiary of Bank of Montreal.

“We’re bringing a transformation to the Canadian payment card and rewards space,” said Katabi. “Our aim is to be cardmember-centric and help cardmembers get the most out of their life and daily spending choices, whether it is travel purchases or big ticket purchases.”

Katabi cited a report by market research agency Bond Brand Loyalty, which reports that there are around C$16 billion worth of unused rewards points in Canada, and that consumers are frustrated as how to redeem their points. Brim's model allows users to pick a transaction in online or in the app to redeem offers.

Katabi said that installment financing has traditionally been merchant-driven.

“So we took that merchant-driven model and transformed it into a merchant-agnostic installment plan that is embedded directly on our credit card app,” she said. “Whether I’m buying a sofa from Pottery Barn in the U.S., or visiting a shopping mall in Hong Kong, or want to buy a painting in a gallery in Toronto, I can finance my purchase over 12, 16 or 24 months by tapping a button embedded in my credit card app.”

Brim charges 0 percent interest on installment loans on its credit cards, but charges a fixed installment fee up-front of 7 percent of the overall purchase price, which is added to the first statement. Thereafter, the cardholder’s monthly payments are the original purchase price divided by the number of months they have chosen to install over, plus a monthly processing fee of 0.475 percent of the original purchase.

Katabi said that merchants participating in Brim’s Marketplace have the option of funding some or all of the 7 percent fixed installment fee on behalf of shoppers.

Brim isn’t the only company to offer card-based point-of-sale installment loans in Canada. U.S.-Israeli fintech Splitit offers merchants in Canada and the U.S. the capability to provide installment credit to their customers on their credit and debit cards.

U.K.-based payments firm Paysafe is in the processing of launching its Paysafe Pay Later service in the U.S. and Canada. In the U.S., Paysafe will offer an installment instore capability, and it will offer an invoice online capability in Canada. Amy Gregus, head of communications North America at Paysafe, said it has no plans to offer installment loans in Canada.

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