Koho Financial, a startup that’s supported by Montreal’s billionaire Desmarais family, is vying to become a Canadian bank and has hired a former ING Groep NV executive to spearhead the effort.
The fintech firm will apply to the country’s banking regulator, the Office of the Superintendent of Financial Institutions, to become a Schedule 1 bank, which would allow it to take customer deposits. It also plans to offer prepaid cards and lending services such as retail loans, according to a notice in the most recent issue of the Canada Gazette, a federal government publication.
Until now, Koho has offered products such as savings accounts, virtual credit cards and lines of credit through its app and online by working with partners including Mastercard Inc. and Peoples Bank of Canada.
That has meant its “innovation has been constrained to product and design,” Koho Chief Executive Officer Daniel Eberhard said Friday in an emailed statement.
“If you really want to move the needle in banking, you need to be able to play at an infrastructure level,” said Eberhard, who describes himself in his LinkedIn profile as a “reluctant banker.”
“With a bank license, we’re full stack,” he said in the statement. “We’ll be able to pay more on deposits, lend cheaper, improve payments and more. It’s going to be tough but if we can figure this out, it’ll improve every part of our user experience.”
Koho is adding Peter Aceto to its leadership team to help secure the banking license, according to a press release Friday. Aceto was once head of ING’s digital-banking subsidiary in Canada and stayed for several years after it was acquired by Bank of Nova Scotia and renamed Tangerine Bank.
He went on to become CEO of cannabis company CannTrust Holdings Inc., where he was caught in a scandal when the firm was alleged to have grown marijuana illegally and lied about it. Aceto was charged, but the prosecution’s case fell apart and he was acquitted in December 2022.
Koho has a number of large institutions as backers, including Ontario’s pension fund for health-care workers and Portage Ventures, a unit of alternative-asset manager Sagard Holdings, which in turn is controlled by the Desmarais family’s Power Corp. of Canada.
Last month, Portage and US-based holding company Eldridge Industries were among investors in a Series D funding round extension that raised $86 million (US$63.9 million) and valued Koho at about C$800 million.
There are 35 Schedule 1 banks in Canada, including the six large institutions that dominate the industry and several of their subsidiaries. Anyone who opposes Koho’s plan has until April 18 to contact OSFI, according to the Canada Gazette notice.