Could Santander succeed in Canada?
But while the market seems ready for a new entrant, it won’t be easy to gain traction, said Michael Liquornik, president and principal of consultancy Fin-Serv Advisors Inc.
“That’s great that you’re opening your doors. But what’s the strategy to actually get people to deposit money? Because it’s not like we lack banking options in this country,” he said.
Santander hasn’t said much about its plans yet, and didn’t provide comment for this story.
It has kept a low profile as it works to secure a banking licence that will allow it to take those deposits and expand its services. In April, the finance minister approved its application, but it still needs the go-ahead from the banking regulator, which has a year from the minister’s approval to make a decision.
So far, it looks like Santander plans to follow the path it’s taking in the U.S., said Liquornik.
The bank launched its no-fee, high-interest online Openbank offering in both the U.S. and Mexico in recent months, in part to gather deposits to help fund its auto lending business.
Santander also has an auto lending operation in Canada after it agreed to buy Edmonton-based Carfinco in 2014 for about $300 million. The bank renamed it Santander Consumer in 2021, saying at the time that it was “excited for the future under this globally recognized brand.”
It makes sense to fund its auto loans through deposits, since they’re cheaper than wholesale funding. But it’s not clear how many Canadians would want to switch over their banking for just a higher interest rate on their deposits, said Liquornik.