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Email this7:25 am
July 9, 2020
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Wise just started offering everyday banking services in Canada. They offer CDIC protection and are a Payment Service Provider. Their current HISA rate is 2.22%.
With a very impressive USD account interest rate: 3.14%. Plus a EUR and GBT...but I'm getting off the topic of this post.
Let's add them to the HISA Chart! Here's to hoping it'll help move change in Canada.
11:32 pm
April 9, 2013
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Just adding my 2cents worth for anyone who cares.
Wise is a fintech not a bank, therefore, any deposits won't be directly CDIC insured. "Because fintechs are not members, we do not protect your funds held by a fintech unless they place them as eligible deposits with a CDIC member institution. Even then, they must be in an account in your name or in a trust account where you are named as beneficiary. Only then are those funds eligible for CDIC protection against the failure of the member institution that holds your funds."
A similar set-up in the US imploded a few mo's back where the fintech fraudulently didn't deposit with a FDIC-insured FI as they said they would, just like Wise has stated & there's no way to verify that they have. Wise up...pun intended!
9:25 am
April 6, 2013
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Earlier thread How Millions of Americans Got Tricked Into Using a Bank That Isn't a Bank discussed the 2024 failure of Synapse Financial Technologies in the US.
Victims and bankruptcy trustee agree over the balances of their rebranded Synpase client accounts. Problem is the balances of Synpase's FDIC-insured bank accounts, that are supposed to hold funds from Synapse clients and back those client accounts, don't add up to the balances of those client accounts.
They are not sure if it was fraud or sloppy bookkeeping. Synpase could have used client funds to pay its own business expenses in error. Unfortunately, not enough money left in the bankrupt company to pay for a forensic reconstruction of the ledgers to determine where the missing funds went.
speedwagen said
… Only then are those funds eligible for CDIC protection against the failure of the member institution that holds your funds."
That matches the response from CDIC when I asked them about such fintech arrangements.
CDIC deposit insurance only covers failure of a CDIC member and not failures of any non-member.
What happens when a non-CDIC member fails? CDIC doesn't get involved; a CDIC member didn't fail.
What happens when a non-CDIC member fintech fails and the fintech's CDIC-insured trust accounts come up short of the balances in the savings accounts offered by the fintech? Will CDIC make up the difference? That is a matter between the fintech's savings account holders and the fintech's bankruptcy trustee. When a CDIC member didn't fail, CDIC doesn't get involved.
10:04 am
July 9, 2020
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I get all the skeptism. Has anyone figured out how Wise IS offering CDIC protection? Has someone investigated the fine print?
speedwagen said
"Because fintechs are not members, we do not protect your funds held by a fintech unless they place them as eligible deposits with a CDIC member institution. Even then, they must be in an account in your name or in a trust account where you are named as beneficiary. Only then are those funds eligible for CDIC protection against the failure of the member institution that holds your funds."
I'm lost, where is this reference from? I don't know the context.
10:06 am
July 9, 2020
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More importantly, my post was to add their chequing account rate to the HISA chart. How does one separated the CDIC discussion from my simple request to add Wise to the HISA chart?
10:15 am
April 21, 2022
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BarterBrad said
More importantly, my post was to add their chequing account rate to the HISA chart. How does one separated the CDIC discussion from my simple request to add Wise to the HISA chart?
Well, maybe a green ✅ checkmark could be noted for financial institutions that have their own CDIC coverage so as to make it clear to those that have concerns.
11:30 am
April 6, 2013
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BarterBrad said
I get all the skeptism. Has anyone figured out how Wise IS offering CDIC protection? Has someone investigated the fine print?speedwagen said
"Because fintechs are not members, we do not protect your funds held by a fintech unless they place them as eligible deposits with a CDIC member institution. Even then, they must be in an account in your name or in a trust account where you are named as beneficiary. Only then are those funds eligible for CDIC protection against the failure of the member institution that holds your funds."I'm lost, where is this reference from? I don't know the context.
That is from CDIC: Fintechs.
Wise is not offering CDIC insurance. Wise is offering CDIC insurance against any failure of CDIC members that they have accounts at to hold funds clients upload to their Wise chequing account.
The fine print at the bottom of Meet Wise Interest has more details:
Wise is not a Bank. Wise Canada is registered with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) as a Money Service Business (MSB Registration No. M15193392) and is registered with the Bank of Canada as a Payment Service Provider under the Retail Payments Activities Act. Registration is not an approval, endorsement, or guarantee of Wise Canada's products or services.
Your Funds are held in a segregated account in accordance with the requirements of the Retail Payment Activity Act. This means your funds are kept separate from Wise Canada's own operating funds. Safeguarding is not equivalent to deposit insurance.
The legal agreement is at Program Agreement. The chequing account would be at and the balance is owed by Wise Payments Canada Inc., not at/by a CDIC member.
12:00 pm
July 9, 2020
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Thanks for the Program Agreement link. From what I read this sounds quite good. Here's the CDIC part:
however, your eligible deposits are held in trust with Banks that are participating CDIC member institutions and you have been designated as a beneficiary. As such, if the institution fails, your funds are eligible for CDIC deposit protection up to $100,000 when CDIC trust disclosure requirements are met. It is our responsibility to meet these disclosure requirements for your automatic protection. See cdic.ca/depositors/whats-covered/fintechs/. CDIC limits apply per beneficiary and are subject to CDIC rules, which may aggregate deposits held at the same member institution. For clarity, Funds are eligible deposits for these purposes only once actually held in trust at a participating Bank. Funds are not eligible for CDIC deposit insurance while they remain in your Wise Account pending sweep into an Account.
I'm not too paranoid of extreme on extreme scenarios. I want to help encourage change in Canadian Banking landscape. Their interest rate is impressive compared to what CU and most others have offered.
3:26 pm
April 6, 2013
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BarterBrad said
Thanks for the Program Agreement link. From what I read this sounds quite good. Here's the CDIC part:
…
That CDIC coverage is for the balances of the trust accounts that Wise has with the CDIC members.
That doesn't apply to you and the balance of uploaded funds in your Wise Account at Wise Payments Canada Inc. You don't have any account with those CDIC members:
2.10 Participating Bank(s). Wise will distribute funds across Banks in its sole discretion, and Participants will not be able to select with which Banks Funds are placed. Participants do not have a direct account relationship with the Bank(s), and you will not be able to directly withdraw or add funds to the Account(s). You may only access your Funds through your Wise Account.
It means you and Wise won't have a problem should one of those CDIC member Banks fail. It doesn't mean you won't have a problem should Wise fail.
12:40 pm
December 12, 2009
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I oppose, strongly, adding Wise to any comparison charts due to their dodge reputation and willful disregard to utilizing multiple FINTRAC-accepted KYC verification methods and due to the limited Canadian regulation because of their status as a money services business. @Briguy may have more to say on this.
People can do much better, with Wealthsimple, EQ Bank, Tangerine, or even Simplii Financial or Alterna Bank.
Cheers,
Doug
3:51 am
April 27, 2017
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Some of the comments overstate the risk and are misleading.
Wise is not itself CDIC-insured, but eligible customer funds held at CDIC-member banks in trust are insured for the customer as beneficiary; a direct account with the bank is not required. Wise failure is a separate risk, but customer funds are also subject to safeguarding and segregation requirements according to Canadian laws.
Also, companies with which “you can do much better” (like Wealthsimple and EQ Bank) trust Wise by using it for International transfers of your money. I use Wise for the same purpose every month and it provides a great service.
10:16 am
October 27, 2013
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I don't buy that argument for Wise any more than I did for WS. The underlying investments may be CDIC insured but the middleman is not insured as such, and that is a key matter. Trust your deposits in Wise only to the extent you can trust Wise as a continuing corporation.
Ask the depositors of Silicon Valley Bank in 2023 how they felt when the bank collapsed. https://en.wikipedia.org/wiki/.....alley_Bank
P.S. Many of us take selective risks for potential financial exposure, including having well over $1M in assets held by CIPF insured firms or over $100k in a CDIC insured account. That is a judgment call based on one's perceived level of risk and the reputation and backing of the firms we do business with. The key criteria is simply understanding there is risk however small it may be.
10:55 am
April 27, 2017
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SVB is an inappropriate parallel. An uninsured SVB depositor was an unsecured creditor of the failed bank. With both WS and Wise Canada, customer funds are held/segregated in trust at financial institutions, and Canadian payment-service-provider rules specifically require safeguarding designed to protect customer funds if the intermediary itself becomes insolvent. There can still be operational and trust-administration risk, but that is quite different from simply being an uninsured depositor of the failed institution. It's a completely different system (not to mention different laws).
11:37 am
October 27, 2013
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Fair enough that SVB was uninsured depositors over FDIC insurance and thus not directly relevant.
That aside though, I don't accept your assertions. Being held in trust is meaningless when WS and Wise control the trust accounts, e.g. terms of the trust plus the selection of the trustee. They can easily remove anything from trust before the declaration of insolvency. Simple...period. Norman1 in particular has been through this argument with you on WS and it would derail this thread to continue entrenched positions.
11:50 am
April 27, 2017
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There are legitimate operational, fraud, recordkeeping and trust-validity risks, which is why I wouldn’t describe it as equivalent to a direct insured bank deposit. But those are fundamentally different risks from being an unsecured creditor of SVB.
And I don’t think “meaningless” follows. The RPAA specifically requires end-user funds to be held in a trust account used for no other purpose, and the Bank of Canada requires the arrangement to constitute a valid express trust and supervises compliance. The PSP is permitted to act as trustee or select a third-party trustee - that doesn’t make the trust disappear. Nor can it simply appropriate trust property for its own creditors without breaching the trust and the statutory safeguarding requirements.
Basically, companies would have to commit fraud and there would have to be deliberate operational failures and regulatory oversight failures, but that is a very different risk from knowingly holding an uninsured deposit at a bank.
As long as the contract is followed and the trust is legally valid and the customer money is actually maintained in the trust in accordance with the law, Wise itself failing does not put that money into Wise’s bankruptcy estate.
12:40 pm
October 27, 2013
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I think you answered the issue yourself, i.e. what you just said
Nor can it simply appropriate trust property for its own creditors without breaching the trust and the statutory safeguarding requirements.
Basically, companies would have to commit fraud and there would have to be deliberate operational failures and regulatory oversight failures, but that is a very different risk from knowingly holding an uninsured deposit at a bank.
As long as the contract is followed and the trust is legally valid and the customer money is actually maintained in the trust in accordance with the law, Wise itself failing does not put that money into Wise’s bankruptcy estate.
is likely exactly what could and would happen in the event of a failure of Wise, i.e. commission of fraud... as long as the contract is followed(not).... is actually maintained in the trust in accordance with the law(not)....
They would likely commit fraud, they would not main contracts, and wouldn't maintain the trust in accordance with the law. As long as Wise (or WS for example) have their hands on the controls, they are not likely going down with the ship without first attempting to save themselves. Why do you think they would NOT do that?
The key point here is there is an added layer of risk in these kinds of arrangements, as small as it might be. Depositors need to make judgments on whether the additional risk , as small as it might be, is worth it.
1:04 pm
April 27, 2017
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I disagree with the assumption that fraud is likely in a Wise failure. Financial institutions fail without any misappropriation or law-breaking (like SVB, Lehman Brothers, etc)
Canadian law specifically requires customer funds to be segregated, imposes insolvency-protection controls, customer-level reconciliation, senior-officer responsibility and independent review.
A normal corporate insolvency is quite different from a scenario in which management deliberately misappropriates trust assets. The latter is possible, but it isn’t an inherent consequence of Wise becoming insolvent. The question is its probability. There are isolated examples which is why regulations contain reconciliation, segregation and oversight requirements. But I don’t see any evidence for the assertion that a regulated firm approaching failure would likely commit fraud and raid the trust.
2:35 pm
October 27, 2013
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The pertinent point in this entire thread is there is an added layer of risk when insured deposits are not directly in client name. Nothing more really needs to be said. Whether that added risk is pertinent or concerning is up to the individual to decide. Full stop.
3:19 pm
December 12, 2009
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The CDIC insurability is indeed more complicated with these fintechs. For me, though, Wise adds an additional layer of risk, and that is reduced domestic regulatory supervision versus Wealthsimple. Having to go to a UK regulator, as opposed to regulators that are all Canadian, in the case of Wealthsimple, requires a new level of intestinal fortitude. 
