I screen shot this website. I'm assuming these Deposit Institutions ("DI") are almost perfectly competitive, because CDIC covers them all to $100 K, and transferring money between banks (cheques or InteraceTransfer) are cheap or free.

Why aren't more DIs, if not all, offering 3.30% or 2.8%? The table doesn't show it, but other banks' (like the Big 5) savings account interest rates are lower than 1.5%! The interest rate difference isn't nothing! Yearly, (3.3% — 2%) x $100K = $1300.

Why don't all Canadians move their DI deposits to LBC Digital?

enter image description here


Why don't all Canadians move their DI deposits to LBC Digital?

You sort of ask a whole new question here at the end of your post, but I think it's the more interesting one, so I'm going to take a stab at answering it.

From a Jun 2019 CBC article:

Canadians are forecast to save just 3.21 per cent of their disposable income in 2020, or about $1,277 on average per household.

Over at LBC Digital and their 3.30% rate, that household will make $42.14 on that.

But those poor saps at the Canadian Tire Bank are only managing 1.50%, for $19.15.

Is the average Canadian household going to switch financial institutions for an extra twenty-three bucks a year? Apparently not.


Banks are businesses, with the attendant differences in service offerings and internal cost structures. This alone accounts for differences in prices for essentially identical goods and services. After all, every accountant offers accounting services by definition, but not all of them charge the same amount.

Googling about for the bank LBC Digital at the top of your list, it turns out that this is Laurentian Bank (cool name, if I may say so, but no, it's not mine). According to a November 2019 review by Money We Have:

The best high interest savings accounts in Canada just got a new player as Laurentian Bank has just launched LBC Digital, an online bank that helps Canadians improve their financial health.

Online banks, like online shops, can have lower cost structures compared to their bricks-and-mortar peers. They may have fewer staff, less rental, and so on. If so, every dollar of profit after expenses needs somewhat less revenue support than peers with higher costs.

When new entrants compete against incumbents, pricing is a popular mechanism with which to get customers. By giving more interest for an equivalent product, they'd probably hope that more people would choose to keep their money with them instead with other banks. More established players have other levers to pull. For example, if you've been getting exceptional service from one bank, you might be happy to forego some interest to continue getting that service. This might be monetary, such as low mortgage costs, or non-monetary, such as simpler access to credit approvals. Or you might just like to be able to walk in and have staff recognise you on sight because you've been banking at that branch for years.

The actual reasons aren't likely to be published, but there are enough other factors that equal insurance (e.g. CDIC) doesn't translate automatically to equal rates.

  • 1
    I think your second to last paragraph is likely the case here. Some banks will be happy to essentially "lose money" on savings accounts as a way to attract consumers that they know will be profitable in other ways (interchange on card swipes, loan income, etc).
    – dwizum
    Jan 21 '20 at 17:56
  • 1
    @dwizum I upvoted your comment and am inclined to agree, though in my experience, loss-leader products tend to go against the conservative nature of banks. I wouldn't be surprised to see a cost-centre event or introductory offer, but I would be surprised to see a bank have an entire product be loss-making. (Being able to change interest rates at will kind of brings it back to something like an introductory offer, though.)
    – Lawrence
    Jan 21 '20 at 18:07
  • 1
    I agree it's not a traditional conservative approach, but newly opened online-only banks are rarely conservative or traditional - and they're really hungry to be primary FIs for their customers! The highest paying bank in the OP's linked website, Motive, is barely a decade old.
    – dwizum
    Jan 21 '20 at 18:16

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy