Alternative banking players are worth another look

Let Stage 2 of the on-line alternative banking revolution begin. The first stage was the rise in the wide popularity of ING Direct and its no-fee, high-interest savings account. An amazing cross-section of Canadians stash some of their savings at ING, while keeping their chequing accounts at a bricks-and-mortar bank.

ING's done well enough in this regard that it can be considered part of today's banking mainstream. Now, on-line banking revolutionaries must look to fringe players such as Achieva Financial, Outlook Financial and Ubiquity Bank of Canada.

These on-line institutions will never rival ING because they're run by provincially based credit unions and not a multinational banking behemoth like Netherlands-based ING Groep NV. Why should you give these small fry a look?

The usual reason, of course. Deal with an on-line player like Achieva Financial (http://www.achieva.mb.ca) or Outlook Financial (http://www.outlookfinancial.com) and you have nothing to lose but the chains of those stingy interest rates offered by the big banks. Example: Both Achieva and Outlook offer 2.85 per cent on their savings accounts, which even beats ING's 2.25 per cent.

"We consistently want to be at least marginally better than ING," said Bruce Fink, Achieva's president. "Their national exposure as far as advertising is far superior to ours, so if our rate is only equal to theirs we're probably not going to be very successful."

Achieva also offers premium rates on guaranteed investment certificates. Its five-year rate of 4.55 per cent was the second highest found this week on a detailed rate survey done by a financial data provider called Cannex. ING's comparable rate was 4.25 per cent, while the big banks were posting 3.15 per cent.

Mr. Fink said Achieva was created by Winnipeg's Cambrian Credit Union in 1998, to increase its exposure in Manitoba without incurring the expense of building branches. For people in other parts of the country, Achieva is also a way to serve clients that care only about getting the highest rates.

"The only way we could deliver the highest rates was to keep costs as low as possible," Mr. Fink said. "If you eliminate the branch, that's a big part of your cost structure."

High rates are great, but safety's crucial. Surprisingly, Achieva delivers a much higher degree of deposit protection than the major banks. All credit unions in Manitoba offer 100-per-cent protection of deposits, which compares to a lid of $60,000 for bank deposits through Canada Deposit Insurance Corp. Achieva's deposit insurance applies to customers in any province.

Access is another key issue in dealing with an on-line alternative bank. ING's about as good as it gets in this regard, allowing customers to log into its website and electronically send money to and from outside bank accounts.

Achieva is not that advanced. You can send them a cheque for deposit by mail, or electronically if your regular bank's website lists Achieva as a bill payee (don't be surprised if it doesn't). Or you can make deposits at bank machines that are part of the credit union movement's AccuLink network.

Outlook Financial is quite similar to Achieva in that it's owned by a Manitoba credit union, in this case Assiniboine Credit Union. Remember how Achieva had the second-highest five-year GIC rate this week? Outlook took the top spot with a rate of 4.6 per cent.

Ubiquity Bank (http://www.ubiquitybank.ca) is owned by Prospera Credit Union in British Columbia. While Achieva and Outlook focus on savings products, Ubiquity is a full-service on-line bank along the lines of Citizens Bank of Canada (http://www.citizensbank.ca). This explains why it's somewhat less aggressive on rates, offering a five-year GIC rate of 3.9 per cent, and 2.25 per cent on savings accounts.

Another alternative on-line option is ICICI Bank Canada (icicibank.ca), a subsidiary of India's largest bank, Mumbai-based ICICI Bank Ltd. A CDIC member, ICICI Bank offers a high-rate savings account of 2.5 per cent.

Players like these are worth a look right now because we're at a point where the original on-line banks aren't quite the wonderful deal they used to be. ING is no longer the last word on high-rate savings accounts, and there are indications President's Choice Financial, a venture involving Canadian Imperial Bank of Commerce and Loblaw is becoming more conventional as well. PC Financial built its franchise on a no-fee bank account, but it has recently started charging a minimum $4.97 fee every month you access your overdraft protection (19-per-cent interest also applies). It's not clear how you can have no-fee banking and charge a fat overdraft fee like this.

rcarrick@globeandmail.ca