How Tech and Data Are Helping Canadians Reduce Costs

_{By Mark LeDain @ Neo | 749 words | Reading Time: 3 minutes and 44 seconds | Date: 2022/11/25}

The best path to financial freedom has always been spending less than you make, including reducing your debt so that it doesn’t eat into your income. At Neo we’ve taken a product and business lens to help customers do those things and we thought it would be interesting to share how we think about these dynamics, enabled by new technologies. The way we build solutions hopefully lets you understand what to look for in financial partners; you don’t have to use Neo specifically as there are lots of great partners that take a similar approach.

To reduce expenses, you can pay back debt, buy fewer things, or pay less for them. Paying less almost sounds like a joke where you’d reply, “that’s nice, but it’s not up to me.” Paying less has been around for the dawn of time though with bartering, and most recently with subsets of marketing that reduce your costs such as coupons and loyalty programs. Businesses have budgets to pay you to spend money with them vs. someone else. 

Sounds weird when you think about it that way, but that’s exactly what marketing or advertising is. The problem is that you don’t get those dollars; the advertising company gets those fees, and they often don’t know that’s why you’re spending there. To solve this, in partnership with major businesses, we set up a rewards network at Neo. Companies pay you directly, sometimes up to 20% cashback on your spending, immediately received through our technology into your account. Instead of paying consultants, and advertising agencies, and tech companies, they can now just pay you. That’s a lot of other people that previously got those dollars, leaving funds that now go to you directly.

Paying less for banking is the other area we immediately attacked to reduce people’s day-to-day costs. There are a surprising number of fees associated with traditional banking and we have worked to move many of these to zero. Canadians currently pay the highest banking fees in the developed world, which is truly upsetting as the lower your income is the higher proportion of your expenses these fees make up. 

Specifically, the current system disproportionately penalizes the most vulnerable. Account maintenance fees are the first ones to look for, and are usually automatically withdrawn from the account each month. Certain banks will also charge minimum balance fees when the account dips below a specific level. Consolidating accounts with a trusted financial institution, typically one with deposit insurance, can be a good way to reduce these fees by reducing the accounts you are being charged on and increasing your balance. 

It’s also worth asking your financial institution right away how these fees can be reduced, as account structures can reduce them. An overdraft fee is charged each time a withdrawal exceeds the available balance in an account. This can be difficult to avoid but thorough planning is a good way to avoid unnecessary ones. Many firms such as Neo also have low balance alert notifications to help prevent these and other charges. If your bank account has been inactive for a long time, there are inactivity fees. A paper statement fee is one that is sometimes on when you open the account, and therefore we have virtual statements at Neo to reduce costs. As you can see, picture everything you do with your bank and then put a fee on it. Review them and reduce them.

Buying fewer things can be achieved through budgeting and that’s why Neo and others have insights that show your month over month spending, with categories and levels so you understand if certain costs are creeping up month over month. Reduced costs on the things you like, combined with better visibility into your spending is a great step on the path to financial freedom. Nothing is better than paying back debt though, as the benefits are tax free and guaranteed. To help avoid people going into debt we set up auto-pay, as well as interest alerts, to let people know when and what they need to pay to avoid incurring interest. 

Better disclosure, in a way that is timely and at the tip of your fingertips, is a key step to improving financial literacy in Canada. Every day tech is improving to create a better solution for Canadians, and we are happy to be your partner in it. 

Legal: This article provides information and is not intended to provide any personalized tax, investment, financial, or legal advice. You are encouraged to seek professional advice before making financial decisions.