The Canadian consumer banking industry is dominated by the big five banks (and Desjardins in Quebec). But there is strong competition, not only among those institutions but also from credit unions, digital banks and Fintech challengers. While COVID-19 has intensified the use of and interest in online and mobile banking, branches remain a source of strength for the major banks. Satisfaction levels are high, which helps customer retention but, of course, building more share of wallet is an ongoing challenge.
With immigration being a key driver of population growth, attracting new Canadians is also a major point of focus. The use of incentives to encourage multiple product ownership and switching is also an important method of building wallet share and acquiring new customers. Below are four key things banks should consider when trying to attract new customers.
1. The big five reign supreme as main banks
Three-quarters of consumers choose a big five bank (TD, RBC, BMO, CIBC and Scotiabank) for where they do most of their day-to-day banking, with TD (21%) and RBC (19%) the top choices. Some 7% choose Desjardins as their main bank (11% use a credit union in general as their main bank), including a third of Quebecers). Besides brand reputation, financial strength and historical presence, the extensive branch networks of the major banks (and Desjardins in Quebec) are an important competitive advantage.
2. Most customers are satisfied with their main bank
8 in 10 Canadian consumers are satisfied with their main bank and only 11% are dissatisfied). Satisfaction is slightly higher among over-55s), reflecting their longer tenure, stronger financial health and stronger branch relationships. The importance of satisfaction becomes apparent with the high correlation between satisfaction and the likelihood to recommend. More than 9 in 10 of those who are satisfied with their main bank would recommend it to a family member/friend versus only 19% who are dissatisfied. When comparing the overall satisfaction scores of the six leading banks (by customer choice), there are no significant differences, which is a reflection of a high-quality and competitive banking environment in Canada.
3. Branches remain important
Nearly 8 in 10 Canadian consumers have visited a bank branch in the past 12 months. There are no significant age differences, with both younger and older consumers equally likely to have visited a branch. There are three primary drivers for the continued affinity for bank branches, even as their utility as transaction centres is on the decline. The first is that a majority of customers prefer to perform complex banking transactions in person, most notably when discussing mortgages, wealth management and new account/product applications. The other is that many customers feel more comfortable entrusting an institution with their money when they have a local presence (the ‘billboard effect’ of branches), and have the option to meet with someone face-to-face to resolve any issues that may arise. Also, when it comes to problem resolution, a majority of customers prefer to visit their local branch rather than use the call centre. This indicates the importance of in-person interactions in building trust.
4. Most consumers are interested in digital features
The embrace of digital banking has resulted in customers favouring online touchpoints for everyday activities such as checking their account balances or transferring money. This is reflected in the high levels of interest among consumers in online/mobile features.. Interest is gender neutral, while age influence on interest varies by feature. Older consumers are relatively less positive about apps, though it should be noted that app acceptance is on the rise among over-55s with, for example, half of over-55s agreeing that apps have enhanced their banking experience. Conversely, younger consumers are more likely to agree that apps have enhanced their banking experience. This is in line with the greater enthusiasm of both these segments (younger and male consumers) for technology in general which also extends to Fintech and apps.
What does the future hold?
There will be a marginal decline in the number of branches and also changes to the structure of branches located in high-density areas. These new format branches in selected areas will be more advice-centric and branch space will be streamlined to optimize service delivery. Mobile banking options will continue to expand through new features and value-added services.
For more information on Canadian consumer attitudes towards banking, contact us today.
