(Photo: Demetrio Carrasco/Getty)
See also, “An ancient idea for a brand new bank.”
On a rainy afternoon in October, a handful of people hang out at the ING Direct café across from Toronto’s Eaton Centre. Despite being owned by a financial institution, about 85% of the café’s foot traffic comes from people with no interest in doing any banking.
Dennis Cannon, a retired Kodak employee, is taking advantage of the free Internet access while other patrons simply chat. This is Cannon’s third visit. He has never picked up one of the free CDs of environmental music or used the community meeting space upstairs. He hasn’t even tried the coffee, which is sold to help raise money for Haiti. Cannon keeps coming back because the ING staff proved helpful when he first dropped in to simply send correspondence over the web. That interaction eventually led him to ask about direct banking and mortgage information for a third party. “I have been with TD for more than 40 years and never once thought much about using another bank,” he says. “I’m not running out and switching, but I have been talking about how my interest has been stimulated by ING.”
Plenty of banking customers have been feeling the same temptation as Cannon. Increased competition from unconventional competitors such as PC Financial and ING, along with waning growth prospects in traditional revenue steams like mortgages, has Canada’s biggest banks desperately trying to find new ways to connect with customers. Our financial sector may be the world’s poster child for industry prudence and stability, but that doesn’t necessarily help them stand out to the average Canadian consumer. As a result, while ING is making like your coffee-house best friend forever, the competition is trying to come across as hip financial advisers or your mall-rat pal.
As the old-school players try to update their game, Internet and mobile applications will obviously play a huge role.
But don’t be fooled by what happens in cyberspace or even on smartphones. The really interesting war, at least among the Big Six, is taking place on the bricks-and-mortar front, where branches across Canada are getting makeovers. Royal Bank of Canada, TD Canada Trust and Bank of Montreal are adding video screens and other touches so clients can relax and enjoy a new high-tech experience. RBC even bills its new branches as retail stores. Bank of Nova Scotia, National Bank and the Canadian Imperial Bank of Commerce are also mixing things up, but so far eschewing the high-tech lip gloss, arguing its better to focus on becoming a better partner for consumers.
This splitting of the herd is a revolution of its own, according to Toronto-based brand consultant Bruce Philp. “Back in the day,” he says, “retail banking was a little bit like drug-dealing in a bad neighbourhood.” By that, he means “whoever had the corner got the business” because consumers always sort of just saw the big banks as different “flavours of vanilla.” Increased competition has heightened the banks’ interest in offering value and quality to customers, and forced banks to form individual identities. But Philp thinks trying to be seen as a cool retail store or friendly high-tech hangout is “as much of a mistake as, you know, your mom coming home in a trampy Halloween costume. It’s just uncomfortable, and a little respect is somehow lost in the process.”
The Canadian banking sector isn’t exactly hurting. Combined net income of the Big Six jumped $6 billion to $20.4 billion last year, besting the previous record of $19.5 billion set in 2007. But as Margaret Willis, HSBCs executive vice-president of retail banking and wealth management, points out, the ability to introduce new fees is limited, raising the importance of gaining share through better service, broader relationships with clients and growth markets.
Furthermore, the current foundation of industry profitability could soon crack. Housing prices can’t rise forever. And household debt in Canada recently surpassed U.S. levels for the first time in 12 years. “We haven’t seen consumer deleveraging yet, but it could very well happen. And growth is slowing thanks to demographics,” says Stephen Forbes, CIBC’s executive vice-president of marketing.
And the competition is already savage. The industry includes 22 domestic banks, 26 foreign-bank subsidiaries, 23 full-service foreign-bank branches and six foreign-bank lending branches. And that’s not counting wannabes. Billionaire fund manager Eric Sprott has partnered with Continental Currency Exchange, an Ontario-based currency trading company, to launch a new bricks-and-mortar bank, something Canada hasn’t seen in a long time (see sidebar). Targeting the emerging mobile-banking market, Rogers Communications, Canada’s biggest wireless phone company (and publisher of this magazine), has also applied for a banking licence, although there are no plans to become a full-service deposit-taking financial institution.
Even Toronto councillor Kristyn Wong-Tam wants in on the game. “When I recently read that Rogers Communications has applied for a bank license,” she recently wrote in a National Post commentary, “I took it as yet more evidence that a proposal I’ve been working on to help Toronto resolve its fiscal problems can work: Toronto should be given the ability to raise funds through its own bank.”
As competition grows, the big question, according to Pat Minicucci, National Bank’s senior vice-president of retail and business banking for central, western and Atlantic Canada, is how the players should try to attract attention while offering products and services that everyone knows “are fairly ubiquitous and similar.”
With online banking now the primary transaction venue for 45% of Canadians—and increasing among all age groups—consumers clearly don’t need branches for getting cash or making payments. Indeed, the ING café exists to show potential clients how easy it is to leave behind the bank branch. But traditional players say branches are more important than ever, because face time is seen as critical to branding themselves as approachable consumer part ners with highly valuable advice.
Branches are a great way to “invisibly deal” with customer service issues, according to Philp. “If I have to act out my dissatisfaction with a bank online, then that conversation becomes part of the social graph of that brand. But if it’s dealt with in a branch, no one else ever needs to know.” Well-trained branch personnel, he adds, are also better than technology at spotting opportunities to cross-sell products and services. But CIBC’s Forbes insists personal relationships are the driving force in the resurgence of branch banking because they are key to gaining ground in the industry’s three growth markets: wealth management for boomers, newcomer clients and youth accounts. (About 45% of Canadians stick with their first bank, so competition for first accounts is always intense.) Forbes notes a recent Ernst & Young study shows Canadians are looking for personalized attention and willing to switch banks to get it. “That’s why,” he says, “branches are back in vogue.”
All of the country’s big banking competitors agree on the importance of branches. There also appears to be consensus on the need to open some of them beyond traditional banking hours. CIBC and TD now offer Sunday hours on a large scale. But when it comes to what the modern bank branch should look like, the consensus falls apart like an EU rescue package. And you’ll have to go to Europe, or elsewhere overseas, if you want to see what a truly bleeding-edge bank might look like.
Pete Champion has pulled a number of successful bank jobs over the years, including ones in Britain, India and Turkey. As the director of I-Am Associates, a U.K.-based branding consultancy, he’s seen a wide range of attempts to be different. In other countries, he notes, banks are making products more tangible by allowing customers to shop for them in off-the-shelf boxes, which makes things like getting a new bank card as easy as picking up cornflakes at your local supermarket. Champion has seen banks with everything from luxury lounges to child playgrounds. He has even heard about one with a cocktail bar. The maturity of bank branding, as he calls it, is clearly an international trend.
Sadly for anyone seeking a G&T with their RRSPs in this country, Canadian concept branches are more conservative in their approach. Nevertheless, at RBC’s concept branch in Burlington, Ont., you’ll find a Canadian banker’s idea of an Apple Store. Like a branch concept being used by Citi in New York, the centrepiece of RBC’s so-called retail store is a futuristic financial-planning table designed to impress upon consumers just how far banking has come from the days of long lines and not-so-great service. Using Microsoft surface computing technology, the goal is to attract consumers by enabling them to investigate RBC banking products, or improve their financial literacy, using the same touch-screen tools you might see used to investigate crime by gearhead cops on the new high-tech Hawaii Five-O.
Bank of Montreal isn’t trying to hide the fact that it is a bank. But it is promising a new kind of banking in a new kind of branch. “We did research and identified an issue,” says Susan Brown, head of BMO retail banking in Ontario. “Banking was really confusing. Customers were really looking for clarity and help in making good choices.” From that, BMO’s Making Money Make Sense brand concept emerged. Everything the bank does today, ranging from mobile applications to online tools that help Canadians budget—not to mention compare their spending patterns with others of equal financial strength—is meant to reinforce that message. To make consumers notice change is afoot, new branches are being given a high-tech upgrade, along with safety-deposit boxes, free coin counters and foreign-currency ATMs. Some redesigned locations even offer BMO’s new Virtual Advisor technology, which allows customers access to additional financial experts via video conferencing.
At TD Canada Trust’s first new concept branch in Richmond, B.C., you won’t find Microsoft surface technology in the tables. Still, the branch’s mobile workstations are surrounded by web kiosks and big-screen televisions. Anyone early for an appointment can wait in a lounge, watch a video presentation about TD or chat—in English, Cantonese or Mandarin—to one of the roaming financial specialists, who work the floor of the open concept operation like sales staff at a car dealer. The bank didn’t grant an interview request. But the stated idea is to “enhance the banking experience for customers” and make “the branch warm, friendly and welcoming.”
Meanwhile, other members of the Big Six argue too much technology can be a bad thing, not to mention a waste of time and money. National, which opened five new branches in Canada this year and plans to add more, is constantly playing around with layouts, lighting and aesthetics. But Minicucci says dramatic high-tech redesigns should not be the anchor of a bank’s brand. He notes National was selected by Bloomberg as the No. 1 bank in North America. “We think that is a tremendous differentiator,” he says, especially when what clients really want is simply reliable advice and an institution that takes care of them.
For its part, Scotiabank is skipping the Star Trek vibe and instead looking at how to better target local markets. It’s begun studying transaction data and using customer base analytics that Robin Hibberd, the bank’s executive vice-president of retail products and services, says “go way beyond postal code analysis.”
The end goal? Finding better ways to serve communities where the branches are located.
“I am not in branch planning,” says Hibberd, “so I am not going to sit here and say nobody has never dreamt up some cooler branches. But having totally different-looking branches is not where we see the big future of Canadian banking.”
Banks, of course, can go high-tech and focus on local needs at the same time. But Forbes says that can be distracting. CIBC, which is currently undergoing its biggest branch expansion ever, explored adding gadgets to branches and didn’t find a return on investment. “We were the first bank to launch mobile banking apps,” he says. “That’s our chosen battleground for technology. When our clients go to a branch, they don’t want to use technology. They want to talk to a real person. You go to an Apple Store for technology. When people go to a bank, they want expertise on financial affairs.”
ING cafés do what they’re supposed to do because they are not bank branches trying not to be bank branches, and ING doesn’t have a 150-year-old image it wants to change. But when it comes to the larger established players, Philp says trying to sell themselves as Apple Stores, or a place to hang out like the gang on TV’s Friends, is a mistake. “Canadians,” he notes, “have this schizophrenic relationship with their financial institutions, even in good times.” As citizens, he says, we value our big banks as paternalistic entities that built the railroads. As customers, we hate them because we need their approval for too much. “So we march around saying we hate those guys, but in our heart of hearts we can’t imagine life without them because we relate to them exactly the way a lot of people might relate to their fathers.” And fathers are not typically cool.
Champion, on the other hand, doesn’t think trying to brand a bank as a hip or friendly place to relax is a bad idea. What matters, he insists, is whether or not the new image reflects the bank’s real character. If banks promote themselves as a high-tech hangout or café, and still maintain a very aggressive service culture, they risk making people feel seduced and sucker-punched by a hidden agenda. “If the people interaction is wrong,” Champion says, “it almost doesn’t matter what hard work has gone into a sexy-looking brand identity.”
While Cannon, the retired Kodak employee, had a grand time getting non-banking help at the ING café, customers at a flashy new BMO branch nearby were having a hard time noticing makeover efforts. “If that’s supposed to be state of the art, then somebody is missing something,” said one client. Others notice the BMO changes, but are not impressed. ”I just want a less irritating banking experience,” says one of them. “But now, my branch has wall-to-wall LCD screens pushing crap into my eyeballs when I’m trying to talk to a live person.” If these reactions are widespread, BMO will hear about it. Every month each of its branches and sales teams invite customers, one at a time, to sit down for what Brown calls “BMO huddles,” which are aimed at making sure the bank delivers a rewarding customer experience.
Back at the RBC retail store in Burlington, a few fancy glass displays might make you think non-banking retail items are actually for sale, until you get close and realize you are looking at promos for the RBC Rewards program. RBC officials were not available to discuss the strategy, so it is unclear how the concept is working out.
But it clearly fails to live up to its marketing. The store, for example, boasts a “town square,” where seminars are supposed to be held, but the area in question consists of nothing more than two chairs in front of a video screen. What about the Hawaii Five-O–style computing tables? The $20,000-plus gadgets are clearly cool enough to impress tech lovers. They are also good at explaining banking solutions and investment options to potential clients. But it is hard to imagine them attracting traffic on their own, which was the goal. That’s especially true on Sundays, when RBC’s much-hyped investment in meeting consumer needs, whenever and however people want, is closed—just like in the good old days, when banks were called banks.
