It’s been more than a year since Canada’s banking industry took a giant leap toward branchless banking with branded, stand-alone entities that are more than just service add-ons to traditional financial institutions.
The first ‘virtual’ bank to enter the market was mbanx Canada, a spin-off of the Bank of Montreal, in October 1996. That was followed in early 1997 by the introduction of Citizens Bank of Canada, the virtual-bank division of Vancouver City Savings, the country’s largest credit union. Then in April, Amsterdam-based ING Group entered the Canadian market with ING Direct.
Rob Hain, partner, financial services consulting at Ernst & Young in Toronto, says virtual banking is part of a continuum that began about 25 years ago with the debut of automated tellers (atms), and evolved with the launch of telephone banking and the introduction of debit cards.
‘We’re suddenly saying, `Gee, look at that, virtual banking is here.’ Sure it is, but the elements of it are all pretty old. It’s just something we’re awakening to.’
The big story, he says, has more to do with the decrease in the cost of communications and home-computing technology, which has made virtual banking that much more viable.
‘We can move huge amounts of data over telephone lines, which means you can have all the functionality of a bank on your own personal computer,’ he says.
That doesn’t mean that brick-and-mortar branches will disappear, says Hain. It’s just that they’ll be smaller and less plentiful, since people will do most of their routine transactions by phone, fax or over the Internet.
Which is precisely how mbanx communicates with its customers right now.
As with all the direct banks, mbanx customers who enquire about the service are mailed an information package. After they return a signed customer agreement, all communication is done electronically. Thanks to parent company Bank of Montreal (bmo), mbanx customers are also able to make deposits and withdrawals through bmo’s atms.
Since its launch, mbanx has offered a full range of banking products and services. Marnie Kinsley, executive vice-president and coo of mbanx Canada, says it’s a formula that appeals to time-pressed, financially active people who are comfortable with technology.
‘We’ve got 110,000 clients now who are giving us extremely good customer satisfaction readings, so we feel we’re in the right market.’
Kinsley says while mbanx did a great deal of tv and newspaper image advertising from its launch to about April of 1997, its current communication focus is on outbound telemarketing and direct-mail initiatives targeting bmo clients and others who show a high propensity for electronic banking.
Jim Kelly, vice-president of marketing for ING Direct, says his company set about building its business from the beginning with a direct-response-driven multi-media campaign, including broadcast, print, unaddressed direct mail and fsis. While all these efforts will be continued, he says, the company is also considering event marketing.
ing has been concentrating its efforts in the Toronto and Vancouver markets, Kelly says, adding the bank will enter its third market by the end of the year. The bank has been rolling out both product and coverage in stages so as not to compromise the high level of customer service to which the bank has committed, he explains.
ING Direct opened with a daily interest savings account and now offers rsps, gics, and a line of credit or loan account. Kelly says the company has signed more than 40,000 customers, well exceeding its modest goal of 25,000 customers by the end of 1997.
As to the future of electronic banking, Kelly says there’s still some resistance to the idea, but that that barrier is gradually disappearing.
‘There’s still a large percentage of Canadians who feel they have to go to a branch. [But our] research also shows that the majority of Canadians accept the fact that they may never enter a branch again, and are willing to use these new channels to get better products.’
As more players enter the field, he says, that trend will continue.
ing does not yet offer its customers atm or pc options, but they can transact business by phone or make deposits electronically via their employers or other banks.
Citizens Bank of Canada – which is also focusing on the Toronto and Vancouver markets – does have a pc banking product and is introducing a new version of the program this year. Customers can also use their Citizens Bank card to withdraw cash from any Interac atm around the world. Deposits can be made electronically, through the mail or at some Hongkong Bank of Canada atms in the Greater Toronto Area.
The bank opened with a menu of basic financial services including a chequing/savings account, term deposit products and mortgages.
Peter Nobes, marketing manager for Citizens Bank, says social responsibility is one of the cornerstones of the bank’s identity and is a feature that attracts many of its customers.
Last September, for example, the bank launched a shared-interest Visa card that promises to donate 10 cents per transaction to charities chosen annually by Citizens Bank customers.
Nobes says aside from all the usual characteristics which define a virtual bank prospect – that is, they own a home computer, they’re comfortable banking outside a branch, and they already use atms or telephone banking – Citizens Bank defines its target market by its willingness to make donations to social causes.
‘We look for lists that have that kind of criteria,’ says Nobes. ‘They’re more successful for us.’
Nobes says Citizens Bank launched with a full multimedia campaign, all with a direct response component, but later in the year, added event marketing to the mix.
Among the events it sponsored was a lunch-time concert series in front of Toronto’s City Hall at which it erected two sign-up booths.
‘We don’t have the luxury of streetfront signage,’ says Nobes, ‘so we have to make sure we have a name in the marketplace.’
Also in this report:
– They’ve only just begun: Big banks intensifying database marketing efforts to retain customers p.DR12
– Mutual fund marketers walk DM tightrope: Must maintain delicate balance when providing information directly to investors so as not to upset the brokers and planners who represent their products p.DR18
– Canada Post uses direct mail to sell mutual fund marketers on the benefits of direct mail p.DR18
