Banks get with the program

In a lot of ways, Canada's big banks could be likened to ocean liners - impressive for their sheer size and power, but not exactly the most manoeuverable vessels on the high seas....

In a lot of ways, Canada’s big banks could be likened to ocean liners – impressive for their sheer size and power, but not exactly the most manoeuverable vessels on the high seas.

In the fast-evolving online world, however, that can be a problematic quality. To stay afloat on the Web’s choppy waters, banking institutions must learn to behave a lot more like powerboats.

It’s not an easy transition. But signs suggest that the banks are making progress, rapidly increasing both the range and sophistication of the products and services that they offer to their customers over the Internet.

In the past year, Canada has gained significant ground on the U.S. in the field of online banking, says Don Rolfe, managing director of GomezCanada, a Toronto-based Internet quality measurement firm. In September, GomezCanada issued its first ‘Internet Banker Scorecard,’ which ranked Canadian banking sites from a customer’s perspective. (TD Bank was found to lead the pack overall.)

‘Canada is closing the gap on the States,’ Rolfe says. ‘If you look back about six to 12 months ago, I would have said Canada was probably about 18 months behind. I don’t believe we’re that far behind anymore, because the development that’s been undertaken by the players has been astronomical.’

(As for Europe, he says, Canada ranks well ahead, because the financial services sector over there has been slower to integrate with the telecommunications world.)

PC and Internet offerings from Canada’s big banks first made their debut about five years ago, and have evolved dramatically of late. Today, if you surf to the Web site of any of these institutions, you’ll find online transaction features that allow you to update account balances, pay bills and transfer funds between accounts. You’ll also discover financial planning tools such as account selectors and mortgage calculators, along with brokerage areas where you can buy and sell stocks and mutual funds.

Online banking services now represent a mainstream offering, says Marnie Kinsley, newly appointed executive vice-president of E-Business at Bank of Montreal (and most recently executive vice-president of the bank’s online and telephone banking arm, BMO Mbanx Direct).

‘We’re way beyond the early adopter stage,’ she says. ‘The types of [online] clients we have now are in every segment, every part of Canada, every income level, both genders. This now looks like a typical Canadian market, even though it’s a subset of our client base. So the kinds of things we’re doing on the Internet are a reflection of what we’re doing in the bank as a whole. It’s beyond leading edge now – it’s just part of our business.’

For the banks, one of the biggest challenges of moving into the online realm has been shouldering the expense of moving various products and services onto the Internet. The timing of the investment – ensuring that there is sufficient consumer demand, that the bugs have been worked out and that any technology consumers require is affordable – can also prove tricky, Kinsley says.

Equally difficult has been the process of trying to change the way they think about serving customers.

‘Traditionally, banks have been organizations geared towards manufacturing products,’ says Neil Parmenter, corporate communications advisor for e-business with Royal Bank of Canada. ‘But that sort of siloed, product-centered approach just won’t work on the Internet.’

Online banking, he says, demands ‘a more holistic approach to the customer experience’ – one that acknowledges the individual consumer’s broad range of needs and expectations. With this in mind, Royal Bank redesigned its own site last year, grouping its various offerings according to customers’ personal, business and life needs.

How do the banks promote their e-banking services to customers? For many, the branch network plays a key role. TD Canada Trust branches, for example, provide information about online services to all customers opening, changing or inquiring about accounts. According to senior vice-president Chuck Hounsell, the bank has also used direct mail and promotions, as well as advertising and sponsorships on sites such as, to spotlight its Web offerings.

CIBC, similarly, takes a multi-tiered approach to promoting its online services. Joe Heim, communications specialist for CIBC Electronic Banking, says the tactics include employee education (so that staff can inform customers of the benefits of banking online), direct mail to various customer segments, banner ads on such key sites as Sympatico and Yahoo! Canada, and phone calls to new customers, to make sure they know about the bank’s range of Web offerings. CIBC also ran a promotion this past summer offering cash prizes to users of various online services.

The next stage in the evolution of Internet banking in the Canadian marketplace is the introduction of electronic bill presentment, which allows customers to view their bills online. All of the major banks are adding this service to their list of offerings this fall.

Also on the horizon is ‘account aggregation,’ a service that enables customers to keep track of all their relationships with banks and brokerages through a single log-on.

Royal Bank will be the first to introduce the service, with implementation expected in the first quarter of 2001. BMO Mbanx Direct also plans to test the waters next spring.

Another frontier that the banks have just begun to explore is wireless banking, via mobile phones, personal digital assistants and other related devices. BMO Mbanx Direct and Scotiabank both introduced wireless banking and brokerage services in the summer of 1999. TD rolled out its own service this past June, followed by Royal Bank in September and CIBC last month.

Chuck Hounsell of TD Canada Trust says that in these initial stages, wireless will probably prove more popular for brokerage services – the users of which generally want to be able to act immediately on specific news or events.

Customer adoption of online banking appears poised to grow. According to a March 2000 survey by the Canadian Bankers Association, 46% of Canadians expect to be conducting their banking transactions via the Internet within the next two to three years. At present, the survey found, approximately 8% of Canadians use online and PC banking as their primary means of conducting transactions.

Lee Horigan, general manager of Toronto-based personal finance site, which releases an annual report on Internet banking, says the banks have succeeded in raising online service levels in the past 12 months. And over the next three years, he expects to see them roll out many new products unique to the online channel.

Last fall, for example, TD introduced its eFunds – a class of mutual funds available exclusively through its online brokerage.

Also in this report:

- Cutting through the clutter: As the mutual fund business grows ever more crowded, fund marketers are looking for new ways to stand out p.19