Nearly one-third of Canadians say they’re less dependent on their bank as their primary financial services provider, according to EY’s 2016 Consumer Banking Survey, which polled more than 2,000 people.
The decreased dependence on traditional banks translates to increased interest in fintechs—digital startups that are seen as “disruptors” to big banks.
According to the survey, nearly 40% of consumers have used non-bank providers (including fintechs and other organizations that offer financial services products, but aren’t in the banking industry) in the last 12 months. An additional 20% who have not used them plan to in the near future.
While 96% of customers trust their bank to keep their money safe, 19% of Canadians have little or no trust that banks will provide unbiased advice.
“There are a number of expectations [with traditional banks] that are just not being fully met,” said Paul Battista, EY’s financial services advisory leader. “Canadians are clearly frustrated that they are not being seen or understood as well as they could be, and they’re finding non-bank providers are doing a better job at that.”
Three of the top four reasons customers would consider using a non-bank provider relate to the customer experience: access to different products and services, ease of setting up an account, and a better online experience and functionality.
Canadians “feel that non-banks are offering them an easier way to do business with them,” said Battista. “Both from a solutions and experience standpoint, they’re finding these non-bank providers are delivering a more customized experience.”
While there’s an increased interest in digital banking services, competing with fintechs doesn’t mean having an online-only presence, according to the report. While 77% of consumers go online first to research a product, 59% need to speak to someone to get advice or sign up for a new product. Similarly, 66% think having a digital presence is highly important, but 60% also think having a physical presence is highly important.
Since customers want both digital and physical channels, banks “should exploit the power that they have in having all of the channels at their disposal,” said Battista.
“Fintechs and many of the non-banks [provide] financial services almost exclusively through digital channels. The great news is that banks have a very robust physical channel network and they’re building their digital capabilities.”
Big banks in Canada are trying to stay ahead of the digital curve by opening tech hubs with a startup mentality. TD has an innovation lab in Kitchener, Ont.; Scotiabank opened its “Digital Factory” last year; ; and CIBC partnered with Toronto’s MaRS Discovery District to develop new banking innovations.
“They’re on it,” said Battista. “They’re working very hard and the challenge is enormous – these are large, complex institutions with massive customer bases and very complex systems. The banks that crack the nut, that are able to seamlessly create these experiences that are customer-centric… are very well-positioned to succeed against these fintech upstarts.”
To stay relevant, traditional banks also have to develop much greater insight into their customers’ needs and preferences, said Battista.
“Banks have a treasure trove of information about their customers; they just haven’t been very good or focused on diving into it… to develop better and more customized products and services. [They] need to get serious about customer insight and the knowledge they have about their customers.”
