In-person banking soon to be a rarity: CIBC CEO
Branches being changed to focus more on advice than transactions
The chief executive of Canadian Imperial Bank of Commerce predicted Wednesday that almost all transactions will soon be conducted remotely rather than in person, as customers continue to take more of their business and daily lives online.
“We see continued migration of clients to do transactions remotely,” CIBC CEO Victor Dodig said Wednesday during his bank’s institutional investor conference in Montreal. “You’re seeing 87 per cent of transactions now being done remotely. And we think it’s going to get to 96 per cent over the next four to five years.”
That migration has prompted some changes. Dodig said CIBC is “retooling” its bank branches to focus more on advice. It is also handing customers more control, such as with the lender’s recent move to allow clients to shut down their credit card via their phone if they suspect it is lost.
“More and more is being pushed out to the client, that they can do on their own, and other resources are being diverted into building relationships and advice with those clients,” he added.
The CEO’s predictions are just the latest sign of the changing times in the banking business, as lenders try to strike the right balance of brick-and-mortar branches and digital offerings.
“We tend to look at what the consumer wants,” Dodig said. “And what the consumer wants is more convenience on their smart tablet or on their smartphone or on their laptop.”
At the same time, banks face challenges from fintech companies, as well as the looming threat that Silicon Valley might get serious about financial services.
There is some serious thought being given to the potential Big Tech menace. And a report from Moody’s Investors Service this week warned that the “greatest risk” to incumbent banks posed by Big Tech is giving up control of customer relationships.
“In most regions, big tech firms will likely avoid manufacturing financial products given a high regulatory burden on financial institutions,” noted Moody’s. “Still, higher price transparency and less customer interaction when customer relationships are ‘owned’ by providers of digital ecosystems could translate to margin pressure for incumbents.”
Those comments are in line with concerns voiced by the head of Royal Bank of Canada, Dave McKay, who told reporters earlier this year that “we don’t want to be buying back our clients through someone else’s channel because they’re living their lives there.”
With that threat in mind, RBC has launched a Ventures unit that aims to reach prospective clients through a variety of apps. McKay said during the bank’s third-quarter conference call in August that the lender has launched nine ventures and already registered more than 200,000 users, “even with limited marketing in early stages.”
RBC’s head of technology and operations was asked about big tech during Wednesday’s CIBC investor conference.
“I’m a big believer in the best defence is a really strong offence,” said Bruce Ross, RBC’s head of tech. “We believe that we have to follow where our clients want to go.”
Ross also said the bank has a three-pronged approach to fintechs: it invests in some, acquires some and partners with some (as the bank does with RBC Ventures). When it comes to bigger tech companies, such as Amazon.com Inc. and Apple Inc., he said a clear line has to be drawn.
“Those players, you have to be very specific on, OK, where are you going to work with them and where are you going to compete with them?” Ross added. “But ultimately it comes down to following the client, and we look at all of our businesses and say, ‘OK, let’s cause the disruption ourselves, versus having someone disrupt us.’”
Also speaking at the conference on Wednesday was Teri Currie, the head of Canadian personal banking at Toronto-Dominion Bank.
Currie told the audience that TD’s tech spending has shifted since around 2012 and 2013 today, going from 75 per cent of the expenses geared toward “run-thebank” outlays and 25 per cent for “change-the-bank” moves, to now 40 per cent of the tech dollars going towards the latter.
“So a significant change in a small period of time,” she noted.