RBC on ‘ collision course’ with Apple, Google: CEO
Dave McKay, the chief executive officer of Royal Bank of Canada, says the bank is on a “collision course” with the likes of Apple Inc. and Google Inc. as customers begin to fully embrace mobile banking.
Apple Pay, the smartphone giant’s mobile payment platform, is taking off in the United States, but such systems threaten to get in between banks and their customers, McKay told RBC investors and clients at a conference in New York on Tuesday.
Though RBC would still be paid for transactions if it were to embrace the platform, the bank would lose an important direct connection to customers that exists with other payment methods such as credit cards.
“So we’re on a collision course,” McKay said, acknowledging that taking on the technology behemoths is not something even Canada’s largest bank would choose to do unless it was necessary.
RBC is seeking an alternative where the bank can be at the top of the ecosystem, McKay said, adding that banks have an edge right now through customers’ trust and a reputation for security with their money.
“Trust and security are key assets. They buy us time,” he said.
He described the outlook for the rest of the bank’s operations in far less confrontational terms.
He pledged to expand in the United States on the heels of January’s $ 5.4 billion US purchase of City National Corp., a private and business bank specializing in highnet- worth clients and lending to the entertainment industry.
He declined to give specific targets, but said the contributions from both the U. S. operations and wealth management are expected to grow.
In 2014, Canada accounted for 63 per cent of the bank’s overall revenue and 76 per cent of net income.
“We certainly want to make the U. S. bigger,” McKay said.
One segment where RBC may shrink is its property and casualty insurance line, where the bank is undersized relative to peers. Like other banks, RBC is barred from selling i nsurance through i ts branches.
“We’re not sure we’re going to be in that business for the long term,” McKay said.
On the wealth management, capital markets, and private banking front, he identified the United Kingdom and Europe as target markets for RBC, though he said he expects it to take five to 10 years to reach the same point in the U. K. that the bank has attained in North America.
In 2010, RBC purchased BlueBay Asset Management PLC, and the Canadian bank has private banking and corporate clients through its U. K. wealth management operation.