At a time when more Canadian banks are reporting profits in the billions, a recent industry study has found that Canadian utilize online banking more than other countries included in the study. If so, why do "in-person" fees continue to rise?
In the early 90's, it was considered a right of passage for a Canadian bank to make it into the ranks of the "Billionaire's Club" – reported annual income in excess of $ 1 Billion. To date, all the banks in the
Big Five (TD Canada Trust, Royal Bank of Canada, Bank of Montreal, ScotiaBank, and Canadian Imperial Bank of Commerce) are (have been) regular members of this select club.
According to the
Canadian Community Reinvestment Coalition (CCRC), these five banks
reported combined profits of over $ 18 Billion in 2006 ($ 600 per person in Canada). One has to keep in mind that banks make their income from three primary streams, i.e., investments, interest from loans (corporate, personal, credit cards), and user fees—although it is generally the regular increases in the latter that draw the most public attention. Why do we have to suffer from them, what are they for, does the consumer actually get value for money spent?
A recently completed survey from
comScore provides interesting insight into the last two questions. The
results of their study show that Canadians prefer to use online banking services more than any of the other 36 countries including in their survey. Canadians outperformed the UK, US and Australia by 18 – 25 percentage points, with two-thirds of the Internet-using public utilizing online banking. The study derived their results from measuring
unique visitors and
pages viewed per visit. Although Canadian banks were then ranked according to these totals, the survey does not appear to have factored those visitors that have business with more than one financial entity.
Some highlights of the results:
• RBC had the highest number of unique visitors, although the Bank of Montreal showed the greatest increase from the previous year.
• ING (completely Internet-based) had one-fifth the total of RBC – a
decline of 9 % from the previous year.
• Visitors aged 45 – 54 showed the highest usage both in visits (12.1) and number of pages viewed per visit (157) for each user.
According to Brent Bernie, president of comScore, "Canadians are typically very savvy Internet users, a fact that is underscored by their heavy usage of online banking.”
Although these results are intriguing, if not impressive, one might ask what relation they have to user fees. The answer is quite simple. Each monthly package, ATM, or per-item fee helps to pay for this (and other) services. Online banking and banking by phone are included as "free" services when a new account is opened in most, if not all, Canadian banks. As consumers demand more convenient ways to manage their finances, these institutions respond, and, must often adjust their fees to compensate for the increased costs.
Since 1995, when RBC
pioneered web-based access to bank information, there has been a steady trend away from banking in-person. At that time, consumers often paid a fee for
many of the transactions that we now take for granted: transfers, utility bill payments, third-party cheque cashing. In this context, user fees have actually increased rather modestly in comparison to the services that are now offered.
The banking industry has progressed by leaps and bounds in the past thirteen years. However, continued growth in customer base, products and services, and income is not a guarantee though. As Bernie warns:
But because the Canadian online banking sector is so developed and competition already so fierce, banks need to closely examine how they are meeting the needs of their consumers online if they are to achieve customer growth and retention through this increasingly important channel.
Only time will tell if our banks heed the advice of Bernie and other industry leaders. Given the recent negative impact of global credit, mortgage concerns, and poor economic performance, it is unclear whether user fees will change or more will be introduced. What is clear is that online usage has dramatically changed the landscape of how Canadians and their banks do business.