Canadian consumers trust their bank more than other institutions to manage their personal data
Toronto, ON--Canadian bank customers continue to overwhelmingly trust their primary financial services provider to securely manage their personal data above other institutions, including non-traditional banks that have entered, or are looking to enter, the banking industry as digital disruptors, according to an Accenture survey of more than 4,000 retail bank customers in Canada and the U.S.
Accenture's survey, ‘ Banking Shaped by the Customer’, is the most recent report in Accenture's multi-year research on the banking industry. It found that 91 per cent of Canadian consumers trust banks [and other financial institutions] more than other types of companies with securely managing their data. This includes payment companies (selected by only four per cent of Canadian respondents), mobile phone providers (two per cent) and consumer technology companies (one per cent). None of the Canadian consumers surveyed said they trust social media providers the most to manage their data.
"As online and digital emerges as a driving force in financial services, it is clear that while Canada's banks possess strong competitive advantages, there is no room for complacency," said Jodie Wallis, managing director of Accenture's Banking practice in Canada. "The survey findings are leading indicators that represent a call to action for the banking industry to focus more on improving customer perceptions of their relationship and appealing to millennials with enhanced digital offerings and loyalty programs."
Even with this competitive advantage that traditional banks have over non-bank entrants, the Accenture survey identified three emerging threats in the Canadian marketplace that could entice consumers to switch providers: (1) the dominance of online banking and the declining importance of local branches for consumers; (2) customers' moving away from large national and regional banks; and (3) the willingness of consumers to shop around for advice-driven financial products.
Even so, switching rates in Canada are much less than in other mature global markets, including the U.S. In 2014, only seven per cent of Canadian consumers switched to a new financial services provider, compared with 11 per cent of American consumers. The survey found that online-only/virtual banks saw the biggest gain from this trend, with an 18 per cent increase in new customers in Canada in 2014, up from 12 per cent in 2013.
When it comes to paying for advice-driven products, the survey found that Canadian consumers are willing to shop around beyond their primary bank. Nearly two-thirds (64 per cent) of Canadian consumers went to a competitor to purchase auto loans; 38 per cent went to a competitor for brokerage accounts; and 31 per cent went to a competitor when considering registered retirement accounts. Two-thirds (67 per cent) of Canadian consumers went to a competitor for financial advice and home mortgage loans.
Local Bank Branch Less Important to Consumers
Accenture's survey found that consumer relationships with local bank branches are less important as the demand for digital channels is on the rise. Four out of five Canadian consumers (82 per cent) said they would not switch banks if their local branch closed. At the same time, almost half (46 per cent) of Canadian consumers said they prefer banking online to banking at branches, compared with 23 per cent who prefer banking at branches. With online becoming the dominant banking channel in Canada, 37 per cent of Canadian consumers said that online is the most important channel for banks to invest in over the next five years, followed by branch (17 per cent) and mobile (15 per cent).
"This is a big change in the evolution of retail banking," said Wallis. "For the first time in our research, Canadian consumers ranked online banking services as the number one reason for staying with their bank, ahead of branch locations and low fees. It is no longer a question of proximity to the local branch that is driving consumer choice, but of which banks are offering the strongest online capabilities and mobile applications."
The Accenture survey also showed that in the next five years, one-third (31 per cent) of Canadian customers expect to use the branch less frequently or not at all – mostly because they will be using digital channels more.
The survey found that, as the branch channel fades, 75 per cent of Canadian consumers define their banking relationship as being transactional or commoditized, rather than being based on value from advice-based products and services. Further, these consumers said that their relationship is defined by simple transactions like paying bills and receiving chequing account statements.
Millennials Switch Banks Twice as Often as Other Consumers
The North America survey results found that banks must do more to retain millennials, defined as consumers aged 18 to 34 years old.
Though the vast majority of millennials (92 per cent) said they are satisfied with their online banking experience at their primary bank, they also change banks more often than any other generation. In the past 12 months, nearly one in five millennials (18 per cent) in the North America survey sample said they switched from their primary bank, compared with 10 per cent of customers aged 35-54 and only three per cent of people 55 and older. Though local/community banks were the biggest "winners" of this trend, 17 per cent of millennials who switched chose digital-only banks. Surprisingly, slightly older consumers were even more likely to have switched to an online-only bank within the past 12 months, with 31 per cent of consumers aged 35 to 39 years old saying they did so.
Millennials in North America also have distinct preferences for how banking services should be delivered. Two-thirds (67 per cent) said that the traditional and digital banking experience they receive at their current bank is only somewhat or not at all seamless, and the same number (47 per cent) said they want their bank to provide tools and services to help them create and monitor their budget. Nearly half (48%) also said they would like their banks to offer video chat on their website or mobile/tablet application, compared with only 23 per cent of those over 55.
"As millennials overtake Baby Boomers as the largest living generation in North America, they are becoming one of the most influential – and challenging – groups of customers for the banking industry," said Robert Mulhall, Managing Director and North America Lead for Accenture Distribution and Marketing Services, Banking. "Not only are they more likely to switch banks, but they are also dissatisfied with the experience they're getting at their existing banks. This poses a significant risk for banks in the coming years."
"Banking Shaped by the Customer," Accenture's 2015 North America Consumer Digital Banking Survey Report, is available for download on Accenture's website.