The ‘fun’ factor that could determine long-term success in Canadian banking

I still remember three glitches that took place when Microsoft held its worldwide partner conference here in Toronto three years ago.

The first was the interminable lineup for attendees to register and pick up their badges. The second was the failure of then-CEO Steve Ballmer’s microphone during his morning keynote.

The third was summed up by a Microsoft partner who complained to me that no matter how great its products and technology were, “the problem with Microsoft is that it’s just not seen as cool.” It’s tough to be viewed as the aging dad of desktop alongside the perceived hipsters of the mobile Me crowd, such as Apple and Google.

Banks are battling a similar image problem these days. According to IDC Canada’s Robert Smythe, traditional banks have become associated with “drudgery” (his word, not mine). Their competitors from the technology world – alternative transaction providers like Apple, PayPal and Square – are seen as “fun.”

“Canadian banks need to deliver more fun from their $12 billion technology spend,” said Smythe, a research consultant at IDC Financial Insights, during a recent presentation in Toronto.

Banks are perceived as “efficient, reliable transaction processors,” Smythe explained, while their “fun” rivals are viewed as capable of “meet(ing) clients’ needs with innovative solutions”.

This case of bad optics is already costing the banks business. In 2012, 20 per cent of customers worldwide changed all or some of their retail banking products, according to a 2014 report by Accenture. The study states this trend “is tied, at least in part, to (customers’) increased expectations, driven by all technology can do to make transactions more engaging.”

A separate 2014 Accenture survey of Canadian and U.S. consumers found that:

– 40% of bank customers aged 18 to 34 would consider switching from their current bank to bank with Google if it offered those services

– 37% would consider banking with Amazon

– 34% would consider banking with Apple

– 60% of Canadians aged 18 to 34 (and 47 of those aged 35 to 54) would consider banking with “at least one technology, telecommunications, retail or shipping/postal company that they do business with if they offered banking services”

It’s not like Canadian banks haven’t been trying to evolve with customer expectations. They’ve improved their online banking offerings, released mobile apps and made some transactions paperless.

But Smythe said it’s still not far enough. He said Canada’s banks must “integrate lifestyle features with banking products” and “offer services to address lifestyle needs beyond banking.” Putting it another way, Accenture says banks must choose to be either “a purely transactional provider” or “become an Everyday Bank – trusted, indispensible and central to consumers’ every day activities.”

What would this look like? Accenture lays out a few examples of how it’s already being executed at some financial institutions around the world.

– Along with information on its mortgage and home insurance rates, Commonwealth Bank of Australia provides customers with data on residential property sales, prices and even crime rates in various neighbourhoods via a mobile app.

– When customers of Spain’s BBVA bank shop for a new car, they receive data on average list prices and past sales prices as well as information about BBVA’s car loan and insurance products.

These institutions are adding value to customers’ lives that goes beyond financial transactions. It’s not enough for banks to go mobile, digitize paper transactions and offer omni-channel service. In Smythe’s words, it’s time for Canadian banks to become “part of clients’ digital world.”