Canadian banking: In slow transition
Five players dominate the sector, which is consolidating further to acquire related services offered by smaller intermediaries like mutual funds and investment trusts, positioning banks as universal financial service providers and important drivers of economic growth. Besides merger activity, the other trends in this market include internationalization, competition, supervision and investment in channel infrastructure.
Because Canada is a mature and stable market, it holds little hope of growth - hence, its institutions are making their way to foreign shores, particularly those of the U.S, U.K and Latin America. Likewise, the country has been seeing the entry of foreign banks like HSBC, ING, BNP Paribas, Citigroup and ICICI, although they currently do not pose a significant threat to the 'big five'.
Besides the Internet shake-out mentioned earlier, Canadian banking is also undergoing a change of product and service profile. With the infusion of young blood into the population, the market is changing to suit new tastes for self-service banking and electronic channels. That being said, this is one market where there is equal emphasis on strengthening branch infrastructure; between 2007 and 2009, the number of branches grew 28%. Even today, branches are being viewed as an influential channel for the delivery of high quality customer experience.
Alternative channels including online and mobile banking, data management and business intelligence are the targets of most technology investment. The financial gloom of the crisis has slowed down IT spending; however, it is important for Canadian banks to realize that in a stable and slowly growing market, technology, as a driver of operating efficiency is one of the key contributors to profitability. Hence, they cannot afford to take their foot off the gas pedal for too long.
