CIBC is blaming the increasing use of Internet banking and debit cards for its decision to close 100 branches across the country by the end of 2004.
Rob McLeod, director of corporate communications for the Toronto-based bank, says the closings are part of a country-wide cost-cutting and reallocation effort to reflect better how its customers conduct their business.
From 1999 to 2001, McLeod says, the bank’s Internet transactions jumped by 165% and debit card transactions increased by 141%, while traditional branch transactions dropped 7% and now account for less than one-10th of the bank’s transaction total.
“We are looking at our branch network in terms of the dramatic changes in how customers are choosing to bank with us,” he says.
Compounding the challenge for many
neighbourhood branches are customers who open an account there but then do most or all of their banking at automated tellers near their workplace, he notes.
The rest of the Big Five banks are experiencing similar trends and have been taking steps to reduce their bricks and mortar as their customers have gone electronic. TD Canada Trust, for example, plans to close a “small handful” of branches over the next few years as part of the branch rationalization following the TD
Bank-Canada Trust merger in 2000.
Jeff van Duynhoven, vice president of Internet banking and payments for TD Canada Trust, says that although Internet banking has surpassed the telephone in channel popularity, the top dog remains automated teller machines.
According to the bank’s statistics, 77% of its customers use ATMs, while online and telephone banking are used by 29% each. In total, 15% of its transactions are done at the branches while the vast majority are conducted via electronic channels including ATMs, direct payment, telephone, Web, and pre-authorized debits and credits.
He notes many of the early adopters of telephone banking have now migrated over to the Internet.
“Telephone growth has flattened and is now on a slight decline. With the advent of broadband technology, the online experience is much easier and faster than with the old dial-up speeds,” he says.
“Clearly, a corner has been turned in the popularity of Internet banking,” van Duynhoven says. “We’ve known for some time that once people have tried banking online, they become enthusiasts.
“Now, a significant proportion of our customer base has made its preference clear. Online banking has now surpassed telephone banking, and we believe this rate of adoption will continue to accelerate.”
More than 40% of TD Canada Trust’s chequing account households and 35% of its small-business customers are registered for Internet banking, the highest proportion among major Canadian financial institutions. More than 70% of active users take advantage of online bill payment.
Including other electronic banking activities, such as ATM use, debit card purchases and electronic bill payments, more than a billion transactions per year are handled electronically, with peak activity sometimes reaching more than 1,000 transactions per second.
Both van Duynhoven and Richard Rudderham, senior vice president of distribution services at Bank of Montreal, agree many customers prefer to use a variety of channels, depending on the product or service they’re after.
For example, a significant proportion of online customers are comfortable doing straightforward account transactions, such as bill payments, transfers between accounts, chequing account balances and account activity, on the Web.
But they have yet to achieve that level of comfort for more complex transactions, such as applying for a loan or mortgage, or buying mutual funds and other financial products.
“We’ve found many customers will research a loan or mortgage over the Web but, with mortgages especially — it’s the single biggest financial transaction many of them will ever make — they want that face-to-face experience that you can’t get on the Web,” van Duynhoven says.
“Five years ago, people thought everybody would do everything online, but that’s not what we’re seeing,” adds Rudderham.
“Transaction volumes are such a small percentage of what is actually done in a branch. We’re relying very heavily on value-added services, such as the sale of mutual funds, investment products and mortgages,” he says.
Rudderham notes the number of BMO branches has remained relatively stable at 986 for the past 18 months.Three years ago, BMO sold 14 of its rural Manitoba branches and their books of business to the Credit Union Central of Manitoba for $11 million, which subsequently sold them to individual credit unions in the province.