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Canadian Banking and Credit Unions - June 2011

Key Points:

  • There is virtually no competition from U.S. banks in Canada except in credit cards, where MBNA and Capital One have managed to carve out respectable market shares.
  • The Canadian banking market in general is much less competitive than its U.S. counterpart. Banking products tend to be more expensive than they are south of the border. Canadian banks tend to emphasize rewards to attract customers, not lower prices and fees.
  • Although lower price alternatives exist, it’s very hard to get Canadian customers to switch banks
  • Walmart entered the Canadian market in 2010 and immediately began offering a rewards MasterCard. If the company decides to expand into other consumer banking products, it could perhaps surpass other retailer-owned banks, such as those operated by Canadian Tire and President’s Choice.
  • Asians are a very desirable, and growing, customer group for retail banking and consumer financial services in Canada.

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Table of contents

  1. Scope and Themes

      • What you need to know
        • Data sources
          • Consumer survey data
            • Abbreviations and terms
              • Terms
                • Companies mentioned in this report
                • Executive Summary

                  • Industry overview
                    • The Consumer – where they bank and why
                      • How they bank
                        • Innovations and innovators
                          • Marketing channels
                            • Marketing strategies
                              • Custom consumer groups: Asians
                              • Insights and Opportunities

                                • Key points
                                  • Credit unions need to attract younger members: social media can help
                                    • Asians are grossly under-represented in credit unions
                                      • Customers need smartphones for mobile banking to take off
                                      • Inspire Insights

                                          • Inspire Trend: “Extend My Brand”
                                          • Market Size

                                            • Key points
                                              • Total Canadian bank and credit union assets total C$3.3 trillion
                                                • Types of banks and bank regulation in Canada
                                                  • Credit unions and caisses populaires
                                                      • Figure 1: Canadian bank and credit union assets, 2010
                                                  • Competitive Context

                                                    • Key points
                                                      • Big Five banks control 80% of Canadian market
                                                        • Figure 2: Market shares of top Canadian banks, by assets, 2010
                                                        • Figure 3: Market shares of top Canadian credit card issuers, by receivables, 2010
                                                      • Strict regulation keeps banks safe, but restricts competition
                                                          • Figure 4: Big Five Canadian Banks, assets, 2009-10
                                                        • Desjardins has big market share in Quebec
                                                          • Figure 5: Top five credit unions outside Quebec, by asset size, Q4 2009 and Q4 2010
                                                      • Segment Performance

                                                        • Key points
                                                          • Net income jumps 44% at Big Five banks in 2010
                                                              • Figure 6: Net income at Big Five Canadian banks, 2009-10
                                                              • Figure 7: Net income at other large financial institutions, 2009-10
                                                            • Bank of Canada: Bank capital positions strengthen
                                                              • Canadian banks continue to rank as world’s safest
                                                                • Figure 8: World’s safest banking systems, 2010
                                                                • Figure 9: Global Finance ranking of the world’s 50 safest banks, September 2010
                                                                • Figure 10: Safest banks in North America, September 2010
                                                              • Canadian banks look abroad to invest
                                                              • Marketing Channels

                                                                • Key points
                                                                  • Credit unions use social media campaign to attract Gen Y members
                                                                    • Differentiating credit unions from banks
                                                                    • Market Drivers

                                                                      • Key points
                                                                        • The Canadian economy is stable, but rising consumer debt is a concern
                                                                          • Solid and steady, if not spectacular
                                                                            • Figure 11: Quarterly GDP growth rate, Canada versus U.S., Q2 2007-Q4 2011
                                                                            • Figure 12: Unemployment rate, Canada versus U.S., Jan. 2008-April 2011
                                                                          • Canadian consumer debt levels grow to historic proportions
                                                                            • Canadian household debt-to-income ratio tops the U.S.
                                                                            • Leading Companies

                                                                              • Key points
                                                                                • Royal Bank of Canada
                                                                                  • TD Bank (Toronto-Dominion)
                                                                                    • Bank of Nova Scotia (Scotiabank)
                                                                                      • Bank of Montreal (BMO)
                                                                                        • CIBC (Canadian Imperial Bank of Commerce)
                                                                                          • Desjardins Group (Fédération des Caisses Desjardins du Québec)
                                                                                            • National Bank Financial Group
                                                                                              • President’s Choice Financial (PC)
                                                                                                • Canadian Tire Financial Services
                                                                                                  • HSBC Bank Canada
                                                                                                    • ICICI Bank Canada
                                                                                                      • MBNA Canada Bank
                                                                                                        • Vancouver City Savings Credit Union (Vancity)
                                                                                                          • Servus Credit Union
                                                                                                            • Coast Capital Savings
                                                                                                              • Meridian Credit Union
                                                                                                                • First West Credit Union
                                                                                                                • Innovations and Innovators

                                                                                                                  • Key points
                                                                                                                    • Walmart enters Canadian banking market with rewards credit card
                                                                                                                      • TD Canada Trust rolls out Sunday banking across Canada
                                                                                                                        • M&T Bank is latest U.S. bank to test Canadian waters
                                                                                                                          • B.C. credit union launches financial literacy program for kids
                                                                                                                            • Mobile phone app lets consumers create virtual wallets
                                                                                                                              • Scotiabank adds eighth language to StartRight website for newcomers
                                                                                                                                • BMO hosts “speed mentoring” event to help immigrants find jobs
                                                                                                                                • Marketing Strategies

                                                                                                                                  • Key points
                                                                                                                                    • Overview
                                                                                                                                      • Representative direct mail advertising
                                                                                                                                        • No Fee Bank Account from President's Choice Financial
                                                                                                                                          • Figure 13: President’s Choice financial direct mail ad, October 2010
                                                                                                                                        • Tax Free High Interest Savings Account from Canadian Tire
                                                                                                                                          • Figure 14: Canadian Tire direct mail ad, December 2010
                                                                                                                                        • Banking Package from RBC
                                                                                                                                          • Figure 15: Direct mail ad, December 2010
                                                                                                                                        • Mobile Banking from Scotiabank
                                                                                                                                          • Figure 16: Scotiabank direct mail ad, October 2010
                                                                                                                                        • MoneyLogic from Bank of Montreal
                                                                                                                                          • Figure 17: Bank of Montreal direct mail ad, January 2011
                                                                                                                                        • Easy Web Internet Banking from TD Bank Financial Group
                                                                                                                                          • Figure 18: TD Bank direct mail ad, October 2010
                                                                                                                                        • Unlimited Chequing Account from CIBC
                                                                                                                                          • Figure 19: CIBC direct mail ad, January 2011
                                                                                                                                        • Statement Mailing from Steinbach Credit Union
                                                                                                                                          • Figure 20: Steinbach Credit Union direct mail ad, January 2011
                                                                                                                                        • High-Interest Savings Account from Ally Bank
                                                                                                                                          • Figure 21: Ally Bank direct mail ad, December 2010
                                                                                                                                        • HSBC Premier from HSBC
                                                                                                                                          • Figure 22: HSBC direct mail ad, September 2010
                                                                                                                                        • Statement Mailing from Servus Credit Union
                                                                                                                                          • Figure 23: Servus Credit Union direct mail ad, September 2010
                                                                                                                                        • Statement Mailing from NorthShore Credit Union
                                                                                                                                          • Figure 24: Northshore direct mail ad, August 2010
                                                                                                                                        • TV advertising
                                                                                                                                            • Figure 25: TD Bank South Asians, 2010
                                                                                                                                            • Figure 26: TD Canada Trust, 2010
                                                                                                                                            • Figure 27: Scotiabank Asian mortgage customers, 2010
                                                                                                                                            • Figure 28: BMO Launches MoneyLogic, 2010
                                                                                                                                        • Where Canadian Consumers Bank and Why

                                                                                                                                          • Key points
                                                                                                                                            • More than two thirds bank at big national banks, 19% at credit unions
                                                                                                                                                • Figure 29: Type of institution for primary banking relationship, by gender, December 2010
                                                                                                                                                • Figure 30: Type of institution for primary banking relationship, by age, December 2010
                                                                                                                                                • Figure 31: Type of institution for primary banking relationship, by household income, December 2010
                                                                                                                                                • Figure 32: Type of institution for primary banking relationship, by census region, December 2010
                                                                                                                                                • Figure 33: Type of institution for primary banking relationship, by survey language, December 2010
                                                                                                                                              • Influence on choice of primary bank: Location, location, location
                                                                                                                                                  • Figure 34: Primary influence on bank choice, by gender, December 2010
                                                                                                                                                  • Figure 35: Primary influence on bank choice, by age, December 2010
                                                                                                                                                  • Figure 36: Primary influence on bank choice, by household income, December 2010
                                                                                                                                                  • Figure 37: Primary influence on bank choice, by survey language, December 2010
                                                                                                                                                • Most respondents bank at just one institution
                                                                                                                                                  • Figure 38: Number of banking relationships, by gender, December 2010
                                                                                                                                                  • Figure 39: Number of banking relationships, by age, December 2010
                                                                                                                                                  • Figure 40: Number of banking relationships, by household income, December 2010
                                                                                                                                                  • Figure 41: Number of banking relationships, by census region, December 2010
                                                                                                                                              • Attitudes Concerning Banking Products and Services

                                                                                                                                                  • Security is most important service banks and credit unions offer
                                                                                                                                                    • Figure 42: Banking service rated “very important,” by gender, December 2010
                                                                                                                                                    • Figure 43: Mean of importance rating for banking services, by gender, December 2010
                                                                                                                                                    • Figure 44: Banking service rated “very important,” by age, December 2010
                                                                                                                                                    • Figure 45: Mean of rating for importance of banking services, by age, December 2010
                                                                                                                                                    • Figure 46: Banking service rated “very important,” by census region, December 2010
                                                                                                                                                    • Figure 47: Mean of rating for importance of banking services, by census region, December 2010
                                                                                                                                                    • Figure 48: Banking service rated “very important,” by survey language, December 2010
                                                                                                                                                    • Figure 49: Mean of rating for importance of banking services, by survey language, December 2010
                                                                                                                                                  • Checking accounts are most popular products at primary bank
                                                                                                                                                    • Figure 50: Types of products at primary bank/credit union, by gender, December 2010
                                                                                                                                                    • Figure 51: Types of products at primary bank/credit union, by age, December 2010
                                                                                                                                                    • Figure 52: Types of products at primary bank/credit union, by household income, December 2010
                                                                                                                                                    • Figure 53: Types of products at primary bank/credit union, by census region, December 2010
                                                                                                                                                  • Credit cards are most popular product to have at another bank
                                                                                                                                                    • Figure 54: Banking products at institution other than primary bank, by gender, December 2010
                                                                                                                                                    • Figure 55: Banking products at institution other than primary bank, by age, December 2010
                                                                                                                                                    • Figure 56: Banking products at institution other than primary bank, by household income, December 2010
                                                                                                                                                    • Figure 57: Banking products at institution other than primary bank, by census region, December 2010
                                                                                                                                                    • Figure 58: Banking products at institution other than primary bank, by survey language, December 2010
                                                                                                                                                • Switching Behavior

                                                                                                                                                    • Eight of 10 Canadians have not switched banks in the past five years
                                                                                                                                                      • Figure 59: Number of times switched banks in past five years, by gender, December 2010
                                                                                                                                                      • Figure 60: Number of times switched banks in past five years, by age, December 2010
                                                                                                                                                      • Figure 61: Number of times switched banks in past five years, by household income, December 2010
                                                                                                                                                    • Lower fees, higher savings rates are most likely reasons to switch banks
                                                                                                                                                      • Figure 62: Reason to potentially switch banks, by gender, December 2010
                                                                                                                                                      • Figure 63: Reason to potentially switch banks, by age, December 2010
                                                                                                                                                      • Figure 64: Reason to potentially switch banks, by census region, December 2010
                                                                                                                                                      • Figure 65: Reason to potentially switch banks, by survey language, December 2010
                                                                                                                                                  • The Consumer and Banking Channels

                                                                                                                                                    • Key points
                                                                                                                                                      • Online is most popular banking method by a wide margin
                                                                                                                                                        • Figure 66: Primary method of banking, by gender, December 2010
                                                                                                                                                        • Figure 67: Primary method of banking, by age, December 2010
                                                                                                                                                        • Figure 68: Primary method of banking, by household income, December 2010
                                                                                                                                                        • Figure 69: Primary method of banking, by census region, December 2010
                                                                                                                                                      • One in five Canadians—and 25% of men—has a smartphone
                                                                                                                                                        • Figure 70: Attitudes about mobile banking activities, by gender, December 2010
                                                                                                                                                        • Figure 71: Attitudes about mobile banking activities, by age, December 2010
                                                                                                                                                        • Figure 72: Attitudes about mobile banking activities, by household income, December 2010
                                                                                                                                                        • Figure 73: Attitudes about mobile banking activities, by survey language, December 2010
                                                                                                                                                    • Credit and debit card usage

                                                                                                                                                      • Key points
                                                                                                                                                        • Figure 74: Attitudes about debit and credit card usage, by gender, December 2010
                                                                                                                                                        • Figure 75: Attitudes about debit and credit card usage, by age, December 2010
                                                                                                                                                        • Figure 76: Attitudes about debit and credit card usage, by household income, December 2010
                                                                                                                                                    • Custom Consumer Groups—Asians

                                                                                                                                                      • Key points
                                                                                                                                                        • Asians are a highly attractive—and growing—consumer group
                                                                                                                                                          • Asians love big national banks, shun credit unions
                                                                                                                                                            • Figure 77: Type of institution for primary banking relationship, white vs. Asian, December 2010
                                                                                                                                                          • Asians are more picky when choosing a bank
                                                                                                                                                            • Figure 78: Primary influence on bank choice, by race/ethnicity, December 2010
                                                                                                                                                          • Asians more likely to bank online than other Canadians
                                                                                                                                                            • Figure 79: Primary method of banking, by race/ethnicity, December 2010
                                                                                                                                                          • Asians have more products at their primary bank than other Canadians do
                                                                                                                                                            • Figure 80: Types of products at primary bank/credit union, by race/ethnicity, December 2010
                                                                                                                                                          • Asians have more accounts at their other banks, too
                                                                                                                                                            • Figure 81: Banking products at other than primary bank, by race/ethnicity, December 2010
                                                                                                                                                          • Majority of Asians have accounts with more than one bank
                                                                                                                                                            • Figure 82: Number of banking relationships, by race/ethnicity, December 2010
                                                                                                                                                          • Asians have switched banks more often...
                                                                                                                                                            • Figure 83: Number of times switched banks in past five years, by race/ethnicity, December 2010
                                                                                                                                                          • … and have more reasons to want to switch again
                                                                                                                                                            • Figure 84: Reason to potentially switch banks, by race/ethnicity, December 2010
                                                                                                                                                          • More Asians have smartphones, and more interested in mobile banking
                                                                                                                                                            • Figure 85: Attitudes about mobile banking activities, by race/ethnicity, December 2010
                                                                                                                                                          • Attitudes about debit and credit cards
                                                                                                                                                            • Figure 86: Attitudes about debit and credit card usage, December 2010
                                                                                                                                                          • Asians less worried about security, but want more branch hours
                                                                                                                                                              • Figure 87: importance of banking services, by race/ethnicity, December 2010
                                                                                                                                                              • Figure 88: ranked importance of banking services, by race/ethnicity, December 2010
                                                                                                                                                          • Cluster Analysis

                                                                                                                                                              • Onliners
                                                                                                                                                                • Characteristics
                                                                                                                                                                  • Demographics
                                                                                                                                                                    • Conveniently Large
                                                                                                                                                                      • Characteristics
                                                                                                                                                                        • Demographics
                                                                                                                                                                          • Friends and Family Fans
                                                                                                                                                                            • Characteristics
                                                                                                                                                                              • Demographics
                                                                                                                                                                                • Characteristic tables
                                                                                                                                                                                  • Figure 89: Canadian banking and credit union clusters, December 2010
                                                                                                                                                                                  • Figure 90: Primary banking relationship, Canadian banking and credit union clusters, December 2010
                                                                                                                                                                                  • Figure 91: Primary influence on choice of bank, Canadian banking and credit union clusters, December 2010
                                                                                                                                                                                  • Figure 92: Number of banking relationships, Canadian banking and credit union clusters, December 2010
                                                                                                                                                                                  • Figure 93: Importance of banking services, Canadian banking and credit union clusters, December 2010
                                                                                                                                                                                  • Figure 94: Frequency of switching banks, Canadian banking and credit union clusters, December 2010
                                                                                                                                                                                  • Figure 95: Primary banking method, Canadian banking and credit union clusters, December 2010
                                                                                                                                                                                • Demographic tables
                                                                                                                                                                                  • Figure 96: Canadian banking and credit union clusters, by gender, December 2010
                                                                                                                                                                                  • Figure 97: Canadian banking and credit union clusters, by age, December 2010
                                                                                                                                                                                  • Figure 98: Canadian banking and credit union clusters, by household income, December 2010
                                                                                                                                                                                  • Figure 99: Canadian banking and credit union clusters, by race, December 2010
                                                                                                                                                                                  • Figure 100: Canadian banking and credit union clusters, by language, December 2010
                                                                                                                                                                                  • Figure 101: Canadian banking and credit union clusters by employment, December 2010
                                                                                                                                                                                • Cluster methodology
                                                                                                                                                                                • Appendix—Trade Associations

                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                  • Ally Financial Inc.
                                                                                                                                                                                  • Bank of America Corporation
                                                                                                                                                                                  • Bank of Montreal
                                                                                                                                                                                  • Bank of Nova Scotia
                                                                                                                                                                                  • Bureau of Economic Analysis
                                                                                                                                                                                  • Canada Deposit Insurance Corporation (CDIC)
                                                                                                                                                                                  • Canadian Banker’s Association (CBA)
                                                                                                                                                                                  • Canadian Payments Association (CPA)
                                                                                                                                                                                  • Canadian Tire Corporation, Limited
                                                                                                                                                                                  • Credit Union Central of Canada
                                                                                                                                                                                  • Credit Union National Association
                                                                                                                                                                                  • Interac Association
                                                                                                                                                                                  • National Bank of Canada
                                                                                                                                                                                  • Steinbach Credit Union Limited
                                                                                                                                                                                  • U.S. Bureau of Labor Statistics

                                                                                                                                                                                  Canadian Banking and Credit Unions - June 2011

                                                                                                                                                                                  £2,684.63 (Excl.Tax)