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Customer Retention and Cross-sell in Banking - Canada - October 2016

“There is a degree of under-utilization of rewards for multiple product ownership which presents an opportunity for banks to offer more targeted rewards based on customer preferences.”
– Sanjay Sharma, Senior Financial Services Analyst

This report discusses the following key topics:

  • Nearly seven in ten Canadians have a ‘big five’ as their main bank
  • While TD is still on top, Tangerine emerges as a strong alternative choice
  • Value for money, branches, product selection and ABMs are dominant influencers
  • Preferred rates, discounts, rewards and cash incentives appeal to nearly half of consumers

The Canadian consumer banking industry is dominated by the five major banks, but there is strong competition, not only among them, but from smaller virtual banks, regional banks and credit unions. However, in this highly competitive market, banks cannot stand still. Digital banking, the advent of Fintech and the entry of start-ups into retail banking and payments require Canadian banks to stay focussed on providing an excellent customer experience. Banks need to meet the basic needs of their customers, but beyond that they need to know their customers, reward their loyalty and enable them to interact in a seamless way.

Although in general, Canadians trust their financial institutions and satisfaction levels are high, there is always room for improvement. Banks need to understand and meet changing customer preferences and offer the latest digital banking solutions while at the same time assure customers that their information is safe and their privacy is being protected.

This Report covers consumer attitudes and behaviour related to customer retention and cross-sell in Canadian consumer banking. It explores the competitive landscape of the major banks, switching intention of consumers, incentives to increase share of wallet, choice factors that influence the switching decision and attitudes related to customer retention, loyalty, trust and preferences.

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Table of contents

  1. Overview

      • Regional classifications
        • Income
        • Executive Summary

            • The issues
              • Nearly seven in ten Canadians have a ‘big five’ as their main bank
                • Figure 1: Choice of main FI, August 2016
              • While TD is still on top, Tangerine emerges as a strong alternative choice
                • Figure 2: Switching choice of main FI, August 2016
              • Value for money, branches, product selection and ABMs are dominant influencers
                • Figure 3: Switching influencers (top five), August 2016
              • Preferred rates, discounts, rewards and cash incentives appeal to nearly half of consumers
                • Figure 4: Interest in cross-sell incentives, August 2016
              • Younger consumers and Asian Canadians are more inclined to switch their main FI
                • Figure 5: Attitudes related to satisfaction, August 2016
              • The opportunities
                • Influencing switching decisions by harnessing the power of recommendations
                  • Building loyalty through branch relationships
                    • Understanding factor preferences that influence customer switching
                      • Figure 6: Top-five rank of factors influencing switching, by age, August 2016
                    • What it means
                    • The Market – What You Need to Know

                      • Canada’s population is expected to age in the coming years
                        • The population is growing and becoming more ethnically diverse
                          • Women outnumber men in Canada
                            • Growth of the LGBT community
                            • Market Factors

                              • Canada’s population is expected to age in the coming years
                                • Figure 7: Population aged 65 years and over in Canada, historical and projected (% of total), 1971-2061
                                • Figure 8: Projected trends in the age structure of the Canada population, 2014-19
                              • The population is growing and becoming ethnically diverse
                                • Women outnumber men in Canada and live longer
                                  • Wage gap declines but women still earn less than men
                                    • Growth of the LGBT community
                                    • Key Players – What You Need to Know

                                      • Meridian credit union seeking license for national online bank
                                        • BMO launches a service that allows people to open accounts through smartphones
                                          • Scotiabank branches out with two new branch formats, Express and Solutions
                                            • Goldman Sachs – Online lender for the masses
                                            • Industry Developments

                                              • Meridian credit union seeking license for national online bank
                                                • RBC first to offer free Interac e-transfer payments
                                                  • Meridian introduces Sweep: A feature that ‘sweeps’ money daily
                                                    • Scotiabank branches out with two new branch formats, Express and Solutions
                                                      • BMO launches a service that allows people to open accounts through smartphones
                                                        • Grow and Celero partner for digital banking solutions
                                                          • Goldman Sachs – Online lender for the masses
                                                          • Marketing Campaigns

                                                            • Selected campaigns from Mintel Comperemedia
                                                              • Tangerine aims to eliminate the hassle-factor in switching banks
                                                                • Figure 9: Tangerine’s switch assistant print advertisement, September 2015
                                                              • TD’s new MySpend App
                                                                • Figure 10: TD’s Myspend app customer email, August 2016
                                                              • TD’s switch offer
                                                                • Figure 11: TD free gift inducement offer, June 2016
                                                              • Tangerine releases follow-up to “Hard Work” Brand Anthem
                                                              • The Consumer – What You Need to Know

                                                                • Nearly seven in ten Canadians have a ‘big five’ as their main bank
                                                                  • While TD is still on top, Tangerine emerges as a strong switching choice
                                                                    • Lower fees are the top factor that influences switching
                                                                      • Younger, Asian Canadians and LGBT consumers more inclined to switch
                                                                        • Young males and Asian Canadians more likely to prefer banking with multiple financial institutions
                                                                        • Choice of Main Financial Institution

                                                                          • Nearly seven in ten Canadians have a ‘big five’ as their main bank
                                                                            • Figure 12: Choice of main FI, August 2016
                                                                          • Scotiabank and RBC top choices in Atlantic Canada, while Desjardins is the clear market leader in Quebec
                                                                            • Figure 13: Top main fi choices in Atlantic Canada and Quebec, August 2016
                                                                          • Tangerine appeals to a younger clientele
                                                                            • Figure 14: Choice of PC financial and Tangerine, by age, August 2016
                                                                          • One in three Chinese Canadians considers TD as their main FI
                                                                            • Figure 15: Choice of main FI (main five), Chinese Canadians vs overall population, August 2016
                                                                        • Switching Choice of Main FI

                                                                          • While TD is still on top, Tangerine emerges as a strong alternative choice
                                                                            • Figure 16: Switching choice of main FI, August 2016
                                                                          • Leveraging brand image to cement a distinctive brand personality
                                                                            • Influencing switching decisions by harnessing the power of recommendations
                                                                              • Among 18-24s, Scotiabank is the leading switching choice
                                                                                • Figure 17: Leading switching choice of FIs (select FIs), by age, August 2016
                                                                              • Likelihood of switching to Tangerine increases with age
                                                                              • Switching Influencers

                                                                                • Lower fees, value for money and proximity are the switching influencers
                                                                                  • Figure 18: Switching influencers (top five), August 2016
                                                                                • Branches matter to both young and old
                                                                                  • Higher interest rates on savings is the top factor for over-65s
                                                                                    • Figure 19: Top-five rank of factors influencing switching, by age, August 2016
                                                                                  • Online banks use different strategies
                                                                                  • Cross-sell Incentives

                                                                                    • Preferred rates, discounts, rewards and cash incentives appeal to nearly half of consumers
                                                                                      • Figure 20: Interest in cross-sell incentives, August 2016
                                                                                    • Higher income customers more interested in an exclusive member program
                                                                                      • Figure 21: Interest in select incentives, by income, August 2016
                                                                                    • Younger consumers are more motivated by rewards and cash incentives
                                                                                      • Figure 22: Interest in select incentives, 18-44s vs over-45s, August 2016
                                                                                    • Women relatively more interested in preffered rates and rewards
                                                                                      • Figure 23: Interest in select incentives, men vs women, August 2016
                                                                                  • Satisfaction and Loyalty

                                                                                    • Younger consumers and Asian Canadians are more inclined to switch their main FI
                                                                                      • Figure 24: Attitudes related to satisfaction, August 2016
                                                                                    • Men are more inclined to agree that credit unions conduct business more fairly than banks
                                                                                      • Majority of customers agree that a strong local branch relationship builds loyalty
                                                                                        • Figure 25: Attitudes related to loyalty, August 2016
                                                                                      • Younger consumers more likely to expect referral rewards
                                                                                        • PC Financial customers more likely to recommend their bank
                                                                                          • Figure 26: Select attitudinal statements (any agree), PC financial vs overall, August 2016
                                                                                        • Desjardins customers least inclined to switch
                                                                                          • Figure 27: Select attitudinal statements (any agree), Desjardins vs overall, August 2016
                                                                                      • Preferences and Trust

                                                                                        • Young, middle-aged men and Asian Canadians more likely to prefer banking with multiple financial institutions
                                                                                          • Figure 28: Attitudes related to customer preferences, August 2016
                                                                                        • Young and middle-aged males more likely to prefer banking with multiple institutions
                                                                                          • Men more likely to agree that credit unions have a more welcoming feel
                                                                                            • Banks and credit unions enjoy high levels of trust
                                                                                              • Figure 29: Attitudes related to trust, August 2016
                                                                                            • Men and Asian Canadians are relatively more likely to trust independent financial advisors
                                                                                              • Desjardins customers less inclined to bank with multiple institutions
                                                                                                • Figure 30: Attitudinal statements about trust (any agree), by main FI, August 2016
                                                                                            • Appendix – Data Sources and Abbreviations

                                                                                              • Data sources
                                                                                                • Consumer survey data
                                                                                                  • Consumer qualitative research
                                                                                                    • Abbreviations and terms

                                                                                                    Companies Covered

                                                                                                    To learn more about the companies covered in this report please contact us.

                                                                                                    Customer Retention and Cross-sell in Banking - Canada - October 2016

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