New Report from IDC Canada Highlights the Transition to Digital Banking
- Feb 17, 2017 -
Toronto ON., - International Data Corporation (IDC) Canada announced today the release of a new IDC Financial Insights presentation Canadian Banks Digital Transformation & Maturity Level.
This IDC Financial Insights Presentation provides an analysis of the digital and fintech strategies and initiatives of the major Canadian banks. The Presentation draws on IDC's review of bank public documents and presentations and the published statements of senior bank executives. The Presentation also identifies the senior executives at the major Canadian banks, and also where responsibility for digital banking possibly resides.
This analysis provides a good representation of how each major bank views the importance and urgency of moving to a digital bank. This has allowed us to arrive at a digital maturity (fintech) rating for each of the major Canadian banks
The ability of banks to deliver convenient, easy-to-use, and secure client-focused digital services across all channels is critical to the long-term viability of a bank. Clients will soon define the relationship with their bank not by the capabilities of the branch network but by the quality of services available via digital channels. The bank is no longer "the branch" but "the smartphone." Responding requires a digital-first strategy for all bank products and services. In essence "the client comes to the store" rather than "the store coming to the client". This model can generate major cost savings by reducing the size of the costly branch distribution model.
Another major cost factor is the effort required to support antiquated core banking systems. Major Canadian banks depending on their size are spending $1B to $2.5B annually. Over half of this is needed to support antiquated core banking systems. Australian examples have shown that the cost to replace a core banking system can exceed $1 billion. Rather than each bank spending this amount, a possible alternative might be a shared solution.
It is recognized that existing processes have created a complicated web of linkages that will need to be sorted out. This work is inevitable as governments in Canada and globally are looking at the implementation of instant payments and open APIs to enhance client services and facilitate fintech competition. If substantive core banking changes have to be made anyway, it would be wise to look for solutions that reduce the costs involved in maintaining antiquated back office banking systems. This would allow the banks to concentrate on delivering exceptional service to their clients via innovative digital channels, and fending off fintech based neobank competitors.
Artificial Intelligence (AI) is also becoming an important part of the client experience. It will impact what information is provided by digital interfaces and how they are served by bank staff. Canada is a leader in AI so banks need to support and use this talent to dramatically change how financial services are delivered.
Finally, the changes that will result from the implementation of digital banking will have a profound impact on bank staff as well as clients. It is expected that there will be a substantial reduction in financial industry staff coupled with a need for the population as a whole to become more digital and financial literate. Banks and government need to start preparing now for this evolution. The digital train cannot be stopped so the only option is to get on board and make Canada a digital leader.
This presentation is part of the IDC Financial Insights: Canadian Financial Industry Strategies series. For more information on this service, please click here.
The Canadian Banks Digital Transformation & Maturity Level presentation, with detailed findings, is available to qualified members of the media. For information about the presentation, purchasing the presentation, analyst quotes, or to arrange a one-on-one interview, with the author, Robert Smythe, please contact: Andrea Loziuk at firstname.lastname@example.org.
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