Canada's big banks are cozying up to ethnic groups, moving into their neighbourhoods and sponsoring their clubs. It isn't the first time banks have targeted new immigrants.
Financial Post, Duncan Mavin, 9 September 2006
Although the major banks are changing to better meet the needs of ethnic markets, white Anglo-Saxon males still rule the banking world.
Next week, in the swanky 40th-floor Georgian Room of the Royal Bank of Canada's headquarters on Bay Street, select media types will be rubbing shoulders over lunch with RBC chief executive Gord Nixon, perhaps the most powerful man in Canadian business, and his senior bank executives.
The reporters, from 45 Chinese and South-Asian media outlets, along with so-called diversity reporters from Canada's major dailies, will be hearing about the bank's future plans: The focus on a lucrative, explosive market that has gripped the entire Canadian banking industry -- new Canadians.
Mark Whitmell, the bank's director of cultural markets, says RBC has done "a ton of research" over the past 18 months -- there have been four research projects and more than 600 pages of analysis -- that revealed RBC needs to do a better job at meeting the needs of ethnic communities.
For example, the traditional approach to deciding whether to lend someone money involves analyzing the applicant's financial history. But new Canadians with no credit history in this country are often unable even to get a credit card.
"We need to help newcomers succeed and eliminate any barriers or obstacles they might face," says Mr. Whitmell.
They would be foolish not to. Retail banking is a mature industry in Canada with little opportunity to gain market share. Sustained immigration represents a rare growth opportunity that could give banks hundreds of thousands of new customers each year.
In fact, immigration now accounts for 70% of Canada's annual population growth. This year, we will welcome 225,000 to 255,000 immigrants -- and the wealth they bring with them.
To be sure, this isn't the first time in Canada's banking history that immigrants have been targeted as an opportunity.
"When we started [looking into diversity issues at RBC], we uncovered advertising welcoming newcomers to Canada back in the early 1920s," says Mr. Whitmell.
"Now it's time to refresh that," he says.
While some critics say banks are abandoning new Canadians by closing branches in typically ethnic downtown neighbourhoods in favour of wealthier -- and whiter -- suburbs, the reality is banks are trying harder than ever to speak to different communities.
RBC isn't alone in courting immigrant communities.
In June, Canadian Imperial Bank of Commerce held its annual Diversity Month, which involved thousands of employees in more than 150 events ranging from panel discussions on race issues to cultural festivals.
"To be most effective, CIBC needs to reflect our clients and communities and celebrate people's differences and individual contributions," chief executive Gerry McCaughey said at the time.
More than 1,000 CIBC ethnic employees participate in racially based Affinity Groups and meet regularly to discuss workplace issues that specifically affect them.
At the same time, the banks are increasingly directing a portion of their multi-million-dollar sponsorship budgets to events and organizations within these communities. For example, CIBC sponsors such organizations as the Yee Hong Community Wellness Foundation, the Mon Sheong Foundation Chinese School, Chinese Family Life Services and the Toronto Chinese Business Association.
Sporting events, too, offer a chance for banks to reach out to specific communities. RBC sponsors golf and cricket tournaments organized by the Indo-Canada Chamber of Commerce. Similarly, Bank of Nova Scotia is a long-time sponsor of cricket in the Caribbean, and is an official sponsor of the Cricket World Cup that will be held in the West Indies next year.
According to a recent survey by Solutions Research Group, Toronto-Dominion Bank has the highest proportion of customers of South Asian or Chinese origin of all the banks.
"The strategic question is pretty simple: Where do you think the face of Canada's population is going?" says Tim Hockey, head of TD's retail banking group. He says TD knows its employees and branch locations have to reflect the changes in Canada's demographics. It can point with pride to the fact that it has employees who speak everything from Mandarin to Urdu, and produces marketing materials in Korean and Punjabi. It also has ABMs that operate in five languages, with more on the way.
Another approach taken by some banks is to buy directly into specific communities. In August, Bank of Montreal acquired eight Canadian branches from Portugal's bcpbank. Last November, Scotiabank bought NBG Bank of Greece's 10 Canadian bank branches. In February, TD acquired sub-prime auto-loans company VFC Inc., which has a strong customer base among new Canadians lacking the credit history that would enable them to get a loan from a mainstream lender.
Retail bank customers don't switch allegiances easily, says Kyle Murray, assistant professor of marketing at the Ivey School of Business. He says buying smaller banks that are well established within an ethnic community is a relatively inexpensive and efficient way to reach a specific group and acquire new customers. For example, BMO's acquisition of bcpbank cost $41-million and introduced 28,000 new customers to the bank in one swoop.
The trend of pursuing customers in specific ethnic groups may in fact be part of a wider shift in the banking industry away from traditional mass-marketing campaigns, says Mr. Murray.
Canada's big banks have no doubt taken notice of the success of ING Canada, which is focused on the mortgage market, and Capital One, which concentrates on marketing its credit card.
Mr. Murray says that's a smart marketing move by the banks. "Banks are realizing there's not just wealthy people and everybody else," he says. "There are a lot of other ways to segment the market."
Despite their potential, ethnic markets still present plenty of challenges. Outside the ranks of Canada's big banks, others with longer and stronger ties to ethnic groups have spotted the opportunity, too. For instance, global banking giant HSBC's Canadian subsidiary has profited from its high recognition within the Chinese community, while India's ICICI Bank has also made inroads into Canada.
TD's Mr. Hockey admits there is still much more to be done.
While the banks have been successful in employing tellers and other front-line staff from visible minorities, at the most senior levels it is still white Anglo-Saxon males who predominate. Certainly, no chief executive at Canada's biggest banks is from a visible minority.
"We are just beginning on the journey," says Mr. Hockey.
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Financial Post, Duncan Mavin, 9 September 2006
Although the major banks are changing to better meet the needs of ethnic markets, white Anglo-Saxon males still rule the banking world.
Next week, in the swanky 40th-floor Georgian Room of the Royal Bank of Canada's headquarters on Bay Street, select media types will be rubbing shoulders over lunch with RBC chief executive Gord Nixon, perhaps the most powerful man in Canadian business, and his senior bank executives.
The reporters, from 45 Chinese and South-Asian media outlets, along with so-called diversity reporters from Canada's major dailies, will be hearing about the bank's future plans: The focus on a lucrative, explosive market that has gripped the entire Canadian banking industry -- new Canadians.
Mark Whitmell, the bank's director of cultural markets, says RBC has done "a ton of research" over the past 18 months -- there have been four research projects and more than 600 pages of analysis -- that revealed RBC needs to do a better job at meeting the needs of ethnic communities.
For example, the traditional approach to deciding whether to lend someone money involves analyzing the applicant's financial history. But new Canadians with no credit history in this country are often unable even to get a credit card.
"We need to help newcomers succeed and eliminate any barriers or obstacles they might face," says Mr. Whitmell.
They would be foolish not to. Retail banking is a mature industry in Canada with little opportunity to gain market share. Sustained immigration represents a rare growth opportunity that could give banks hundreds of thousands of new customers each year.
In fact, immigration now accounts for 70% of Canada's annual population growth. This year, we will welcome 225,000 to 255,000 immigrants -- and the wealth they bring with them.
To be sure, this isn't the first time in Canada's banking history that immigrants have been targeted as an opportunity.
"When we started [looking into diversity issues at RBC], we uncovered advertising welcoming newcomers to Canada back in the early 1920s," says Mr. Whitmell.
"Now it's time to refresh that," he says.
While some critics say banks are abandoning new Canadians by closing branches in typically ethnic downtown neighbourhoods in favour of wealthier -- and whiter -- suburbs, the reality is banks are trying harder than ever to speak to different communities.
RBC isn't alone in courting immigrant communities.
In June, Canadian Imperial Bank of Commerce held its annual Diversity Month, which involved thousands of employees in more than 150 events ranging from panel discussions on race issues to cultural festivals.
"To be most effective, CIBC needs to reflect our clients and communities and celebrate people's differences and individual contributions," chief executive Gerry McCaughey said at the time.
More than 1,000 CIBC ethnic employees participate in racially based Affinity Groups and meet regularly to discuss workplace issues that specifically affect them.
At the same time, the banks are increasingly directing a portion of their multi-million-dollar sponsorship budgets to events and organizations within these communities. For example, CIBC sponsors such organizations as the Yee Hong Community Wellness Foundation, the Mon Sheong Foundation Chinese School, Chinese Family Life Services and the Toronto Chinese Business Association.
Sporting events, too, offer a chance for banks to reach out to specific communities. RBC sponsors golf and cricket tournaments organized by the Indo-Canada Chamber of Commerce. Similarly, Bank of Nova Scotia is a long-time sponsor of cricket in the Caribbean, and is an official sponsor of the Cricket World Cup that will be held in the West Indies next year.
According to a recent survey by Solutions Research Group, Toronto-Dominion Bank has the highest proportion of customers of South Asian or Chinese origin of all the banks.
"The strategic question is pretty simple: Where do you think the face of Canada's population is going?" says Tim Hockey, head of TD's retail banking group. He says TD knows its employees and branch locations have to reflect the changes in Canada's demographics. It can point with pride to the fact that it has employees who speak everything from Mandarin to Urdu, and produces marketing materials in Korean and Punjabi. It also has ABMs that operate in five languages, with more on the way.
Another approach taken by some banks is to buy directly into specific communities. In August, Bank of Montreal acquired eight Canadian branches from Portugal's bcpbank. Last November, Scotiabank bought NBG Bank of Greece's 10 Canadian bank branches. In February, TD acquired sub-prime auto-loans company VFC Inc., which has a strong customer base among new Canadians lacking the credit history that would enable them to get a loan from a mainstream lender.
Retail bank customers don't switch allegiances easily, says Kyle Murray, assistant professor of marketing at the Ivey School of Business. He says buying smaller banks that are well established within an ethnic community is a relatively inexpensive and efficient way to reach a specific group and acquire new customers. For example, BMO's acquisition of bcpbank cost $41-million and introduced 28,000 new customers to the bank in one swoop.
The trend of pursuing customers in specific ethnic groups may in fact be part of a wider shift in the banking industry away from traditional mass-marketing campaigns, says Mr. Murray.
Canada's big banks have no doubt taken notice of the success of ING Canada, which is focused on the mortgage market, and Capital One, which concentrates on marketing its credit card.
Mr. Murray says that's a smart marketing move by the banks. "Banks are realizing there's not just wealthy people and everybody else," he says. "There are a lot of other ways to segment the market."
Despite their potential, ethnic markets still present plenty of challenges. Outside the ranks of Canada's big banks, others with longer and stronger ties to ethnic groups have spotted the opportunity, too. For instance, global banking giant HSBC's Canadian subsidiary has profited from its high recognition within the Chinese community, while India's ICICI Bank has also made inroads into Canada.
TD's Mr. Hockey admits there is still much more to be done.
While the banks have been successful in employing tellers and other front-line staff from visible minorities, at the most senior levels it is still white Anglo-Saxon males who predominate. Certainly, no chief executive at Canada's biggest banks is from a visible minority.
"We are just beginning on the journey," says Mr. Hockey.
