You just have to ask

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This article was published 10/08/2024 (450 days ago), so information in it may no longer be current.

I don’t know about you, but getting a C grade is not a mark of achievement.

Yet, big Canadian banks in J.D. Power’s 2024 Canada Retail Banking Advice Satisfaction Study appear to have accomplished just that.

The survey of more than 2,800 Canadians who use one of the big five — RBC Royal Bank, BMO Bank of Montreal, Scotiabank, TD Canada Trust and CIBC — ranked these financial institutions on advice services over the past 12 months, on a score out of 1,000.

RBC came out on top this year, as it has in past years, says Jennifer White, senior director for banking and payments intelligence at J.D. Power. “But the gap between their score and the lowest score is not necessarily all that wide.”

Indeed, RBC had a score of 582 versus the lowest scoring bank CIBC at 556.

White notes the closeness of their scores reflects how the banks “compete quite effectively with each other.”

When one introduces an innovative, new product or service, the others soon have similar versions.

Yet, the high score of 582 effectively translates into roughly a 58 per cent as a test score, or a C, if you will.

J.D. Power runs the same survey in the U.S., where there are more banks, and the overall scores are slightly higher.

“The gap between number one and the lowest performing brand is also wider in the U.S,” she says. “There is more differentiation.”

Although Canadian banks seem to have middling scores, where their efforts are resonating with consumers, however, is when they provide advice for saving for school, retirement and other life goals, J.D. Power found.

And satisfaction tended to be highest among newcomers and young adults, which is not entirely surprising, says Abhishek Sinha, partner at EY Canada, specializing in banking and capital markets.

“Because the Canadian financial system is so unique, newcomers don’t know how RRSPs work for example.”

It’s similar with younger clients looking to pay off student debt and start saving for the future.

They don’t know, so they ask.

When they do, the banks do a good job. The survey found that the more they ask, the merrier they are with banking service, says White. “To truly delight customers, they need to have at least three of value-added experiences within a year.”

The trouble is many bank customers aren’t asking often enough.

It’s hard to pinpoint why. It’s not like the big banks — which make up 90 per cent of the Canadian banking marketplace — aren’t trying, says Maggie Cheung, spokesperson for the Canadian Bankers Association.

“Supporting financial well-being of Canadians is core to the banking sector, with the ambition to increase their access to financial services and drive more equitable prosperity.”

Financial institutions strive to meet the consumer where they are — often on their cellphones — with a growing array of digital tools, for example, she adds.

CIBC has its Smart Planner, an interactive digital tool helping clients set financial goals and track their progress. Once set up, clients receive bespoke financial advice from ‘CIBC Coach’ — a digital money mentor, Cheung notes.

Demand is there. The service offerings are there. Yet, there is a mismatch.

“Customer demand for value-added experiences outpaces the rate at which banks are meeting these needs,” White says.

This may partly explain the average survey scores.

Scores may also illustrate Canadians aren’t sure how to compare what they’re getting.

“The only people who will have some kind of reference point … are those who have seen how it works in other countries,” Sinha says. “In the absence of that, in an insulated, highly protected environment, you’re just looking at incremental differences.”

Banks in India and Brazil, for example, have innovations we have yet to see here, including low-cost digital payment systems and digital IDs — that allow for faster onboarding for a variety of financial services, he says.

Of course, the banks — like so many other Canadian business sectors — are oligopolies. While competition is all fine and good, it’s difficult to win market share from one another, Sinha says.

By comparison, telecom services — another highly concentrated sector — constantly steal each other’s customers with limited, special offers. Bank customers, however, are less likely to move from one financial institution to another, says Clay Jarvis, personal finance expert with NerdWallet.

“I’ve been with RBC since I was like 10 years old, and it’s not because I’m in love with RBC. I am just wired as a lot of people are to stay the course.”

Banking is a sticky business. Once you become a customer, you’re likely to stay, particularly as the relationship deepens, he says. “Am I going to move all my money and break my existing relationship with my bank for an extra one per cent on savings? Probably not.”

One corner of the industry that does go after bank customers are credit unions, which weren’t included in the J.D. Power survey.

They take up a smaller share of the market, except in Manitoba where they make up about 41 per cent of the market, says Curtis Wennberg, chief executive officer at Credit Union Central of Manitoba. “That’s the highest in Canada.”

Other surveys, including a recent one by Ipsos, found on average credit unions score about 10 percentage points higher than banks for customer satisfaction, he says.

“The customers are also members so they may feel some sort of affinity to the credit union based on regional location,” Wennberg explains, noting that as credit union members, clients share in the financial institution’s profits.

Be it banks or credit unions, financial institutions may not always “delight,” but they are all eager to help — often with good advice, as the J.D. Power survey found.

All we need to do is ask.

Joel Schlesinger is a Winnipeg-based freelance journalist

joelschles@gmail.com