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Pattie Lovett-Reid

Chief Financial Commentator, CTV


The digital divide among retail banks continues to grow and customer satisfaction levels aren’t where they need to be, according to a new study released Thursday by J.D. Power.

Little doubt Canadian banks are doubling down and investing significantly in new technology in an effort to shift more people into digital channels. This is an enormous opportunity for the banks to reduce costs – and it is working.

Forty-seven per cent of retail bank customers are now categorized as “digital centric,” which describes customers who use a digital platform but haven’t abandoned a branch. In fact, J.D. Power found that only 32 per cent of customers who use retail banking are “digital-only,” meaning they opt to do their banking solely online or with a mobile device.

Yet this innovation hasn’t come without a cost; in fact, banks’ digitization of services has resulted in lower levels of engagement or satisfaction among digital-only customers, J.D. Power found.

This is a big deal. If you think about the big banks, they pretty much offer the same products and services with their main point of differentiation being service. High service levels leads to greater engagement and share of customers’ wallets. This is how market share is grown. You can only compete on price for so long.

Here are some other findings from J.D. Power’s study:

  • Leading the digital charge among the five big banks is RBC, which has 49 per cent of its customers in the digital-centric segment. Meanwhile, TD is at the other end of the segment at 36 per cent. Among medium-size banks, Tangerine boasts the largest share of digital-centric customers at 93 per cent.
  • There’s an opportunity for improvement in banks’ communication. Banks still rely heavily on phone calls to proactively communicate but digital-centric and branch-dependent customers show a clear preference for other forms of communication. Email is the communication vehicle of choice, yet only one out of five customers indicate their most recent communication with their bank was delivered via email.
  • Email is a good start but the banks have to go beyond that – texting, in-app messaging and even social media.
  • No surprise here – the study found that millennials embrace mobile banking more than anyone.

By the way, the study’s findings don’t mean that banks have to choose between digital innovation and customer service. It is about finding the balance between the digital-centric customer and those who are branch-dependent. This is where engagement leads to satisfaction and that results in increasing market share.