This is how you will bank
Once a far-off promise, the digital bank is here to stay
Darren Chartier is seriously thinking about ditching his bricks-and-mortar bank. The 38-year-old Toronto product manager would rather house his money at a “digital bank,” a branch-less business where every transaction is done online. “I can’t remember the last time I was in a bank branch,” he says. “And every time I’ve gone into one I’ve gotten bad advice.”
While he still uses one of the Big Five banks, over the last decade he has kept some cash in an account with one of the first online only banks to come to Canada. In January, he moved those savings to EQ Bank, a new Canadian digital bank with an attractive savings rate, no branches, and where every action can be completed from home, the restaurant, the park, anywhere there is Internet access.
The attraction? Besides the interest rate, which is higher than other banks, Chartier likes making his own savings decisions, investing when and where he wants to, and he likes how easy it is to use the website. Some of the digital banks have yet to introduce traditional services such as loans, RRSPs or ATM cash withdrawals—a customer removes money by e-transferring cash to an account at a different bank—but once they do he’ll make the switch.
Experts have been predicting the rise of the digital bank for years. Thanks to technological innovations, a saturated mobile phone market, and our increasing comfort with online transactions, digital banking is finally becoming more, well, real.
There is a difference between digital banking and online banking, which has been around for a couple of decades, says Miklos Dietz, a Vancouver-based senior partner at McKinsey & Company consulting firm. Digital banking is more than banking from home. It’s a different business model, he says, where fees are cheap or non-existent, savings rates are higher due to lower overhead, and where holistic financial management is the goal.
While an increasing number of consumers are opening accounts with digital banks, Dan Dickinson, EQ Bank’s vice-president of digital banking, says the tipping point—where everyone banks online—has yet to arrive. But it’s not technology that is holding us back. “Customers haven’t been ready to go digital, but that’s changing,” says Dickinson. “We’re seeing a lot of appetite for what we’re offering.”
DIGITAL BANKING BY NUMBERS
Percentage of bank customers who are interested in real-time and forward-looking spending analysis (Accenture)
Percentage of Canadians who do almost all of their banking using non- branch options (Canadian Bankers Association, 2016)
Percentage of Canadians willing to pay a fee to have their bank notify them via Twitter or Facebook about an account transaction (PwC)
Percentage of Canadians who don’t think they will be carrying cash in 10 years; 54% anticipate no longer using cheques (Canadian Bankers Association, 2015)