One of Canada’s biggest banks is tapping into less expensive distri-bution networks by forming strategic alliances with supermarkets and exploiting Internet opportunities.
One of Canada’s biggest banks is tapping into less expensive distri-bution networks by forming strategic alliances with supermarkets and exploiting Internet opportunities.
Imagine realising halfway through a hectic afternoon in the office that you’ve forgotten to do your banking. You look around, trying to gauge whether or not anyone will miss you if you duck out for 20 min-utes. You see a colleague heading towards your desk and your phone starts ringing again. There is no way on earth that you’ll be able to make it outside at all, let alone stand in a bank queue.
Now imagine yourself sitting in front of your computer and logging on to your work’s Intranet – not to be confused with Internet – site to do your banking.
This is the reality the Canadian Imperial Bank of Commerce (CIBC) is bringing to its clients through a Bank@Work scheme, in which discount banking facilities are offered as part of a staff benefit program, supplied to corporates under agreement by CIBC.
However, as CIBC’s electronic banking executive vice-president Brian Cassidy points out, this is only one of a raft of new distribution networks which the bank is exploring.
Cassidy, in Australia recently to speak at Priority Learning’s Ecom.marketing conference in Sydney, says CIBC hopes to make its tra-ditional branch structure redundant in the near future.
“We basically made the decision to force customers out of the branches very aggressively,” he says.
The group has been working to move its 6.5 million customers to on-line banking. The results so far have been positive. A recent break-down shows 88 per cent of customers are using the bank’s online serv-ices, while 32 per cent use online banking exclusively. Only 12 per cent of customers now rely on the CIBC branch network, and they are mostly retirees.
In line with this strategy, CIBC has slashed branch staff from 9000 to 3000. The group has flagged plans to transform these branches into “primary sales channels and financial advice centres” with staff pos-sessing planning accreditation and offering across the board finan-cial planning advice to customers.
“The hope is that we can become credible at offering financial plan-ning and brokerage services, so that we can compete with the Fidel-ity’s of the world. We have a large customer base to do this,” Cas-sidy says.
On top of its traditional banking services, CIBC offers discount and full service brokerage, mutual funds and a range of retirement prod-ucts for the Canadian RRSP (Registered Retirement Savings Plan) mar-ket.
The bank is looking at increasing market penetration through a recent alliance with Canadian supermarket chain President’s Choice. As a re-sult of the joint venture, known as President’s Choice Financial, CIBC will have access to the estimated 7.3 million customers going through President’s Choice checkouts each week.
CIBC offers President’s Choice Financial exclusive products and pays President’s Choice for each customer lead.
“CIBC has complete access to the brand and the customer base. Presi-dent’s Choice bring this to the table and we bring the bank in a box,” Cassidy says.
Cassidy is quick to point out that President’s Choice Financial is a competitor to CIBC in the market, although it leverages off CIBC’s infrastructure. At the moment, the products available are basic bank-ing facilities but the group hopes to introduce a discount brokerage service early next year.
Currently, the brand is experiencing a five per cent growth in funds managed each week. Cassidy hopes President’s Choice Financial will service 200,000 customers by the end of the year. Like the bank’s other products, it is also available on the Internet and through its own kiosks in supermarkets across Canada.
However, it is the Bank@Work initiative which Cassidy believes is one of the most promising of the bank’s new distribution networks. Through the scheme, CIBC provides infrastructure to an employer to provide, through an employer’s own Intranet and ATMs, discount bank-ing services to employees.
At the moment, Cassidy says seven companies in Canada offer the serv-ice, including communications giant Nortel.
“This is a new and growing market that CIBC is not really as public about, but we have a target of about 50 corporations who we feel are large enough for this service,” he says.
It doesn’t cost CIBC’s employer clients to use the service. Instead, CIBC generates new business by exposure to potential customers. In return, large corporates are able to offer their employees an extra benefit of working within their organisation, and the employees re-ceive discount banking services from the convenience of their office desktops.
In offering such schemes as Bank@Work and President’s Choice Finan-cial, and through its increasing online clout, CIBC is aiming to broaden its distribution without incurring huge costs.
“Distribution for banks is incredibly expensive, but we’ve found that the Internet and technology have offered us low cost distribution,” Cassidy says.
The global reach of the Internet has not been lost on CIBC strate-gists, either.
“If we can do this with success in the Canadian market, then we can do it in other markets as well. In fact, we are already moving into the US market,” Cassidy says.
CIBC’s strategy, he says, is to increase distribution networks by smaller pieces, without overextending its online brand.
“The idea of a bank becoming a portal is not going to happen. We’re too narrow in what we offer. We can’t compete with sites getting 30 million hits, and we never will,” he says.
