RBC Plans New Push to Get Clients to Adopt Digital Offerings
(Bloomberg) -- Royal Bank of Canada introduced a wave of technology initiatives to combat a source of angst among its executives: Not enough people are switching banks to try their offerings.
“We’ve built this incredible franchise over time with all this sales power, yet we’re frustrated," Chief Executive Officer David McKay said Wednesday during an investor event in Toronto. “We’re No. 1, the customer tells us we’re No. 1, experts like Retail Banker say we’re No. 1 in the world -- yet we don’t think enough Canadians are using our services."
The frustration stems from what McKay calls “inert" Canadian customers who don’t switch banks easily because they don’t want to take the time or they don’t recognize differences between the country’s lenders. Tapping technology to showcase Royal Bank’s offerings and build new connections is a “secular opportunity" for Canada’s second-largest lender by assets, according to McKay.
RBC plans to spend C$3.2 billion ($2.5 billion) this year on technology -- including artificial intelligence, digital products and social media -- and use the push to woo more than 2.5 million new Canadian customers by 2023, the bank said at the event.
The lender identified a wide range of initiatives and expectations for its Canadian banking and wealth businesses, including a new loyalty program with WestJet Airlines Ltd. Among its targets, the Toronto-based company set a goal of adding clients at up to three times its current rate.
Royal Bank already holds a dominant position in Canadian banking: It has No. 1 market share in personal loans, credit lines, mutual funds, business loans and deposits, while it’s second in credit cards and deposits. The bank has 6.5 million “active” digital users, which is 8 percent higher than a year ago.
"Our story is, how does the market leader grow?” McKay said.
RBC shares have dropped 2.8 percent this year, while its closest rival, Toronto-Dominion Bank, climbed 3.4 percent.
Digital offerings under the bank’s new RBC Ventures unit include ‘‘ownr,’’ a platform for entrepreneurs starting a business; “Drive,” a mobile app for car owners; and “finfit,” a financial-advice app. The bank also unveiled a digital platform called “arrive” to help immigrants set up in Canada.
“There has never been a greater opportunity to connect with Canadians,” McKay said.
Other details from RBC’s investor day:
- Canadian banking aims to drive efficiency ratio down to less than 40 percent by 2021.
- Canadian wealth management targets an efficiency ratio of less than 65 percent by 2021.
- The bank anticipates more than C$1 billion in accumulated cost savings by 2023 through increased automation and system consolidation.
- RBC sees C$1.9 billion of revenue growth from rising interest rates, with about C$1.4 billion in incremental net interest income in Canada by 2021, versus $400 million in the U.S. in that period.
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