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Banking in Canada

September 18, 2018 Uncategorized

Banking in Canada has changed dramatically over the past several decades.  The greatest changes have been in the delivery of services to bank clients.  Banks have changed from trusted institutions to high pressure financial sales outlets, and these changes have been well documented by national media outlets.

Major banks including TD and RBC banks have utilized offshore services often in India to take advantage of lower cost labour pools.  TD engaged its Canadian IT group to train their offshore replacements.  Team members were laid off and some were brought back on a contract basis.  RBC received more media attention than TD for following a similar practice, and many other large financial services firms are doing the same thing.  Interestingly, amid increasing revenues, between 2014 and 2016 Canadian banks reduced their staff by 4,695 employees.

So, how and why have banks been able to make such drastic changes in their modes of operation?  The answer is very complicated, first the nature of banking has completely changed as we have moved away from a sterling backed cash economy to an arguably less stable, fiat currency model.  Secondly, deregulation has allowed the banking industry to write its own rules in developing creative new business models to generate sales and profits.  Then, of course spiraling consumer debt has ensured long tail returns.

Banks have ramped up lending and investing services on a fee for use basis while downloading the delivery to self-serve online models.  We have recently seen the emergence of other fee based do-it-yourself banking services that have increasingly supplanted the traditional brick and mortar branch model of banking.  In fact, since 2014 Canadian banks have closed 441 branches across the country, while offering 228 fewer ABM outlets.

Banking in Canada has changed, and it continues to evolve, several banks have been developing the so called “cafeteria model” of banking designed to allow clients to have speedier access to mortgage and investment advisers avoiding line ups for teller services.  Consumer habits have also changed, very few people carry cash and we used our debit cards 540,200,000 times less for point of sale purchases between 2016 and 2017.   However, over the same period we used credit cards 604,900,000 times more often.

What is not changing as quickly as banking in Canada is the attitudes, trends and habits of consumers.  We continue to be stuck in a debt vortex with no solid plans to exit.