The largest financial institutions in Canada have reportedly spent over $71 billion (appr. C$100 billion) on technology since the financial crisis, in order to accommodate an increasing number of customers who now prefer to use digital banking platforms.
According to several reports, the Coronavirus (COVID-19) outbreak has accelerated the shift toward virtual banking solutions.
The increased spending by Canada on developing its digital banking infrastructure was meant to enhance the efficiency of the nation’s financial system, while helping local consumers with getting comfortable with using mobile devices to take care of their banking needs – without visiting physical branches.
Due to nationwide lockdowns, Canadian banks have a greater ability to keep offering services as they don’t have to cover costs associated with maintaining a physical presence (in most cases for now).
“The pandemic has highlighted the emphasis on blocking and tackling — the ability to migrate a large proportion of the workforce to remote access, working with clients impacted by the crisis and ensuring risk levels are adhered to.”
“By and large, the systems of Canada’s banking industry are operating very well.”
Technology is a major expense item for Canada’s financial institutions, as the nation’s six biggest lenders have spent over $9.2 billion (appr. C$13 billion) annually on tech upgrades. This, according to Paul Gulberg, analyst at Bloomberg Intelligence.
Technology-related expenses reportedly account for about 9% of bank revenue and 15% of annual operating costs.
Canada’s six largest banks spent about $63.8 billion (appr. C$90 billion) on technology between 2009 and 2018, the Canadian Bankers Association revealed.
Neil Parmenter, the head of the association, has argued that the Coronavirus is the “ultimate test” for how such investments can make the banking system more resilient.
Parmenter said that electronic transfers, check-image capture and integration with the country’s evolving digital payments system have helped local financial service providers with coping with the pandemic.
“When we’re trying to discourage people from going anywhere physically and doing as little as possible face to face, the digital options are not only resilient, but they’re providing customers flexibility to do whatever they need to do from home.”
Bank of Montreal’s self-serve transactions have reportedly increased to around 95% of total retail transactions, following the COVID-19 outbreak. Before the crisis, about 89% to 90% of all retail transactions were self-serve.
The bank claims that its weekly rate of new customers sign ups for digital banking services has increased by 300% in just the past month.