Why Canada wins in online banking.

• Author: Bernstel, Janet Bigham
• Position: Cover Story

Banks located in our neighbor to the north have successfully built up their Internet customer base by winning the confidence and trust of consumers. American financial institutions can learn from the Canadian marketing experience.

It took the Canadians 50 years to win a gold medal in ice hockey, defeating the United States at the 2002 Winter Olympic Games. But it took our northern neighbors just a few years to outpace us in Internet usage. In fact, over half of Canadians said that if they were stuck on a deserted island for a month, they would prefer a computer with Internet access to a TV or phone, according to a recent survey by Ipsos-Reid. Maybe that's because they're so accustomed to shopping and banking online. The same company conducted a 2001 survey that revealed 61 percent of active Internet users in Canada have conducted financial transactions online, versus 29 percent of active Internet users in the United States.

Canadian e-commerce comfort stems from the fact that Canadian banks have been aggressive in promoting online banking as a viable and secure option, according to statements by Marcie Sayiner, Ipsos-Reid senior manager of research. So how did the northern banks get customers to place so much trust in their online offerings? Timing, says FutureBrand's Worldwide Managing Director, James Cerruti. FutureBrand's work with MIT and independent studies on e-commerce indicated that the online environment is not the place for an established institution to start to build trust. That's a concept the Canadians simply "got" sooner than the Americans.

"They recognized that the success online was not about creating a totally separate business model, but as a way to extend an already existing, trusted brand into a new channel," explains Cerruti, a financial and professional services branding expert who has worked with what he calls "the big four," Royal Bank of Canada (RBC) Financial Group, Bank of Montreal, Canadian Imperial Bank of Commerce (CIBC) and Toronto Dominion.

Cultural diversity

The sheer dominance of the handful of major banks in Canada has actually created a more skeptical banking public, says Cerruti. So on the demand side of the equation, behaviors and attitudes of Canadian Internet users are not too different from American users. There is another factor affecting the speed of Canadian online banking success that comes from the supply side--a difference in corporate culture. In Canada there is a tendency toward cooperation. In American industry, the sharing of ideas and information is antithetical to the typical corporate maxim of "constructive competition." In the case of online banking, that U.S. mind-set has backfired.

"What has transpired in the United States has been an internal, ongoing fight over resources and clients," claims Cerruti. "That's impacted the ability to implement strategy."

Geography lessons

You don't have to be hit with a hockey stick to realize that geography has also played a large part in Internet acceptance in the land of maple trees and beavers. Judy White, segment marketing manager for Lincoln, Mass-based Unica Corp., points to a few land-related factors that have cleared the ice for online banking in Canada.

Geography and population: Canada has one-tenth of the population of the United States and a lot of physical ground to cover. Banks are forced to encourage consumers to use online banking because branch banking in the wilderness is not practical.

"In the United States, there are banks on every corner, but in many areas in Canada you have to drive a long distance," explains White, whose company has worked with Canadian customers such as Bank of Montreal and RBC Royal Bank. "The push for online banking has become an absolute necessity in bank corporate strategy."

Competitive necessity: With only a few major players, each leading Canadian bank is under pressure to offer matching services.

"The largest banks in Canada have a very large percent of the population as their consumer base," says White. "So they are able to invest enormous amounts of money into online banking. Whatever one is doing, they all have to do."

Technology and customer...