Canadian banks could be sideswiped by upstart rivals if they don’t heed customer demand for digital services, Cisco’s global Internet of Everything strategist warned on Wednesday.

During his keynote presentation at the FinTech Conference in Toronto, Gino Zucca used a sports analogy to characterize how smaller alternative providers are already cutting into business at their much bigger competitors, the major banks and credit card firms.

“I used to play football and if someone’s bigger than you, don’t take them head on. Hit them from the side,” said Zucca, director of Internet of Everything (IoE) strategy and market development at Cisco Systems Inc.

Making mobile inroads

Although Apple and Google are giants in the IT sector, they’re still relatively tiny players in financial services. While they don’t face the same regulatory requirements as banks and credit card companies, they’ve made inroads in areas such as mobile payments, expense tracking and money transfers.

video.banking
Offering customers financial advice via live video chat is one way banks can meet demand for digital service, says Cisco’s Gino Zucca.

Royal Bank of Canada CEO Dave McKay acknowledged as much in March when he stated during a New York conference that banks are “on a collision course” with new alternative service providers.

Something simple

Consumers today expect the same sort of digital convenience in banking services that they’ve grown accustomed to in sectors such as retail and communications, Zucca said.

“People just want something very simple. They want a button. They want a green button to make a call, they want a green button to make a payment,” he said.

IDC estimates that two per cent of all global payments will be routed over “alternative” payment networks in 2015, Zucca noted.

Cisco released its own research in March suggesting that number will rise. In Cisco’s survey of 7,200 financial services customers in 12 countries, 75 per cent said they’d be willing to move their money to institutions offering more digital service options to make “interaction and transactions easier.”

gino.zucca
Gino Zucca, Cisco’s director of IOE strategy and market development.

“There’s … an increasing risk (customers) will seek another financial institution – possibly one outside the traditional realm of banking – to fulfill their needs,” the report concludes.

In the same study, 60 per cent of Canadian participants indicated they would switch providers specifically to access IOE-enabled services such as video-based mortgage consultations and automated financial advice systems.

Since Cisco is a major vendor of cloud-based videoconferencing solutions and invested $100 million to build an IOE lab in Toronto, it does have a vested interest in encouraging banks to embrace IOE technology.

Yet other research released in August also warns banks risk losing customers – especially younger ones – if they fail to deploy digital services.

Courting younger customers

“Young customers are already shifting their behaviours toward usage of alternative financial service providers,” the FIS Consumer Banking Pace Index report stated. “While these customers are likely to maintain a transactional account with their primary financial provider, the more valuable parts of their financial dealings are in danger of being captured by competitors.”

And a study released by Accenture last year found that 40 per cent of U.S. and Canadian consumers aged 18 to 34 would consider banking with Google if it offered full financial services. Thirty-seven per cent would consider banking with Amazon and 34 per cent would think about moving their money to Apple.

Nymi.bands
RBC and TD both announced plans to pilot test the Nymi biometric wristband to authenticate MasterCard payments.

Besides embracing digital technology, banks will have to focus on security and customer experience to retain existing customers and gain new ones, Zucca said. To improve the customer experience, he said banks must digitize their business processes to give clients more flexible, automated options and cut their own operating costs; use analytics to provide personalized financial service and advice; and change their corporate culture.

“The hardest part of all of this is changing people and changing mindsets,” he said. “And changing how people and companies have done things for a long time.”

At least two Canadian banks have tested the IOE waters. RBC and TD Bank Group both announced pilot projects to authenticate MasterCard transactions with the Toronto-made Nymi biometric wristband.

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