RBC ranks number 1 in almost every key Canadian banking product category. Douglas Blakey meets with Jennifer Tory to discuss how RBC’s retail focussed Personal & Commercial Banking unit continues to churn out record quarter after record quarter
A strict focus on client first, collaboration, accountability, diversity and inclusion and integrity would be a fair summary of the key values that guide, unite and inspire RBC staffers to produce record result year after year.
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2015 was no exception: record net income of C$10.02bn for the year ended 31 October 2015, up 11% from the prior year.
RBC’s retail focussed Personal & Commercial Banking unit posted 12% earnings growth, contributing more than half of group net income and enjoyed particular success with its Home equity offerings supported by RBC’s Newcomer Advantage and Employee Pricing campaigns.
Other highlights included credit cards through strong account and balance growth in its industry leading Avion card; ongoing investment in digitising the client experience with a focus on speed of service and simplifying the end-to-end processes, such as the launch of Cheque-Pro, allowing high cheque volume clients to connect to RBC’s online banking channels using an in-office scanner to make deposits.
In addition, RBC continued to invest in the branch channel, evolving the network for basic service transactions while investing in digital and mobile platforms.
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By GlobalDataRBC ended 2015 with 5 million active clients on its digital and mobile platforms, with particularly strong growth of 23% in the number of active clients using the mobile platform. Other digital highlights included the launch of Host Card Emulation technology allowing RBC clients with Android devices to use the RBC Wallet anywhere in the world with a mobile network.
RBI met up in Toronto with Jennifer Tory. As Group Head, Personal & Commercial Banking (P&CB), Jennifer is responsible for RBC’s banking businesses in Canada, the US and the Caribbean, including personal and commercial financial services, credit cards and payments, as well as RBC’s sales and branch distribution, operations and advice centres.
RBI: How would you summarise RBC’s current distribution strategy?
Jennifer Tory (JT): Our distribution strategy is based on the premise that customers increasingly expect a seamless, omni-channel experience that includes branches, Automated Teller Machines (ATMs), call centres, digital, and mobile sales capabilities. As a result, the bank’s goal is to maximise the volume of client business at the most effective cost while always meeting or exceeding client expectations.
RBI: How do you persuade clients to use the most appropriate channel?
JT:Our primary goal is to make it easier for clients to do business with us wherever, whenever and however they want while encouraging them to choose the most effective channel through pricing, convenience, and advice.
To support that journey, we’ll be making a number of investments; in smarter ATMs that can support an increasing number of service and simple sales transactions, as well as in data analytics, loyalty programmes, and building advice capabilities across all our channels to support the increasingly connected client.
We want to ensure we evolve as our clients’ needs and expectations evolve, especially as they integrate mobile and digital into their lives.
RBI: Unlike a number of the leading retail banks in the US for example and in the UK, where the banks are actively shrinking the size of the branch network, the size of RBC’s branch network has barely changed: 1,355 branches in 2015 compared with 1,372 outlets in 2013. Just how important are branches to the overall distribution mix?
JT: The branch channel remains a key driver of P&CB’s outstanding performance and is foundational to our client experience. Though as customers continue to heavily use all of our alternative channels, the role of the branch will evolve away from transactional banking and toward being a client onboarding, education, advice and problem resolution centre.
When it comes to clients’ complex needs and their financial well-being, most clients turn to an adviser they know and trust, who will give them the advice and solutions they need and deserve. That has been, and will always be, a foundational element of our client experience and one of our most significant differentiators going forward. In the future we see our branches becoming:
– an “Onboarding Centre” – for setting up new clients, as well as our current clients, with the everyday banking relationship they need to carry on their life in both the digital and physical world.
– an “Education Centre”, where we educate clients on our products and services including how to use them, and where we educate them on using our digital and ATM channels to make their banking life simpler and more accessible.
– an “Advice Centre”, where we proactively advise and support them with their more complex financial needs, where we activate or turn on already approved offers and services.
– and a “Problem Resolution Centre” to help our clients with the challenging moments that we all know occur.
We have been “right-sizing” our branch network since 2010, with a focus on technology, roles and physical design to enable greater flexibility and operational effectiveness. This includes organising our branches in a community around a hub and spoke concept.
We design our markets based on competition and demographics, including how multi-channel the customer base is. We do the same with our stores. Stores within each market are designed based on our “kit of parts” store elements that we’ve tested and refined in “concept” stores and then rolled out to fit the market the store will serve.
Part of this work has involved the creation of multiple retail tools and store formats which we developed to help address needs and differences of Canadian communities. Our formats now include our Retail Stores, Small Retail Stores, as well as our newly launched Showcase store.
While we continue to explore additional formats, such as mobile and pop-up branches, a primary focus has been on identifying successful elements from our new formats that can be scaled effectively across the network.
Our Retail Store designs are made up of a hybrid of best-in-class retail shopping and financial services – a more open concept that provides a more informative and friendly experience.
RBI: And what about the small retail stores?
JT: Our “small-footprint” stores occupy an average of 1,500 sq-ft compared to a typical branch of 4,500 sq-ft, which represents a 65% reduction in space. The smaller store requires five staff to operate as compared to an average of eight staff for traditional branches, yet they can provide virtually all of the sales and service offerings available from much larger branches.
This new format provides the bank with an alternative footprint within its network and will improve efficiency and shareholder returns. In fact, our first cohort of small footprint stores has had strong client acquisition and volume growth results to date, despite the smaller footprint and fewer staff.
RBI: How is the new retail store strategy delivering?
JT: Retail Store results have been positive, and are highlighted by new client acquisition at newly opened retail stores that meets or exceeds historical averages, and driving top-line revenue growth.
Newly opened stores continue to perform well against key performance indicators (KPIs), including incremental business volumes, client acquisition, client satisfaction and loyalty measures, and staff surveys.
Overall we are satisfied with our return on investment, notwithstanding recent factors impacting the broader branch network including slower market growth, change in product mix (e.g. less consumer demand for personal loans), site selection/regional differences, and spread compression.
Overall in-branch sales increased by 7% YoY and the number of service client solutions we provided per week increased by 9% YoY.
– We led the industry with 17% of our clients having at least three key products or services with us (transaction, investment and borrowing), compared to the peer average of 11% and next closest competitor at 13%.
– A best-in-class efficiency ratio of 43.5% as at Q3/2015 for Canadian Banking, improved by 70 basis points (bps) over 2014 and by 630 bps since 2008. This ratio is ~460 bps better than its Canadian peer group average.
– A 19% premium in year-over-year (YoY) volume growth for Canadian Banking over its Canadian peers (RBC growth of 5.6% vs. peer average 4.75%).
RBI: One of the channels that RBC has pioneered is the mobile sales force. How does this operate?
JT: When it comes to service, we believe that our customers want options and flexibility. In the physical network, this means giving clients the option of coming to a branch to interact with us, or our mobile sales professionals can go to them at their work or home.
In addition, through RBC’s ‘Bank at Work’ programme, we send representatives to large employers in the community who have our group banking services, and we provide banking services to employees at their place of work.
As clients continue to visit branches less frequently, we will be increasingly externally-oriented. We want to be where clients are, to be on their path, where and when they need us most.
Our connection to our clients and our communities both physically and virtually will become an even more significant differentiator for us in the future.
RBI: How important is the retail sales force to your strategy?
JT: Our physical channel strategy is designed to employ the right combination of people and technology to deliver an even greater client experience. The retail sales force is a critical enabler of this strategy. Branch sales and service employees take care of the everyday banking needs of customers, complemented by more specialised sales people who support clients with more complex needs.
Our specialised sales forces include 1,164 commercial bankers aligned to industry sectors, 659 small business specialists, 1,299 mortgage specialists, 1,120 financial planners and 974 investment and retirement professionals, making it the largest and most specialized proprietary sales force of any Canadian bank. These specialised sales forces work together with our branch staff, often via technology, to give RBC the scale and specialised skills to meet unique customer needs in any location.
In addition, private bankers have long met the needs of our high value clients wherever and whenever it’s most convenient for the client.
RBI:What about mobile banking? How important is this to your distribution strategy?
JT: As consumers adopt new connected technologies, RBC needs to be at the forefront of delivering financial service capabilities across all channels that improve the experience of our clients, while keeping advisors central to the client experience.
Canadians check their mobile phones over 100 times a day. The relationship our clients have with their phones is unlike any channel. We are investing in digital distribution, not only because of its efficiency, but also because our clients are interacting with the channel differently than anything else. Through mobile we are able to be a part of our clients lives every day, even multiple times a day.
RBI: RBC is one of the few banks in the world that has developed its cloud-based digital wallet. Can you talk about the strategy behind this move?
JT: RBC Wallet is about making it safer, easier and more rewarding for our clients to choose an RBC payment card at the point of sale. This past summer, we made it even easier for our clients to use their phone to pay by updating our app to the latest technology – HCE (host card emulation). Now virtually all clients with an Android smartphone can pay with their RBC debit or credit card in seconds, without worrying about being on the right mobile network or having the right SIM card.
Now that we have the foundation, we are investing in new capabilities that unleash the power of the mobile phone for commerce. We recently launched a mobile gift card wallet that allows clients to digitise and use all of their gift cards wherever they are, and will be adding digital loyalty cards and programs, and receipts. We already have one of the industry’s best loyalty programmes in RBC Rewards, so we are building on one of our key strengths.
The Secure Cloud wallet is built to be flexible now and into the future. We are already seeing new form factors – like wearable technology- entering into the payment space.
Secure Cloud is designed to accommodate these evolutions. As the name would suggest, it is also a highly secure platform that keeps sensitive client data with the bank as opposed to on the phone. We are very proud to have been awarded a patent on RBC Secure Cloud this past September.
