Canadian Millennials are relying on banks less and less to manage their finances
The 2019 Canada Retail Banking Satisfaction Study conducted by J.D. Power looked at customer satisfaction with large and mid-size banks in Canada.
Among the Big Five banks, TD Canada Trust came in with the highest satisfaction score, 789, while RBC Royal Bank followed with a score of 784. BMO Bank of Montreal’s score was 782.
As for midsize banks, Tangerine was the highest ranked with a score of 827. ATB Financial’s score was 815, and Desjardins came in third with 803.
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Six factors were taken into account when measuring consumer satisfaction: channel activities, communication/advice, convenience, new account opening, problem resolution, and products/fees.
“It makes sense that Tangerine is ranked the top mid-size bank because they have consistently had no fees on their chequing accounts and higher interest on their savings accounts,” says financial counsellor Jessica Moorhouse. “That’s huge for millennials.”
Moorhouse advises millennials on money and saving, and says that more young Canadians are becoming aware of things that will affect their financial health in the long term.
“We are trying to save on fees more than ever because we better understand how much those fees compound over years or decades,” says Moorhouse.
Moorhouse adds that younger Canadians aren’t necessarily ditching banks for other digital financial platforms, rather, how millennials bank is changing.
“Millennials aren’t looking for a one-stop shop for their chequing or savings accounts, credit cards, line of credit, mortgage, and insurance anymore. We’ve got more options, so we spread things around more to get the most value,” she says.
Platforms like Credit Karma and KOHO are tailoring services for one’s financial health, and are able to generate a following because they offer value with affordability. These platforms aren’t replacing banks Moorhouse says, but they are filling a need not currently met.
“KOHO, for instance, services the need of wanting a no-fee chequing account to be used as a day-to-day spending account. And sometimes banks won’t let you have more than one chequing account or will charge you fees, so millennials are choosing KOHO as a way to not have to open a no-fee chequing account at a new bank,” explains Moorhouse.
Credit Karma, which allows consumers to check their TransUnion score and report for free, is also servicing a need (we should know our credit scores), but without charging a fee.
“TransUnion will charge you $19.99 a month to check your score and report,” notes Moorhouse.
Then there are robo-advisors that are also attractive to many younger Canadians, challenging traditional banking services. Robo-advisors like Wealthsimple serve as a way to invest in low-cost index-based ETFs (exchange-traded funds) easily in an automated way and most banks don’t offer that service, says Moorhouse. But, banks have started developing their own robo-advisors such as BMO Smartfolio and RBC Investease with more to come.
“At the end of the day, millennials are looking for the best value. If they need to use multiple platforms and bank at more than one bank to get the best value, that’s what they’ll do and I’m all for it,” she adds.
Moorhouse says that financial institutions need to offer low or no fee options on chequing accounts, higher interest rates on savings accounts and put more importance on including financial literacy tools such as guides, calculators, videos, and webinars.