The Canadian Imperial Bank of Commerce is taking over President's Choice Financial bank accounts with a new online brand as it responds to the continuing trend towards digital banking.
The Toronto-based bank said Wednesday it will cut its nearly 20-year relationship with PC Financial-owner Loblaw Companies Ltd. and launch its Simplii Financial brand.
CIBC customers will be able to access Simplii Financial online, on smartphones and through call centres, with the roughly two million current PC Financial savings, chequing, and mortgage accounts switched over on Nov. 1.
"It was a mutual decision that we feel good about, and gives both of us more control and greater flexibility going forward," said Mike Boluch, executive vice-president of direct banking at CIBC.
Simplii customers will still have free access to CIBC's ATM network, but won't be able to bank through its branches, while CIBC and Loblaw will start in November to phase out their banking machines and pavilions in Loblaw's stores.
Loblaw said it will focus on its PC Points loyalty program and its line of PC Financial MasterCard credit cards.
Meanwhile, CIBC will concentrate on making a smooth transition for PC Financial clients, who won't see any changes to their account numbers, mortgage terms or automatic payments and deposits.
Boluch declined to provide financial details of the agreement with Loblaw, but said CIBC's fourth-quarter results would recognize $100 million in pre-tax fees and charges related to the deal.
The bank will be under pressure to minimize disruption as cost-conscious consumers have increasing options in online banking, with Scotiabank pushing its Tangerine brand, while credit unions and new entrants like EQ Bank offer high interest rates and no fees.
David Lewis, an assistant professor at Ryerson University's Ted Rogers School of Management, suspects CIBC wasn't satisfied with how well the PC Financial brand was working and will look to capitalize on the greater trust people place in banks.
"There are consumers who are extremely conservative when it comes to their money, and may not trust a supermarket with their money, but would trust a bank," he said.
Lewis added the move will also allow CIBC to better cater to the millennial generation that is more comfortable banking online, and will soon become a much more substantial wealth base.
"The time to build the capability is now, so that as that segment matures and grows in wealth, CIBC's going to be well positioned to take advantage of it," he said.
Bob Smythe, an associate analyst at marketing research firm IDC Canada, said the firm ranks CIBC low among Canada's big banks in terms of digital offerings, so the deal could spur some needed investment.
"The banks are revamping their user interface continuously. That's a crucial requirement and that's going to go on and on a long time," Smythe said.
He said banks need to be able to respond to changing needs and new technology like voice recognition and the move towards automated wealth management, with increasing competition from new digital players like money management firm Wealthsimple and an even bigger challenge from Silicon Valley giants such as Google and Apple.
Boluch said CIBC has seen more people move online – across generational lines – and the company will be investing more in Simplii Financial.
He said the bank wants to meet the needs of a range of clients, from simple no-fee online banking customers to those looking for more in-person advice.
"We see a wide spectrum of client needs, and we see this as being an important part of that spectrum."