Peter Aceto, the chief executive officer of ING Direct Canada, is about to do something he never thought his bank would do: issue cheques.
In a attempt to carve away market share from the country's major banks, Internet-focused ING - which made its name through online saving accounts and mortgages - is now getting into the business of chequing accounts. It is an unusual step for ING, which has always advocated a strategy that eschews the traditional hallmarks of banking, such as branches or automated tellers, in part to save costs.
That means the vast majority of ING's 1.8 million customers have chequing accounts with other banks. Seeing an opportunity to bulk up its deposits, ING now wants to convince those consumers to bring their chequing accounts over as well.
Canadians move more than $200-billion through their chequing accounts each month, according to the Bank of Canada, meaning the market is substantial even if ING makes small inroads. Initially the bank is setting its sights low, hoping about 100,000 clients will move in the first year.
"Our ambition is for 100,000 customers but we're optimistic it could be more," Mr. Aceto said in an interview. "We've got a lot of customers and enough customers that are interested, that we thought the time has come."
Chequing accounts are key to the big banks because consumer and business deposits are their biggest and cheapest source of funding. They use those funds to make loans which bring in interest revenue.
ING launched in Canada 14 years ago, starting initially with savings accounts, then moving into mortgages and eventually offering mutual funds.
When the bank began testing its new accounts with a select group of customers late last year, ING attempted to offer as few paper cheques as possible, assuming people would do most of their transactions through bank machines, debit purchases and online.
But in a clear sign that the age of electronic banking hasn't yet killed off traditional paper cheques, test customers demanded more than the free 20 cheques ING was offering. That forced the bank to boost the number to 50.
"Originally we provided 20 free cheques, with the hope that with e-mail money transfers and ATM transactions, we could get people to stop using cheques," Mr. Aceto said. "But at the end of the day there are things we just need to write cheques for."
To compete with the large branch networks of the major banks, ING is attempting to entice customers with perks such as no required minimum balances and no fees on chequing, and an interest rate of 0.25 per cent. Whether that will be enough to convince consumers to migrate from the major banks - and their tens of thousands of bank machines across the country - is unclear.
ING's cards will use a network of bank machines that includes all credit unions and HSBC banks in Canada, with no fees for transactions. The cards will also be accepted on other ATMs, but fees will apply. For ING, which has always tried to win customers through low-fee online banking, Mr. Aceto knows his bank faces a challenge trying to get more of its clients' business.
"To have your savings account with us is one thing. But to be part of your daily life is another thing."
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