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A majority new customers for Canadian banks are immigrants, eclipsing the growth from young adults growing up or customers switching institutions.Fred Lum/the Globe and Mail

Competition is heating up among major banks to land new customers arriving from abroad, as Canada ramps up its immigration targets and a pending bank merger adds pressure to an already crowded banking market.

The largest Canadian banks have spent years building and honing offerings for newcomers to Canada, as well as referral networks to reach them before they arrive. That’s for good reason: A large majority of banks’ new customers are immigrants, far eclipsing the growth that comes from young adults growing up, or established clients switching financial institutions.

Canada set an annual immigration record in 2021, when it welcomed 405,000 new permanent residents. Now the country is opening its doors wider in an attempt to fuel economic growth, aiming to attract at least 500,000 newcomers annually by 2025. That could bring the total number of new immigrants added between 2016 and 2025 to more than 3.7 million, up from 2.6 million over the previous 10 years.

With a race to capture those new customers already under way, Royal Bank of Canada RY-T announced a deal to buy HSBC Group PLC’s Canadian banking unit for $13.5-billion late last month. The day the deal was announced, RBC executives stressed that it would help strengthen the bank’s position when it courts newcomers, and create a better pipeline of referrals to would-be clients, especially in Asia.

HSBC lands about 4 per cent of all newcomers to Canada as clients, the sixth-largest share in the country, behind Canada’s five largest banks. It has typically been one of the top choices for customers arriving from China, according to data from Solutions Research Group (SRG), a consumer research consultancy.

That has sparked rival banks’ competitive spirit, which could make the incentives and offers presented to newcomers more generous in the near term, and spur more partnership agreements intended to bring in referrals from abroad.

“With the increased number of newcomers coming to Canada, that’s going to create a sharpened focus,” Jacqui Allard, RBC’s executive vice-president of personal financing products, said in an interview. “They’re the lifeblood of the economy ... They’re fuelling the labour market right now and we need them.”

On average, new immigrants to Canada are younger than the general population – a majority are 25 to 44 years old. That means they have more significant life events ahead, such as buying homes or cars, or saving for children’s education. As a result, they need more banking products and services over time, including mortgages, auto loans, RESPs and home renovation financing.

To attract as many of those customers as possible, all banks have newcomer offers and websites. For example, Bank of Montreal’s NewStart Program and Canadian Imperial Bank of Commerce’s Smart Account for Newcomers offer accounts with no monthly fees for a year or more, and no-fee global money transfers for periods of time. Most banks also offer new immigrants credit cards that don’t require any credit history, with spending limits that can be as high as $15,000, depending on a customer’s income level and immigration status.

Over the past several years, courting new-to-Canada banking clients has become “a much more explicit priority,” said Kaan Yigit, president and research director at SRG, which surveys people who have arrived in Canada within the past five years. And with the market share of new Canadians fairly evenly spread between the five largest banks, “it’s a much tighter race now than it was before.”

Part of what makes this client segment so competitive is that there is a small window of opportunity in which to make an impression. About 77 per cent of newcomers have family or friends in Canada before they arrive, according to a study by SRG, which means word of mouth is vital. A small percentage open accounts before they land in Canada, and 65 per cent have accounts open within one week of arrival, rising to 88 per cent within one month.

Banks also try to reach potential customers through embassies, immigration and education consultants and bankers working in foreign markets. And RBC recently announced a partnership that will refer customers from ICICI Bank Canada, a subsidiary of a bank in India, the country that accounts for the most new arrivals in Canada. The arrangement allows customers with ICICI accounts to do most of the work to open RBC accounts digitally before they arrive in Canada.

“We’re getting the advantage of their pre-arrival reach in India,” Ms. Allard said.

To lure younger immigrants, banks must also be visible in Google searches and on social media. This has spurred banks to polish their online channels to make them more accessible.

For some time, Bank of Nova Scotia BNS-T has been “trying to simplify the language” in online marketing materials for its StartRight program for newcomers, said Dan Rees, the bank’s group head of Canadian banking.

“That would be a category where we say, okay, let’s get a team together and make sure we bang through all that content and make sure it’s hyper simple, and that there’s language translation in all online channels so that they can send links to their friends,” he said.

The challenge, often, is making the process as easy as possible for new customers once they arrive in the country. A survey of immigrants by SRG found that 17 per cent of respondents had difficulty opening bank accounts soon after coming to Canada.

Having a branch nearby remains a high priority for newcomers, even as bank executives face pressure to reduce costs by trimming branch networks. And Scotiabank has been trying to recruit, promote and retain employees who speak second languages in communities with large concentrations of new immigrants.

“Most new Canadians, wealthy or otherwise, pre-existing employment or otherwise, find the banking system here pretty complicated,” Mr. Rees said. “If my cousin’s coming over and I go in to see the branch manager, who can speak my language and knows the region ... it makes a big difference.”