Toronto-Dominion Bank is putting Canadian retail branches at the centre of its growth plans, a new strategy that will make the lender look more like its old self.
For the past five years, banks have been obsessed with ‘fintech,’ or financial technology, fearing that software emanating from Silicon Valley would eat the industry. As this fascination grew, bricks-and-mortar branches were thought of as archaic and expensive and banks in both Canada and the United States shut scores of branches, while also slashing the square footage of the locations they kept.
Lately, however, TD has noticed that digital tools can only do so much. Human beings are social animals, and for some crucial interactions, nothing beats face-to-face meetings.
“For customers, it’s not branches or digital,” says Teri Currie, TD’s head of Canadian retail banking. “It’s both.”
For all the migration to digital channels, 80 per cent of all of TD’s customer acquisitions, or new business, still comes through its branches. In response, the bank is reinvesting in its branch network, making it a top priority.
TD is not the first domestic bank to stress the importance of branches. Canadian Imperial Bank of Commerce, for one, unveiled a similar strategy in 2015.
But the shift has more cultural significance for TD. After acquiring Canada Trust in 2000, the organization built a brand around old-fashioned banking and made a name for itself through customer service and convenience – the mantras stressed by former chief executive Ed Clark and his head of retail banking, Tim Hockey. Branches were central to this strategy, and TD offered longer opening hours and more locations in more communities across the country. To this day, Canadian banking contributes 63 per cent of the bank’s total profit.
The strategy started shifting when Bharat Masrani became CEO in 2014. During the first year of his tenure, TD incurred two restructuring charges that totalled $686-million. In both, branch ‘optimization’ was a main focus. The next year, there was executive turnover. Mr. Hockey left to run TD Ameritade, and some of his retail banking deputies also eventually departed, including former retail branch head Tom Dyck.
Ms. Currie took over in the aftermath, having previously run human resources and later digital banking strategy. At the time, fintech was still all the rage. “When I came in, in 2016, many of the questions I got from investors would be, ‘How are you reducing your expenses in the physical channel to be able to afford your digital investment?' ” she said.
Because of this obsession, TD invested heavily in technology, and today more than 80 per cent of its client transactions, such as bill payments and money transfers, take place in self-service forums such as mobile apps and online banking.
Despite this transformation, though, the bulk of customer acquisitions kept coming through the branches, making them critical for growth.
Building off this TD is emphasizing a reinvestment in its branches, one that is multifaceted. For one, the physical formats are changing – fewer tellers, more wealth advisers; less total square footage, but larger meeting rooms. The overarching vision is that branches can be used for branding and marketing, displaying large TD logos and signage, and they are now thought of more as advice centres than as transaction hubs.
“When it comes to complex advice, when it comes to saving for your children’s education, when it comes to financing your first home, when it comes to investing for retirement, people want that advice in a face-to-face capacity and to look the person in the eye,” Andy Pilkington, head of branch banking, said in an interview in TD’s newly remodelled branch on Toronto’s Bay Street.
This is true for younger clients, as well. Through focus groups, the bank found that millennials will research and shop online, and they will ask their friends and family for advice, “but when they do something they deem to be complex, they want to sit face to face with our advisers,” said Ms. Currie, who started at Canada Trust in 1983 within Calgary’s Market Mall branch.
The third pillar of TD’s new strategy is built around talent, including re-energizing branch staff. Last month, TD brought all 1,100 of its Canadian branch managers to Toronto for the first time, where they attended a symposium that stressed how much they matter to the bank.
Within the branches, TD is also changing how advice is delivered, and the way staff performance is measured. For the past five years, Canadians banks have placed more emphasis on cross-selling – that is, offering additional products to existing clients. It is all an effort to boost profits.
Lately, however, TD has changed its tune, investing in artificial-intelligence tools that conduct deep dives through client-data profiles, in order to assess risk appetites and investment profiles and then offer advice based on the algorithm’s results. As for performance, the bank also incorporates customer feedback into its employee scores.
The goal, Mr. Pilkington said, is to "give more consistent advice across the network.”