Several big banks have flunked a test of their savviness about a financial future dominated by technology. Credit unions, too.
Some financial institutions do understand the utility of electronic money transfers, though. Royal Bank of Canada now offers free Interac e-transfers on all personal chequing accounts, while newcomer EQ Bank lets you send five e-transfers at no cost each month and Alberta's ATB Financial includes 10 free e-transfers in its mainstream Unlimited Account. Canadian Imperial Bank of Commerce's new Smart Account is one of the first to make e-transfers just another routine transaction rather than giving them special treatment.
Earth to other banks: E-transfers are a rare win-win in the financial biz. Customers get a better way to move money and banks cut down on the paper chase of chequing. End e-transfer discrimination and stop gouging your customers for extra fees when they use this service.
Interac e-transfers were introduced in 2002, but they're a taste of a financial future in which money moves nearly instantly from person to person through a mobile phone, tablet or computer. The e-transfer kills cheques dead, full stop.
Two weekends ago, I paid for a share of a birthday present, some gardening work and concert tickets bought by someone else through e-transfer. The money left my account instantly as e-mails went out to notify the people I was paying. The next time I logged into my account online, I saw confirmation messages saying that each of the three parties had accepted their payments. All they needed to do to collect their money was click on a link in the e-mail they received and log on to their bank's website. There's also a security question to answer.
Quick, clean transactions such as these explain why use of Interac e-transfers has increased by 50 per cent annually over the past three years.
This popularity means banks have to make a decision – build customer loyalty by making e-transfers a core banking service, or continue treating these transfers as a kind of exotica that warrants an extra charge.
Here's a quick survey of Interac e-transfer fees using the public websites of banks and credit unions:
- Bank of Montreal: Includes five e-transfers in its $30-a-month Premium Plan; clients with other accounts pay $1.50 an e-transfer.
- Coast Capital Savings Credit Union: The Free Chequing, Fee Debit and More Account – no monthly fee – does not appear to cover e-transfers; they run you $1.50 each.
- Bank of Nova Scotia: $1 to send.
- Meridian Credit Union: $1.25 to send.
- National Bank of Canada: $1 to send.
- Toronto-Dominion Bank: $1.50 to send.
Tangerine, the online bank owned by Scotiabank, is an odd case. The Tangerine Chequing Account has no monthly fees, but Interac e-transfers are excluded and cost $1 each to send. Tangerine does offer its own e-mail money transfers at no cost, but warns it can take two to three business days to complete the transaction.
There's been a lot of talk lately about how the big banks will compete with upstart "fintech" companies that use technology to provide cheaper, more personalized financial services. Offering free e-transfers allows banks to "take away a point of differentiation from emerging players," said David McVay, a consultant to banks at McVay and Associates.
One of those emerging players is EQ Bank, an online outfit that recently made a big impression by launching with a 3-per-cent interest rate on saving and then cutting it to 2.25 per cent within a few months. EQ doesn't offer ATM withdrawals or Interac debit, but it does allow clients to pay bills and send money through e-transfers.
Free e-transfers are also a way to appeal to millennial clients who don't have extensive relationships with their banks and so are more open to fintech competition. The popularity of e-transfers to young adults can be seen in the fact that more than 50 per cent of RBC e-transfers are done on mobile devices.
Interac, a non-profit banking network, charges financial institutions a wholesale fee on e-transfers. Banks offering free e-transfers are eating this fee, which raises the question of where and when they will boost other costs to its customers.
For now, what matters is that RBC, CIBC, EQ, ATB (and soon, one hopes, others) have freed e-transfers from the tyranny of extra fees. The other banks look out of step.
The nuts and bolts of Interac e-transfers
Here are three things to know about Interac e-transfers:
- Limits: Interac sets a $10,000 limit a transfer, but individual banks and credit unions can apply their own lower caps.
- Speed: About 50 per cent of e-transfer recipients get instant notification and are able to deposit money immediately; in other cases, there may be a delay of 30 minutes between the time a notification e-mail is sent and received.
- Availability: Offered by virtually all Canadian financial institutions and thus widely available to people signed up for online banking.