Canadian Imperial Bank of Commerce inked a multi-year partnership with the Greater Toronto Airports Authority to become the sole financial sponsor of Canada's largest travel hub.
Under the agreement, CIBC will be the only bank allowed to advertise in Toronto's Lester B. Pearson International Airport and has the exclusive right to offer banking services through automated banking machines and full service branches.
CIBC won the rights through an auction that the GTAA launched. The deal is the first of its kind in Canada, and financial terms were not immediately disclosed.
The new partnership should help CIBC market its Aventura credit card, which was recently revamped to make it more competitive. Until this summer, CIBC was a long-time partner of the Aeroplan loyalty program, but its contract came up for renewal and Toronto-Dominion Bank won the right to become Aeroplan's new primary card issuer.
Although CIBC is still an Aeroplan partner and will keep half of its Aeroplan accounts, it cannot market the card outside of its own channels. To make up for the lost profits, CIBC is relying on strong customer adoption of the Aventura card.
Wining new credit card customers can be difficult because myriad financial institutions are now marketing their own rewards cards. These products are heavily promoted because their users are often high-end cardholders that transact often, and financial institution earn a fee of between two and three per cent of the total purchase price every time they do. These fees are so lucrative that they can make up one-third of total credit card revenues for a Canadian bank.
CIBC believes the deal will give it a leg up because the new contract clears out any competition from inside the airport. CIBC will be the only bank allowed to market its card and sign up new customers. Airports are proven to be one of the most lucrative places to attract credit card clients, outside of traditional bank channels.
By establishing a branch within the airport, CIBC said it will be able to service the tens of thousands of GTAA employees, as well as all of the retailers within the airport complex. CIBC will also be able to target newcomers to Canada – one of the most lucrative demographics for retail banking. Canadians tend to stick with their existing financial institutions, so attracting newcomers is one of the best ways to boost market share.
Before signing the deal, CIBC said it explored various sponsorship possibilities that would boost its brand awareness, such as acquiring the naming rights to major sports stadiums. The bank ultimately decided against going this route. "What we didn't see with that is the ability to embed your business into the organization," said CIBC executive vice-president Stephen Forbes. The GTAA contract offers premium brand promotion as well as the right to offer banking services and to sign up new clients.
Although CIBC will have exclusive promotional rights within the physical airport, HSBC Holdings Plc will still be able to advertise in the gangways that passengers walk down to board their planes.