Canadian Imperial Bank of Commerce is deepening its investments in technology, loyalty programs and credit cards in an effort to make banking easier and more appealing to customers amid stiff industry competition.
On Wednesday CIBC rolled out a credit card in partnership with Tim Hortons Inc. and linked to the chain's loyalty program, a move that connects the bank with a loyal group of coffee drinkers across the country. The "Double Double Visa Card" is the first of its kind in Canada, and represents both an effort to grow CIBC's customer base, as well as offer a memorable client experience, executives say.
The card is completely flat, with two circles labelled Visa and Tims. Pressing one of the circles to pay lights up a blue or white light, and there's a tactile "click" feeling. Cardholders can collect Tim Cash as they make purchases.
"We want the card to be front of wallet, that's part of it, because when they go to a department store we're hoping they'll pull this card out," said David Williamson, group head of retail and business banking at CIBC.
Banks have been targeting popular retailers in an effort to get more face-time with customers in their favourite store as well as pick up on the interchange fees they collect each time customers make purchases on their credit cards. Retailers with loyalty programs that keep people coming back have a special appeal: Royal Bank of Canada has a partnership with Shoppers Drug Mart, for example, and Bank of Nova Scotia bought 20 per cent of Canadian Tire Corp. Ltd.'s financial services business earlier this year.
Through Tim Hortons, CIBC gains branding opportunities in 3,500 stores – the majority of Tims' Canadian footprint. The bank was attracted to the chain's customer base, which buys two billion cups of coffee in Canada each year. According to Tim Hortons, 5.3 million people visit its locations in Canada each day.
CIBC gave up a big portion of its credit card portfolio last year after it renegotiated its relationship with Aimia Inc., operator of the Aeroplan loyalty rewards program. The result was half a million customers moving to Toronto-Dominion Bank when it acquired about half the Aeroplan credit card portfolio in a deal completed late last year.
Now CIBC is looking to new technologies to grow its business and boost its credit card portfolio, hoping to get out ahead of other banks as customers seek more convenient banking and payment solutions. Mobile payments, apps, online banking and cheques that can be deposited by taking a digital picture are among the offerings CIBC is hoping to use to lure and satisfy.
Technological innovation poses two challenges to a bank. First, the bank is taking a risk that customers will want to adopt the new device, system or process. And the bank must find a balance between racing to bring new technologies to market and maintaining a reputation for safety and stability that clients and customers value in Canadian financial institutions.
In the case of the Tim Hortons card, CIBC took more than one year to develop it, and needed to be sure that the technology could last for three years, the length of time customers typically use their cards.
CIBC partnered with Dynamics Inc., a Pennsylvania-based company focused on next-generation payment cards and platforms, to create the card itself.
"It's a new technology from a fairly young company. Banking things have to work," Mr. Williamson said. "We worked with them to make sure this product is bulletproof."
CIBC has the rights to the card's patents in Canada and Mr. Williamson doesn't rule out offering the technology on other cards in the future, but in the "quick service" business, Tim Hortons will be the only vendor.
CIBC is seeking new banking relationships through the Tim Hortons deal, offering up to $400 to new customers who sign up for a Double Double card.