Banks have increasingly been pushing an emphasis on new technology over the past few years. The desire to harness digital banking services over legacy systems has been central to most strategies. This includes the Royal Bank of Canada (RBC), which rolled out plans to spend upwards of $3.2 billion on tech spending this year alone.
2018 has seen a closer blend of banking and fintech than ever before. Recent years have seen lofty research projects, new units being formed, and the adoption of blockchain and other technologies. The eventual goal: a changeover to digital banking services. This has indeed been the direction most banks are headed, leading to a steady uptick in closures of physical branches.
RBC sets sights on customer growth
Shifting customer demand has been one such factor in driving this trend, though many banks are also embarking on cost-cutting measures as well. For RBC’s part, the bank has echoed this strategy, pushing for the utilization of new technology such as artificial intelligence (AI), digital services and social media.
Per an RBC forward estimate, the group is eying a growth of upwards of 2.5 million customers by 2023, which reflects a massive growth in customer acquisition. Such lofty goals are not likely to be achieved with traditional banking services.
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Presently, RBC currently has approximately 6.5 million digital users, with an 8.0 percent increase relative to the year prior. Over this period, however, RBC has already released a number of new digital services through its RBC Ventures division, which includes a financial advice app and a digital platform for small business owners.
A $3.2 billion injection of cash into technology spending could further push this trend to new heights, with RBC homing in on client acquisition as the main goal. The plan was reported in depth during an investor meeting in Toronto this week by chief executive, David McKay.
According to McKay, all banks must diversify their offerings beyond traditional financial services to remain relevant to customers and to see off the threat from big tech companies and e-commerce platforms.
The reliance on new technology such as AI and digital banking services also comes with another important draw, savings of more than $1.0 billion, given greater automation and system consolidation. RBC’s budget on technology, while high, is still much lower than other leading banking institutions in both the US and Europe.
For example, HSBC announced plans of spending a massive $17.0 billion on technology while JPMorgan already has a budget in excess of $10.0 billion. Moving forward, it seems a more concerted push towards digital banking services will come to reflect the norm. It remains to be seen however if this will translate directly to increased client acquisition however with competition for this space already heating up.