For the exclusive use of S. Albo, 2022.
TD – Preparing for the Future of Banking
Michael Ross, Wilfrid Laurier University
Sofy Carayannopoulos, Wilfrid Laurier University
Matthew Donovan, Wilfrid Laurier University
HBP# NA0671
On October 10th, 2018, Tim Hogarth, Vice President (VP) of Innovation Framework
and Strategies at Toronto-Dominion Bank Group (TD) made his way down to the
parking garage after the monthly meeting of the TD Innovation Council.
The Innovation Council was a cross-functional group of senior leaders whose
mandate was determining strategic innovation priorities for which Hogarth and his
team would then recommend and develop solutions. Today’s meeting had focused on
the “fintech” (financial technology) start-ups and technology giants entering financial
services. They were getting between the banks and their customers, and some industry
analysts speculated that the entrants had already made significant headway into
attracting customers with services such as Apple Pay and Google Pay. Everyone on
the Innovation Council agreed with the industry analysts: banks had to respond or they
risked losing relevance and becoming a supporting actor in the background of financial
services.
Jeff Henderson, Executive Vice President and Chief Information Officer to whom
Hogarth reported, reminded everyone that chasing too many solutions at once was
unwise. He wanted Hogarth to choose an activity to start with: should this be
payments, wealth management or consumer finance/lending? Should TD focus on
younger, newer customers or its established and higher-value customers? Henderson
had added, “TD has invested a great deal in updating its technology infrastructure, so
new additions can easily be integrated into our digital ecosystem, while also maintaining
cyber security. We have the financial resources to invest whatever is needed to address
this issue, but the long-term returns have to make sense.”
As Hogarth pressed the button for the elevator, Henderson’s last words to him
rang in his head, “Everything is moving so fast that we have to run hard to not fall
behind. Please send me your proposal for our digital strategy by next week. We have
roll out within six months and re-evaluate and adjust in nine.”
INDUSTRY PROFILE
The operations of banks in Canada could largely be divided into three business lines:
(i) consumer/ business banking, (ii) wealth management, and (iii) investment banking
and capital markets. Consumer banking provided services such as chequing, savings,
loans, credit cards, and insurance to address the daily banking needs of individuals and
-----------------------------
Copyright  2021 by the Case Research Journal and by Michael Ross, Sofy Carayannopoulos and
Matthew Donovan.
TD – Preparing for the Future of Banking
1
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
businesses customers. Wealth management provided advice-based wealth and asset
management services and wealth products such as mutual funds. Both of these
business lines served a wide range of customers from children to high-net-worth
individuals and from small businesses to large corporations. These were often referred
to as “retail” or “commercial” lines. Investment banking provided companies,
institutional investors and governments with products and services such as distribution
of debt and equity issues, and advice on acquisition and divestitures.
The “Big Five” banks (Royal Bank of Canada, Toronto-Dominion Bank, Canadian
Imperial Bank of Commerce, Bank of Nova Scotia, and Bank of Montreal) held almost
90% of the industry's total assets1.
Banks operating in Canada were regulated under the Bank Act to provide stability
and protect consumer wealth and privacy. Regulatory requirements set a high bar and
created entry barriers for potential newcomers. For example, new start-ups could not
access the systems to process payments without having a bank partner. The process of
opening a bank branch in Canada was also slow. For example, Silicon Valley Bank, a
lender, applied in May 2017 to establish a branch in Canada, received an order from
Canada’s Finance Minister authorizing a branch in March 2018, but was still subject to
further approval from the Office of the Superintendent of Financial Institutions,
Canada’s banking regulator.
As Hogarth had pointed out at the Innovation Council,
Our size and the banking regulations pose some challenges, but our stability
and experience are also advantages. Safety and security are primary concerns
for customers, and we have far more and valuable experience navigating the
complex regulatory environment. Regulations still mean that new entrants have
to meet standards that ensure customers aren’t exposed to unnecessary risk. A
newcomer can’t simply access systems to process payments: they need banking
partners like us.
In the 1980s and 1990s, two significant events were the launch of ING Bank of
Canada (Canada’s first notable branchless banking model) and the emergence of nonbank/alternative mortgage origination companies (e.g., Mortgage Central Nationwide).
Since 2016, several new domestic Schedule I2 banks had begun operating in Canada.
The newest entrants — Street Capital Bank of Canada, Uni Financial Cooperation,
Wealth One Bank of Canada Inc., Exchange Bank of Canada and Concentra Bank —
were either focusing on a particular niche or service or using technology to connect
with customers online or on their mobile phones. For example, Wealth One was
targeting the Chinese Canadian population with full Mandarin and Cantonese
supported speakers. In 2017, there were 32 Schedule I banks in Canada.
The most important components of competition in banking were price and range
of service offerings. The keys to profitability were attracting and retaining customer
relationships. This was achieved through exceptional service and convenience, and a
diverse range of product and service offerings delivered through an array of
distribution channels. Basic services such as paying for purchases and paying bills were
provided at a low cost to attract customers. Inertia then made the bank the default
choice for subsequent, higher margin products such as loans, insurance, investment
products and advisory services. Mobile payment systems and other new offerings were
additional revenue sources and offset low interest income. See Exhibit 1 for key
statistics of the Canadian banking industry.
2
Case Research Journal •Volume 41• Issue 1• Winter 2021
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
BANKING IN THE DIGITAL AGE
The digital landscape in banking was changing rapidly driven by smartphone adoption,
big data and artificial intelligence and predictive analytics. Adoption of smartphones in
Canada was over 85 percent with rates of over 95 percent in the 44 and younger
demographics, 87 percent in the 44 to 64 and roughly 60 percent in those older than
643. Switching banks had become easier over time, and new apps and online services
were beginning to attract customers with convenience and lower fees. Analysts
predicted that banks that didn’t use digital technologies to reduce costs by automating
processes and improve customer experiences could miss opportunities to improve
performance and see profits decline (see Exhibit 2). However, industry experts
believed that the larger threat lay in disintermediation (see Exhibit 3 for Digital Effects
on Performance).
Banks served as intermediaries – they were a conduit for transactions between
buyers and sellers or consumers to other consumers. Fintechs were intervening
between banks and consumers with services offered through new technologies. They
offered loans, mortgages, deposits, currency exchange and other basic banking
services. While the fintechs still usually used the banks to fulfill the products they sold,
the fintechs were interacting with the clients and thus meant they were disconnecting
the banks from their customers. Aside from the lost revenue opportunities, the banks
were losing two other valuable assets – data and relationships. The technology
company that handled the transaction would scrub the customer data. The bank could
see the transaction’s value but would not receive related information – data which was
important in improving and personalizing customer service. Data analytics could
identify and recommend a more economical way of handling a transaction or
automating a recurring task such as monthly money transfers. It could also identify
opportunities for cross-selling. If a bank noticed that a client was paying rent on a new
property, the bank could offer its own renters’ insurance. Fees from and sales of other
products such as insurance accounted for roughly 22 percent of bank’s return on equity
compared to roughly six percent ROE for provision of credit4.
New entrants were entering retail banking as stand-alone businesses, service
partners and important elements of financial value chains, setting a higher bar for
customer experience and eroding margins. Nutmeg, a UK investment provider,
promised mass affluent customers that if they spent 10 minutes online answering
questions about themselves and their goals, Nutmeg would build and manage an
investment portfolio for them. This was a significant difference from the involved and
in-person traditional wealth advisory services. Similarly, Kabbage partnered with
Scotiabank in Canada. Kabbage created an online platform that allowed customers to
quickly and easily apply for small business loans and used analytics of data sources like
social media profiles and QuickBooks accounts to assess applications and respond in
six minutes.
Technology giants were also entering financial services, motivated by significant
revenue opportunities. During the Innovation Council meeting, Hogarth pointed out
that having some of the world’s leading technology firms providing financial services
was as, if not more, worrisome than the smaller fintechs. In addition, non-technology
firms were entering the industry with their own loans and credit cards. Walmart was
offering micro-finance loans and Costco and other department stores were offering
exclusive credit cards. (See Exhibit 4 for size of banking activities relative to
technology companies).
TD – Preparing for the Future of Banking
3
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
Many of these players had strong technology capabilities and large user bases.
Google Pay and Apple Pay were just two of a plethora of digital wallets being
developed by technology giants and some believed disruption had already occurred in
payments. As Henderson stated during the meeting, Hogarth would have to prioritize
which activity to focus. Should he focus on regaining ground on digital wallets even
though the margins were small and there were already giants with expertise and large
user bases like Google and Apple firmly established there? Should he cede this function
and focus on wealth management or consumer finance that would have a large negative
impact and was not yet a target for the giants?
In addition to fintechs that provided components of a bank’s services, a 2018
report by KMPG5 noted that an increasing number of neobanks and challenger banks
were being established. These firms offered lower fees and/or more perks compared
to traditional banks due to the cost savings of being fully digital. Neobanks such as
Monzo, Starling and Atom Bank were newer, completely digital mobile outfits that
were focused on a completely new banking experience. A lot of the neobanking activity
was being driven by open banking, a concept that allowed banks to securely and in real
time share customer data with a third-party developer and “bolt” that developer’s
capabilities onto their own. The implication was that it made it easier for customers to
manage different services across different providers, but this also made it easier to
switch providers. Challenger banks could be established firms or brand-new banks with
licenses that sought to compete with larger institutions and weren’t burdened by legacy
systems and cumbersome organizational structures such as major bank operations.
Cyber security however was a substantial concern for purely digital players because all
transactions and activities were conducted online. This risk was lower in traditional
banks such as TD because they also offered in-person and physical evidence of
transactions.
Most challenger banks focused on niche products rather than the entire retail
banking value chain which meant they also were less hampered by regulatory
requirements and barriers. Customers could open a checking account or borrow
money, but they had to go elsewhere for services such as credit cards or mortgages.
They focused on the relatively small segment of customers that were comfortable
executing all of their banking activities digitally. Most challenger and neobanks were in
the United Kingdom, however, they were popping up worldwide. Some legacy firms
such as JPMorgan were launching digital banks of their own, targeting younger
customers and areas of the U.S. with a shortage of brick-and-mortar banks.
CUSTOMER INFORMATION
Banking customers ranged from children to retired seniors and across all income
classes and investment needs and knowledge. They ranged in their preferences for faceto-face interactions versus comfort and preference for digital interfaces. The banking
relationship usually began with the creation of a savings account with a small amount
of money, often set up by parents. It evolved as the customer moved through various
life stages and financial circumstances and financial activities changed.
Younger customers, such as students, were just starting out on their independent
lives and did not have large savings accounts or the need for many financial products,
such as a mortgage. Viewed as the next large wave of banking customers, Millennials
(those born between 1981-1996) and Generation Z (born 1997-2012) consumers were
most willing to shop around to acquire financial products and to try digital innovation
4
Case Research Journal •Volume 41• Issue 1• Winter 2021
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
from non-traditional providers. A 2015 study showed that one in five Millennials had
switched their bank in the past year6.
Older generations who were more established financially offered greater revenue
opportunities for the banks. With stable incomes, savings and investments, and
mortgages, middle-aged and older Canadians were able to use many more retail banking
products. These consumers were much less open to switching services once established
with a provider; only three percent of those 55 years and older switched primary banks
each year6.
Increasing technological adoption, in particular banking via smartphone, was one
reason banking was shifting to digital. According to the Canadian Bankers
Association7, 56 percent of Canadians had used online banking in 2019, with 76 percent
using online and digital banking to conduct most of their banking. Adoption of digital
banking was highest among Millennials and Generation Z but it was a trend that
spanned all generations. Furthermore, Millennials were three times more likely to rely
on mobile banking compared to Baby Boomers (born 1946-1964), and 36 percent of
Millennials identified mobile apps as their leading banking method compared to 23
percent across all other demographic groups. Regardless of age and life stage,
customers were increasingly expecting personalized, convenient services and were
willing to switch banks to obtain it. (See Exhibit 5 for additional consumer
information).
Wealthsimple and Questrade were examples of two new online investment
management services focused on making investing easier by providing low- and nocommission stock trading and managed portfolios at a fraction of the cost of banks’
mutual funds. Robo-advice was gaining traction among many consumers, and
particularly among Millennials, which was why TD was developing and testing roboadvisor solutions.
Quick and easy access to and assistance with buying a car or home was also a top
consumer concern; however, fintechs had not yet meaningfully addressed this space in
Canada. The Canadian federal government mandated that banks put borrowers
through a rigorous financial stress test to be eligible for a mortgage. Fintech lenders
typically entered the space by focusing on subprime loans8, since Canadian banks
typically stayed away from these borrowers.
At the same time, persuading customers to switch from their banks to a new fintech
product for daily activities was not easy. It required persuading them to change
ingrained, habitual behaviours. The online services banks already provided such as
automatic bill payments tied people to their existing banks.
Importantly, protection of their financial assets was the valued most by all
demographics. Hogarth often reminded the Innovation Council that trust and
reputation were still very important factors in influencing who customers used for
financial services and would continue to be important even in the digital age. See
Exhibit 5 for consumer interests.
The 2016 CGI9 research report showed, trust was a significant factor driving
consumer preference for their current institution rather than new, digital financial
service providers.
Twenty-four percent of consumers still preferred to use the branch and 86 percent
of consumers including Millennials reported they would use their branches at some
point in the future, attributable at least in part to the fact that speaking to a person was
more trusted and was perceived to provide greater value than other channels10.
TD – Preparing for the Future of Banking
5
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
TORONTO-DOMINION BANK GROUP
TD was founded in 1852 and headquartered in Toronto. TD was divided into three
areas: Canadian retail, U.S. retail and Wholesale. It served over 25 million customers
worldwide. In 2018 it had over 2400 retail locations and over 5100 ATMs in North
America. TD’s market share in Canada was roughly 21 percent and it was ranked
number one or two in market share for most retail products. It had top three
investment dealer status in Canada and had roughly 38,800 employees in 2018. TD also
offered a full range of financial products and services to over nine million customers
in the United States. (See Exhibit 6 for details on TD’s operations).
The third quarter results of 2018 showed that Canadian retail contributed roughly
60 percent of earnings. U.S. retail contributed 26 percent. Of the Canadian operations,
roughly half of its total revenue was generated by personal banking, 13 percent by
business banking, 18 percent wealth management and another 18 percent insurance.
See Exhibit 7 for more details from TD’s 2017 annual report.
TD had a wide range of retail customers and functions. At one end of the spectrum
were governments and large corporations, at the other were young children opening
their first bank account. In between there were high-net-worth individuals and
institutions seeking wealth management services and small businesses who had varying
needs.
TD’s brand promise focused on enriching the lives of customers and making them
more confident in their financial futures and financial decisions. TD espoused to be
more than just a place to go for savings, payments and loans; it wanted to help
customers achieve life goals that had financial implications, and help their customers
make their financial and everyday lives better. The pillars of its brand promise were: (a)
personal human experiences, (b) proactive advice and solutions, and (c) convenient,
simple and timely interactions. Hogarth was proud that TD was viewed as an industry
leader in customer service excellence.
DIGITAL ACTIVITIES
TD had over 12 million digital customers. It had a long history of being willing to push
boundaries and be innovative to deliver customers digitally-enabled experiences. (See
Exhibit 8 for an overview of digital strategy in 2018).
In 1996, it established WebBroker, the first Internet brokerage service in Canada.
Self-directed, online trading was also pioneered in the U.S. in the 1990s through TD
Ameritrade. The continued improvement in online trading experience for self-directed
investors made Ameritrade a leader in a booming industry. In 2011, the TD app was
launched, allowing users to perform all mainstream banking activities such as viewing
accounts and paying for bills on their mobile phones. It was named the number one
Canadian mobile banking app by Silicon Valley’s App Annie.
In 2015, TD formed an exclusive partnership with Flybits to build TD for Me into
its TD app. This acted as a digital concierge and provided special offers and discounts
at points of interest based on user interests and location. Similarly, TD formed an
exclusive partnership with Moven to create TD MySpend, a companion to the TD app.
TD MySpend tracked and categorized spending, compared it with the user’s past
spending patterns and savings goals. It then notified users so that they could make
informed spending decisions and improve spending habits in real time. One quarter of
users were between the ages of 18 to 25 while 30 percent were between 25 and 35, and
TD’s research had shown that users of this app spent 8 percent less than those that did
6
Case Research Journal •Volume 41• Issue 1• Winter 2021
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
not. In 2017, TD introduced voice banking "skills" on Alexa (a Wi-Fi-based device that
used voice commands to execute a wide variety of tasks). It was the first financial
institution in Canada to offer Facebook Messenger and Twitter chatbots to give
customers instant help on select general inquiries such as how to report a lost or stolen
card. TD also formed an agreement with Kasisto, enabling customers to get instant
answers about specific spending-related questions such as how much they spent on a
recent trip, what their largest transaction was last week, or what they spent on
categories like coffee last month.
In 2018, TD acquired Layer 6, a leader in the use of machine learning, in order to
enhance its capabilities in the delivery of responsive, personalized and insight-driven
customer experiences. TD, like other banks, had also begun re-organizing internally
around end-to-end customer journeys rather than product lines. Recognizing that
homebuying made over 56 percent of Canadians anxious, TD collaborated with Flybits
to create the Homeowers’ Journey. In 2018 it added a mortgage concierge to its TD
app. Customers could calculate how much they could afford by inputting their financial
information and then search active real estate listings that matched their budget and
desired neighbourhood. They could also receive digital mortgage pre-approval and
hold the rate for 120 days. Using geolocation technology, customers could quickly and
easily connect with local mortgage specialists to receive advice as well as help with the
home-buying process.
PREPARING FOR THE FUTURE OF BANKING
Henderson invested a great deal in updating the bank’s infrastructure and acquiring
technology talent. As Henderson said, “To fuel our innovation, TD is in search of
diverse skills and perspectives from a wide range of fields, including cyber.” Between
2014 to 2018 TD modernized its architecture, invested in application programming
interfaces11 (API), and externalized those APIs so that outside organizations could
develop programs and services that connected with TD technology. It was looking at
proof of concepts in everything from virtual and augmented reality to blockchain,
predictive technologies, and the Internet of things. Hogarth was hired in 2017 in large
part because he had helped create the Australian Commonwealth Bank’s industryleading digital capabilities. His mandate at TD was to innovate TD’s digital activities
so it could be a leader in the future of banking.
Rather than viewing fintechs as a threat, Hogarth viewed them as opportunities for
mutually beneficial collaborations. Hogarth was often heard making statements such
as, “Partnering with fintechs enables us to harness their creativity and implement
innovations faster while the fintechs benefit from our large customer base and brand
reputation. It should be a win-win.” In May 2018, TD took part in a reverse pitch event
at the Canadian Fintech 2.0 Summit. This event featured financial institution executives
pitching fintechs on the merits of working with banks. An important component was
the patents for start-ups program where TD provided the start-ups with the resources
to navigate the patent filing process so that start-ups retained control over their
innovations.
The challenge was that innovation cycles were becoming shorter, meaning banks
now had to respond quickly with tools that were changing quickly and outside of their
core capabilities. Hogarth recognized that, in addition to choosing what business lines
and customers to prioritize, he needed an execution strategy that could be deployed
for this and future actions.
TD – Preparing for the Future of Banking
7
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
He recognized that while internal development ensured control, secrecy and good
integration, the trial and error approach that was a norm in technology companies was
an uncomfortable factor for banks; they could not risk errors with financial
transactions that could diminish customer trust and create accounting errors. Although
banks were a reliable and mature employer, technology was a supporting function
rather than the identity of the organization. They were not the first option that came
to mind for technology talent. Moreover, in-house IT projects at many financial firms
were notorious for cost and time overruns. McKinsey Consulting estimated that “large
IT projects run 45 percent over budget and 7 percent over time, while delivering 56
percent less value than predicted.”12
The other option was forming partnerships or acquisitions. Hogarth recognized
that the rapid growth of the fintech ecosystem that was creating challenges also offered
a wide range of small companies with which the bank could partner or could acquire
for innovative solutions and quick access to new capabilities. TD had the financial
capacity to pursue acquisitions and had successfully done so, but he recognized that
this was not a sustainable strategy for innovation, both due to its cost and the need to
manage new and unfamiliar technology activities and organizations. Partnerships with
technology giants were also an option but this was a double-edged sword: the new
ventures and giants could provide critical infrastructure and differentiating
technologies, but the bank could not become so dependent on them that they could
lose control in the long-run.
Hogarth was actively involved with TD’s fintech outreach and partnership efforts,
and he always made sure to set up online news alerts for firms that he was particularly
interested in. He had his eye on a couple of promising companies and technologies.
He wondered if it was time to take a closer look at some of them as part of his
recommendation.
Aislelabs was a Toronto-based company that used location tracking to provide
marketing services and analytics for brick and mortar retailers. Typically, the intended
use was for retailers to push coupons and advertisements to consumers’ phones as they
walked by their store in a mall. Hogarth envisioned TD using this technology in a way
that instead benefited the consumer. If someone set a budget for clothing in the TD
MySpend app and they had already exceeded it for the month, then TD could use this
technology to push a notification reminding them if they spent too long in a Banana
Republic store. According to a 2018 report from consulting firm Oliver Wyman, nontraditional banking needs, such as helping consumers with smart spending, were
features that were wanted by consumers and created customer loyalty and lock-in
through habitual use but were under-delivered by banks13.
Revolut was a British fintech that specialized in low-cost currency exchange and
transfers, which made it popular in the multi-currency EU region. The firm was looking
to expand to additional countries in the coming years, including Canada. Canadians
had Interac E-transfers as a way of sending funds between Canadian bank accounts
for low or no cost, depending on the bank; however, foreign currencies or accounts
were not compatible. More than half of Asian, Black, and South American residents of
Canada were first-generation immigrants, with the largest groups coming from China,
India, Philippines, and Mexico14. Among Canadians born in Official Development
Assistance countries (a Government of Canada designation for most low-to-middle
income countries), 37 percent of these immigrants sent money back to their home
country every year, at a transfer fee that ranged from two to 20 percent of the amount
sent15. Low-cost currency conversions and transfers could be an attractive feature to
offer to Canada’s growing immigrant population.
8
Case Research Journal •Volume 41• Issue 1• Winter 2021
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
In the same immigrant-focused vein, Nova Credit was an American company that
specialized in transferring credit history from foreign countries to the U.S. when
someone moved. Accessing credit with no domestic history was a challenge, and Nova
Credit would allow immigrants with no history in the U.S. to access credit cards and
loans for which they would not normally be qualified. TD could become Nova Credit’s
first non-American partner and allow new immigrants to qualify for TD credit cards,
mortgages, and loans. Canada welcomed roughly 275,000 new immigrants each year.
By using foreign credit scores to approve reputable borrowers, TD could build a multiproduct relationship with new immigrants from the moment they entered Canada.
Google Pay stored credit cards from participating banks. Google Pay could be used
to pay for things online and in stores through contactless payment on consumers’
phones. Many Canadian banks already allowed consumers to add their cards to the
platform and some experts believed that disruption was already significantly in progress
in that activity. TD already allowed customers to add cards to their Apple Wallet.
Hogarth wondered if it made sense to allow it on Google Pay as well or if it should
develop its own digital wallet to avoid ceding even more power to outside organizations
that might diminish TD’s power to compete in the future. In addition to control,
bringing TD support to third-party wallets didn’t come without financial costs. Apple
Pay charged TD about 50 cents per credit card on the platform each year and 0.15
percent per transaction processed; Google Pay likely would have similar costs16.
DIGITAL STRATEGY PROPOSAL
Stepping off the elevator and walking toward his car, Hogarth mulled over the remarks
Innovation Council executives that were central to the issue.
Wendy Arnott, VP Customer Experience & Innovation, reinforced the fact that
customer expectations were increasing, "Customers continue to express that they want
to bank with us through their channel of choice. They are increasingly comparing their
experiences with us to those that they're receiving from all companies they do business
with, not just banks."
The Innovation Council all agreed that as customers’ lives became increasingly
digital, exploring technologies was critical if TD wanted to shape the future of banking.
Hogarth thought, “This is about bringing the bank to fintech. We must embrace
technology and find pragmatic solutions, and it won't be replicating what we've done
in the branches and moving it to the screen. It’s about evolving the nature of the
relationship with the customer.” Henderson’s statement rang in Hogarth’s ears, “We
have the financial resources to invest whatever is needed to address this issue, but the
long-term returns have to make sense.”
He created a list of questions in his mind:
1. What activity should we prioritize to enhance and protect from fintech
disruption, payments, consumer finance/lending or wealth
management?
2. What customers should we pursue first with our solutions? Should we
pursue the Gen Z and Millennials that embrace technology, or should
we focus on older generations that generate more of our revenues?
As he reviewed these thoughts, he realized he was standing on the passenger side
of his car. It had been four years since he had moved to Canada, but from time to time
his Australian roots still showed.
TD – Preparing for the Future of Banking
9
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
Exhibit 1 – Canadian Commercial Banking Overview
Breakdown of market share for major banks in Canada
Major players
(Market share)
Royal Bank of Canada
24.1%
TD
Scotiabank
Canadian Imperial Bank of Commerce
Bank of Montreal
Other
21.6%
15.3%
14.9%
12.4%
11.7%
Annual industry growth
Businesses
4.4% (2017-2022)
87
Segmentation of Canadian banking clients and the products provided to these clients
Product and services
segmentation (2017)
Business
loans, 12%
Other, 57%
Mortgage
loans, 15%
Consumer
loans, 15%
Market segmentation (2017)
Branch
banking
customers,
10%
Other personal
clients, 3%
Sales,
Online
banking
customers,
41%
ATM
banking
users, 13%
Mobile
banking
customers,
14%
Corporate
customers,
20%
Source: Prepared with data from Ismailanji, M. (2017, September). Commercial banking in
Canada. Report 52211CA. Retrieved from IBISWorld database
10
Case Research Journal •Volume 41• Issue 1• Winter 2021
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
Exhibit 2 – The Impact of Digital Operations on Banking Revenues
Impact from digital changes, % of net profit for retail bank
% of retail business profit
40
30
30
20
10
10
5
0
-6
-10
-20
-13
Innovative new Increased revenue
from innovative
offers by
offers and
competitors
business models
-16
Margin
compression
Increased
Increased revenue Lower operational
operational risk
costs from
from new products
automation,
and cross-selling
digitization
Source: Prepared with data from Broeders, H., & Khanna, S. (2015). Strategic choices
for banks in the digital age. Retrieved from
https://www.mckinsey.com/industries/financial-services/our-insights/strategicchoices-for-banks-in-the-digital-age
TD – Preparing for the Future of Banking
11
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
Exhibit 3 – Digital Effects on Performance
Direction and scale of impact of main threats and opportunities for banks
Full
disintermediation
Service area
Consumer
disintermediation
Significantly
cheaper
operations
New markets
Net profit impact
Consumer finance
Mortgages
SME lending
Retail & SME payments
Chequing account deposits &
personal financial management
Wealth management
Insurance
Legend:
Very large negative impact
Large negative impact
Modest negative impact
Slight negative impact
Neutral
Slight improvement
Source: Dietz, M., Harle, P., Khanna, S. and Mazingo, C. (2015). The fight for the customer.
McKinsey global banking annual review 2015. McKinsey. Retrieved from www.mckinsey.com
12
Case Research Journal •Volume 41• Issue 1• Winter 2021
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
Exhibit 4 – Banking Revenue Activities and Disruptive Threats
Disruptive threat to various financial services areas
Ranking of banking activities and how attractive they are to and how well they fit with the capabilities
of digital giants
Activity
Attractiveness based on
size of revenue pool,
regulations, capital
intensity
Consumer lending
Mortgages
Consumer wealth
management
Consumer & small
business payments
3
4
2
Fit with capabilities
based on customer
access, brand power,
scale & network effects,
data advantage
4
3
2
1
1
1= most attractive/best aligned; 4=least
Source: Kumar, M., Saumya, S., Berz, K., Le Boulay, G., Tang, T., Tripathi, S., Walsh,
I., Xavier, A., & Robin. M. (2019). Banks brace for a new wave of digital disruption.
Boston Consulting Group. Retrieved from https://www.bcg.com/enca/publications/2019/banks-brace-new-wave-digital-disruption.aspx
Estimated impact in fintech disruption on five retail banking businesses by 2025
Area
Consumer finance
Payments
SME lending
Wealth management
Mortgages
Profit change (%)
-60
-35
-35
-30
-20
Revenue change (%)
-40
-30
-15
-15
-10
Source: Created with data from Dietz, M., Harle, P., Khanna, S. and Mazingo, C.
(2015). The fight for the customer. McKinsey global banking annual review 2015.
McKinsey. Retrieved from www.mckinsey.com
TD – Preparing for the Future of Banking
13
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
Exhibit 5 – Consumer Insights
Response to consumer survey on what services would change their loyalty to their primary bank.
Locate discounts
Simplify home buying
Provide more personal service
Provide real-time, proactive actionable
advice
Help to proactively pay & manage bills
(n=4013)
45%
43%
40%
39%
39%
Source: Created with data from Edmondson, D., Sadowski, S., & Vogtle, J. (2016). 2016 North
America Consumer Digital Banking Survey. Retrieved from Accenture Consulting:
https://www.accenture.com/t20160609T222453__w__/us-en/_acnmedia/PDF-22/Accenture2016-North-America-Consumer-Digital-Banking-Survey.pdf
What global financial services consumers value the most
90%
80%
Protection valued most by all demographics
70%
60%
50%
40%
30%
20%
10%
0%
Valued most by affluent
consumers over 40 years old
Source: Created with data from CGI (2016). FinTech disruption in financial services. A consumer perspective.
Retrieved from https://www.cgi.com
14
Case Research Journal •Volume 41• Issue 1• Winter 2021
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
Exhibit 6 – TD Bank Group Overview
Business
description
Canadian Retail
Personal banking, credit
cards & auto finance
Small
business
&
commercial banking
Direct investing, advicebased wealth businesses
and asset management
Property, casualty, life and
health insurance
Operations & results
Earnings
$1,852
(CAD$ MM
Q3, 2018)
Customers
Over 15 million
Employees
Approx. 38,500
Branches/
1,154 branches;
ATMs
ATMs
U.S. Retail
Wholesale
Personal banking, credit Research, investment
cards & auto finance
banking and capital
Small
business
& market services
commercial banking
Global
transaction
Corporate & specialty banking
banking
Presence in key global
Wealth private client financial
centres,
services
including New York,
Strategic relationship with London, Singapore
TD Ameritrade
$1,143
$223
Over 9 million
Approx. 26,000
3,172 1, 244 stores; 2,399 ATMs
Source: Created from data provided by TD
TD – Preparing for the Future of Banking
15
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
Exhibit 7 – Relevant Excerpts and Financials from TD’s 2017 Annual Report
Canadian Retail segment business strategy
The strategy for Canadian Retail is to:
• Consistently deliver legendary personal connected customer experiences
across all channels and provide trusted advice to help our customers feel
confident about their financial future.
• Deepen customer relationships by… growing in underrepresented products
and markets.
• Execute with speed and impact, taking only those risks we can understand and
manage.
• Innovate with purpose for our customers and colleagues, simplifying to make
it easier to get things done.
• Be recognized as an extraordinary place to work where diversity and
inclusiveness are valued.
• Contribute to the well-being of our communities.
U.S. Retail segment business strategy
The strategy for U.S. Retail is to:
• Deliver legendary omni-channel service and convenience.
• Grow and deepen customer relationships.
• Leverage our differentiated brand as the “human” bank.
• Deliver productivity initiatives that enhance both customer and employee
experience.
• Build upon our unique employee culture.
• Maintain our conservative risk appetite.
• Actively support the communities where we operate.
16
Case Research Journal •Volume 41• Issue 1• Winter 2021
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
Exhibit 7 – Relevant Excerpts and Financials from TD’s 2017 Annual Report
(Cont’d)
Corporate income statement
Corporate balance sheet
TD – Preparing for the Future of Banking
17
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
Exhibit 7 – Relevant Excerpts and Financials from TD’s 2017 Annual Report (Cont’d)
Canadian retail banking revenue breakdown
U.S. retail banking revenue breakdown
Source: TD. (2018). 2017 Annual Report. Retrieved from
https://www.td.com/document/PDF/ar2017/ar2017-Complete-Report.pdf
Exhibit 8 – Overview TD digital activities
Included with permission from TD. Source: TD Bank Group. (2018). Investor Presentation - Q3
2018. Retrieved from https://www.td.com/document/PDF/investor/2018/2018Q3_TD_Investor_Presentation_F_EN.pdf
18
Case Research Journal •Volume 41• Issue 1• Winter 2021
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
NOTES
Ismailanji, M. (2017, September). Commercial banking in Canada. Report 52211CA.
Retrieved from IBISWorld database.
1
Schedule I banks were permitted to accept deposits and were not subsidiaries of
foreign banks, which made them eligible to receive, hold and enforce a special
security interest. Schedule II banks were subsidiaries of foreign banks. Both Schedule
I and II banks were allowed to accept deposits. Schedule III banks were often foreign
banks permitted to operate in Canada but limited in the range of banking services
they could offer. Examples of Schedule III banks included Capital One and Bank of
America.
2
Statistics Canada (2020). Table 22-10-0115-01 Smartphone use and smartphone habits by
gender and age group. Retrieved from https://doi.org/10.25318/2210011501-eng
3
Dietz, M., Harle, P., Khanna, S. and Mazingo, C. (2015). The fight for the customer.
McKinsey global banking annual review 2015. McKinsey. Retrieved from
www.mckinsey.com
4
Caplain, J. (2018). Taking on the world. KPMG. Retrieved from
https://home.kpmg.com
5
Pilcher, J. (2015, May). No Loyalty? Millennials Not Afraid to Dump Their Banks.
The Financial Brand. Retrieved from https://thefinancialbrand.com/51778/millennialbank-switching-study/
6
Canadian Bankers Association (2019). Focus: How Canadians Bank. Retrieved from
https://cba.ca/technology-and-banking
7
TransUnion. (n.d.) https://www.newswire.ca/news-releases/growth-in-canadianfintechs-having-impact-on-canada-s-banking-landscape-882169096.html
8
CGI (2016). FinTech Disruption in Financial Services. A Consumer Perspective.
Retrieved from https://www.cgi.com
9
Edmondson, D., Sadowski, S., & Vogtle, J. (2016). 2016 North America Consumer
Digital Banking Survey. Retrieved from Accenture Consulting:
https://www.accenture.com/t20160609T222453__w__/us-en/_acnmedia/PDF22/Accenture-2016-North-America-Consumer-Digital-Banking-Survey.pdf
10
Application programming interfaces (APIs) make it easier for developers to use
certain technologies in building applications.
11
Bloch, M., Blumberg, S., & Laartz, J. (2012, October 1). Delivering large-scale IT
projects on time, on budget, and on value. Retrieved from
https://www.mckinsey.com/business-functions/mckinsey-digital/ourinsights/delivering-large-scale-it-projects-on-time-on-budget-and-on-value
12
Oliver Wyman. (2018, February). The Customer Value Gap: Re-Calculating Route.
Retrieved from https://www.oliverwyman.com/content/dam/oliverwyman/v2/publications/2018/February/The-State-Of-The-Financial-ServicesIndustry-2018.pdf
13
Statistics Canada. (2017, October 25). Ethnic and cultural origins of Canadians: Portrait
of a rich heritage. https://www12.statcan.gc.ca/census-recensement/2016/as-sa/98200-x/2016016/98-200-x2016016-eng.cfm
14
TD – Preparing for the Future of Banking
19
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.
For the exclusive use of S. Albo, 2022.
Dimbuene, Z. T. & Turcotte, M. (2019, April 17). Study on International Money
Transfers from Canada. Statistics Canada. Retrieved from
https://www150.statcan.gc.ca/n1/pub/89-657-x/89-657-x2019007-eng.htm
15
Shecter, B. (2016, May 10). Canadian banks got slightly better deal on Apple Pay:
source. Financial Times. Retrieved from https://financialpost.com/news/fpstreet/canadian-banks-got-slightly-better-deal-on-apple-pay-source
16
20
Case Research Journal •Volume 41• Issue 1• Winter 2021
This document is authorized for use only by Sophie Albo in Comm 401 Winter 22 taught by Michel Greiche, Concordia University - Canada from Jan 2022 to Apr 2022.