Canadian banks look to newcomers as key source of client growth

Canada is banking on newcomers to help keep the economy humming along, while banks themselves are eying the hundreds of thousands of people coming to the country every year as a key source of client growth.

Those efforts have been growing along with the number of newcomers, including more efforts to secure people as customers before they even arrive in Canada.

“We’re seeing it as a big focus across all categories of banks, not just the big banks,” said Abhishek Sinha, banking transformation leader at EY Canada.

“Whether you talk to the Big Five or you talk to the next tier after that, or even the credit union segment, newcomers and penetrating that market segment is super important.”

The efforts come as Canada has been welcoming record numbers of newcomers, with an aim to bring in 432,000 permanent residents this year, rising to 451,000 by 2024, while the first half of the 2010s saw the average number of newcomers sit around 260,000.

The segment, which the federal government says accounts for almost all of Canada’s labour force growth and roughly three quarters of population growth, has pushed banks to create partnerships like one recently announced between RBC and ICICI Bank, India’s largest.

“With immigration levels expected to rise to record levels, we’ve announced a collaboration agreement with ICICI Bank Canada,” said RBC chief executive Dave McKay on an analyst call in August.

Some student visa classes require students to put down cash deposits, and the program allows those to seamlessly be transferred to an RBC account in Canada. The program is starting with students but RBC wants to expand the pipeline of account transfers to a wider field.

“As part of our agreement, ICICI Bank Canada will refer all newcomer clients to RBC over time, making it easier for them to open a bank account upon arrival,” said McKay.

The program, only the second initiative in another country for RBC after it launched a program with a separate focus on China a few years back, taps into an increasingly large source of newcomers, said Amit Brahme, head of the newcomer and cultural client segment at RBC, in an interview.

“We know that the international students segment is one of the fastest growing segments within different visa classes. So we’re really excited about the fact that we are going to be tapping into a growing segment.”

Overall, the number of international students coming to Canada more than tripled in the decade leading up to 2019, reaching 638,000. The pandemic then led to a dip in numbers with 2021 drawing about 622,000.

And while many students will only be in Canada temporarily, a growing number return as potential long-term clients. Statistics Canada says about three in 10 international students become landed immigrants within 10 years of arrival.

Other banks have also been ramping up their efforts, such as Simplii Financial last year rolling out a digital identity verification program that allows clients to open accounts before they even land in the country. Some efforts to secure clients before they come to Canada, however, such as Scotiabank’s partnerships in China, go back more than a decade.

The rise of fintechs has also opened new avenues to solve old challenges for newcomers, such as using more global data and international bank partnerships to solve the challenge of credit histories, said Sinha.

“We’ve seen a few fintechs come up who are creating credit models which are based on a more holistic history of the individual than just their history in Canada, and that’s starting to get more mainstream traction.”

Efforts once people arrive in Canada also continue to evolve. Banks, such as CIBC at Toronto Pearson International, have established themselves at airports to be a first point of contact, while banks have also worked to expand and adapt their product offerings, including credit cards without a need for credit history, which is a key stumbling block for many.

At VanCity, the credit union’s efforts have included supporting financial literacy courses to help both immigrants and refugees, while it also looks to help newcomers on the business side, said Gurpreet Jhaj, vice-president of marketing.

“We support them with micro-financing. And we provide that with financing at favorable terms. And we look really beyond just credit history. We consider what their ambition, character determination and things like that.”

It also provides loans for newcomers to help them write exams to allow their foreign credentials to be recognized, a key barrier for many, and has also been working with the B.C. government to support arriving displaced Ukrainians.

Refugees, such as people fleeing the war in Ukraine, are set to make up about 77,000 of the wider permanent residency goals for this year, so it’s an important segment for banks while for those arriving a bank account is absolutely critical to getting established, said Effat Ghassemi, executive director of the Newcomer Centre of Peel.

“It’s like oxygen, they have to have a bank account.”

She said banks have helped out by bringing teams to the hotels where refugees are staying to help set them up with the accounts necessary to get government aid.

The biggest barrier really for newcomers is trust, said Ghassemi.

“Put yourself in their shoes, you know, they’re new, they came from war. They don’t trust anybody. They don’t trust government or banking.”

Banks are working to build up the trust factor in part by becoming general resources for clients. RBC has created hubs near cultural centres and on campuses where newcomers can get answers to all sorts of questions beyond banking such as getting a drivers’ licence or daycare, along with apps as general resources to get settled, as it works to differentiate itself in a tough market said Brahme at RBC.

“The space is extremely competitive, because newcomers are the source of new clients to majority of the organizations.”