Canadian banks will roll out new digital banking products and services in 2018 – some of which will make use of artificial intelligence (AI) capabilities – as the Big Six strive to meet shifting consumer expectations and capitalize on their investments in digital platforms.

“The banks recognize that they need to follow customers through their whole lives, and across all their products,” says Michael King, associate professor of finance with the Ivey Business School at the University of Western Ontario in London, Ont. “They’re desperately trying to get an end-to-end view of their customers and to anticipate what they need. That’s where AI and machine learning are going to help.”

The Big Six also are shifting their focus away from their traditional, transactional businesses and toward services such as financial planning and wealth management and building out their international- and commercial-banking business lines.

“You walk into a bank branch [today], and it’s not necessarily a transaction experience, but a financial advice experience,” says Robert Vokes, managing director of financial services, Canada, with Accenture LLP in Toronto. “[The focus is on] helping consumers or business owners understand how the financial system can be helpful for them to achieve their goals.”

To accomplish these initiatives, however, banks must keep a sharp eye on costs because revenue growth from the mature domestic market may be constrained this year. “With [gross domestic product] growing slowly, growing earnings as quickly [as in years past] is getting harder and harder,” King says, “so there’s increased focus on reducing costs.”

Savings realized through cost-cutting are being directed toward updating legacy information-technology systems and further investment in digital platforms. These initiatives include: launching innovation hubs modelled on the fintech startup culture; partnering with or investing in fintech firms to provide clients with mobile apps and other digital innovations; and hiring dedicated digital specialists, some of whom don’t have a traditional financial services background.

“Mixing up that gene pool of talent is very positive and very healthy,” says Diane Kazarian, national financial services leader with PricewaterhouseCoopers LLP (PwC) in Toronto, “especially when you’re trying to cater to new customer expectations in this significantly digitally enabled world.”

The banks’ investments in technology have been bearing fruit as the introduction of digital banking features continues. These technologies include mobile apps that allow customers to perform tasks such as making payments and applying for loans online. On the wealth-management front, the Big Six either have launched in-house robo-advisor investment services or are working behind the scenes on introducing one.

Other digital tools that the banks have launched recently leverage both the firms’ considerable advantage in customer data and burgeoning AI capabilities. Last year, Royal Bank of Canada (RBC) introduced NOMI Insights and NOMI Find & Save features for users of its banking app. Both features use predictive technology and client data to identify trends, unusual activity and savings opportunities for users.

“We’re in the earliest days of that [AI] journey,” says Neil Parmenter, president and CEO of the Canadian Bankers Association (CBA) in Toronto. “But if you were to play that out, the power and the potential of providing context and advice for people based on patterns, trends and their behaviours, that’s something you’re likely to see more of. I think that 2018 will be a step forward in that journey.”

At the same time, the Big Six will have to keep a keen eye out for potential risks associated with the banking industry’s digital transformation, including managing data privacy and cybersecurity.

“Banks are continually facing attacks on their websites,” King says. “We don’t necessarily hear about them because they’re unsuccessful, but [cybersecurity is] a daily preoccupation for the banks.”

Adds Jason Boggs, partner and financial services consulting leader with PwC in Toronto: “The banks’ brands are based on trust. Therefore, as the banks get the ability to do more with their customers’ data, they [must] focus on several things to maintain that trust.”

The banks hope to enjoy greater regulatory flexibility to partner with and invest in fintech firms. The Department of Finance Canada is reviewing the Bank Act, with legislation likely to be introduced in 2018 for implementation in 2019. The CBA says that current banking legislation is outdated, and the association hopes revised legislation will remove some of the restrictions that limit banks’ ability to work with fintech firms.

“What’s encouraging,” Parmenter says, “is that in [Finance Canada’s] most recent consultation paper, published in August, the focus [was] on the digital space.”

The banks also want to expand their international businesses. Last year, Bank of Nova Scotia announced a deal to acquire a majority stake in BBVA Chile from Spain-based Banco Bilbao Vizcaya Argentaria SA for US$2.2 billion, with plans to merge it into Scotiabank’s existing Chilean operations. Further, Canadian Imperial Bank of Commerce (CIBC) completed a deal to buy Chicago-based PrivateBancorp for US$5 billion last year, making CIBC the fourth of the Big Six – along with RBC, Toronto-Dominion Bank and Bank of Montreal – to have significant retail operations in the U.S.

“There’s opportunity to grab market share in the U.S.,” King says, “not only in retail banking, but also in wealth management, investment banking and capital markets.”

Adds Vokes: “For the Canadian banks to grow, they’re going to have to grow their international segments and their wealth-management segments globally.”