Royal Bank of Canada (RBC) and WestJet are to create Ampli, a next generation loyalty platform with the aim of delivering unparalleled value to consumers through amplified earning power on a simple and convenient digital solution.
Open to all Canadians, Ampli will provide members with merchant offers, flexible rewards and exclusive bonuses. In addition, members who spend on RBC cards and fly with WestJet will receive augmented rewards.
Speaking at RBC’s Investor Day, RBC CEO Dave McKay said:
“The Canadian loyalty landscape is ready for disruption, and Ampli is a fundamental shift in the business model. We are bringing together top Canadian brands to help them reach consumers more efficiently and effectively. We will also provide consumers with opportunities to earn rewards and save money like never before.”
Neil McLaughlin, Group Head of Personal & Commercial Banking at RBC, told analysts that RBC will accelerate a reduction in its physical footprint as more Canadians adopt digital banking channels.
RBC will shrink its branch square footage by 20% in the next five years, compared to a cut in its branch network of only 40 outlets, 4% of all units, and a reduction in total branch square footage of 6% in the past three years.
Creating a digitally-enabled relationship bank to drive shareholder value was at the heart of all of the presentations.
RBC targets cost-income ratio of below 40%
RBC has set two major goals for its domestic market: add an additional 2.5 new clients by 2023 and cut its cost-income ratio to below 40% by 2021.
Other highlights of RBC’s Investor Day included:
- RBC aims to grow client acquisition at up to three times its current rate;
- RBC’s AI powered award-winning digital money management platform NOMI now has 3.4 million active users;
- RBC’s Rewards Programme now has 5 million active members and by 2019 is positioned to deliver more rewards points than its peers’ programme`s;
- The RBC branch network of 1,221 outlets remains a key channel for client acquisition with 200,000 client visits every day; the bank’s new branch formats are delivering double the client acquisition rate compared to its traditional branches;
- RBC’s active digital users grew by 8% in the past year to 6.5 million; its digital adoption rate of 49% is up 6 percentage points since 2015; digital clients have twice as many products as non-digital customers, and
- RBC’s market share of 32.8% in mutual funds is being further boosted by its digital financial adviser solution, MyAdvisor; it reported a 37% higher AUM per client for MyAdvisor clients versus traditional clients, with more than 7,000 investment advice appointments booked and C$1.2bn of AUM for clients that are engaging remotely.
RBC targets 50% of sales via digital
In 2017, digital sales accounted for 30% as a percentage of all sales, up from 24% in 2015; RBC has set a target of 50% by the end of 2021.
Bruce Ross, group head, technology & operations told analysts that “RBC would leverage the scale of its global technology investment to create market leading operational efficiency” and – that recurring theme – “the leading Digitally Enabled Relationship Bank.”
Ross said that RBC had ingested more data in the past six months than in the previous 20 years and looking ahead, said that the bank’s data lake would grow tenfold in the next two years.
RBC’s technology spend will grow to C$3.2bn in 2018, up from C$2.6bn in 2015 and C$2.9bn in 2017.
Attracting and retaining the brightest talent was another recurring theme and a direct case in point was one of the standouts of Investor Day, Foteini Agrafioti, Head of Borealis AI and CSO.
Agrafioti leads a team of more than 60 academics at Borealis AI, an RBC Institute for Research in the field of Artificial Intelligence. It performs fundamental and applied research in deep learning and reinforcement learning with applications in the financial industry and beyond.
McKay told analysts: “There is a limited amount of talent-not enough to go round. If we do not grab them, nurture them now, we will miss out.”
Dobbins takes wraps of RBC Ventures
Mike Dobbins, chief strategy & corporate development officer made a number of headline-grabbing announcements.
Said Dobbins: “Historically, banks store, lend, move and invest your money. RBC’s digitally-enabled relationship bank delivers considerably more value for clients. RBC Ventures goes beyond banking to deliver unique value for all Canadians.”
RBC Ventures has been established with the aim of engaging Canadians in new and innovative ways, in particular with the goal of engaging earlier in the customer journey with clients.
Dobbins revealed that RBC Ventures is off to a flying start with seven ventures launched and 12 new ventures under development.
Dobbins said that Ventures will bring in 5 million users and has targeted a conversion rate of at least 10% of users to become RBC clients by 2023.
Dobbins highlighted three of the seven ventures, Ownr, Drive and Finfit.
Ownr: enables aspiring entrepreneurs to launch their businesses. In addition to banking, Ownr offers business insights and tools, accounting/invoicing, business insights and tools; logo design and branding and registration and incorporation features.
Drive:-an always on comprehensive automotive solution for all Canadians with features including notification of car recalls, a car valuation tool, regular service information and a search facility to buy/sell autos as well as finance and leasing features. More than 800 auto dealers have already signed up with data available on Drive of over 500,000 cars.
Finfit: offers financial advice, free credit scoring and personalised insights; education and advice, savings goals and progress tracking and spend benchmarking.
Secular opportunity: McKay
McKay concluded:”We have a lot of big things to get done quickly. We sense a secular opportunity and we are going for it. There are significant opportunities in the US and Canada. Organic is our priority in retail and commercial banking; asset prices are expensive and we see the same opportunities as everyone else to bid.
He did not however rule out M&A activity but said: “we do not feel the need to buy growth.”