Future of banking: digital banking trends

The banking sector in Canada is a well-regulated industry. As one of three financial system pillars, banking is considered a critical component of Canada’s overall economic health.⁽¹⁾ As a result, relatively few major changes take place in this sector; however, one of the biggest upheavals was the introduction of online banks. Also known as digital banks, these financial firms leverage technology to improve the speed and cost of banking services. (The sector is commonly referred to as fintech — for financial technology firms.)

In almost all cases, digital banks, like Tangerine, EQ Bank and Simplii Financial, don’t own or operate physical bank branches. Instead, these online banks give customers access to banking products and services through online portals and mobile banking apps, as well as using telephone and email customer service representatives, along with live chat technology.

The concept of a digital bank is to offer customers a more convenient way to manage their finances. Digital banking trends are on the rise in Canada with new firms and new products launched every year. To assess the growth and impact of digital banking trends, here are some key online banking statistics.

Key digital banking trends and online banking statistics

• 9% of Canadians have an online-only bank account⁽²⁾
• Almost 1 in 4 Canadians (24%) plan to open an account with a digital bank⁽³⁾
• 90% of Canadians believe that new technologies have made banking a lot more convenient⁽⁴⁾
• 16% (almost 5 million Canadians) will have a digital-only account by 2026⁽⁵⁾
• 28% of people worldwide will have an online bank account by 2026⁽⁶⁾
• 78% of Canadians use online and mobile banking to perform most of their banking transactions⁽⁷⁾
• 76% of Canadians use mobile banking apps to access banking services⁽⁸⁾
• 72% of Canadians use an online bank portal to access banking services⁽⁹⁾
• 5% fewer bank branches in Canada in 2021, with 6,026 bank branches in 2017 and dropping to 5,711 bank branches in 2021⁽¹⁰⁾
• 66% of Canadians still bank in person making in-branch locations far from obsolete⁽¹¹⁾

What percentage of Canadian adults use online banking?

Digital banking trends transformed how Canadians manage their finances. According to a 2022 survey by the Canadian Bankers Association, 78% of Canadians use online and mobile app banking to carry out most of their banking transactions. In fact, a whopping 89% of people reported using online banking in the past year, with 49% of people nominating it as their most common banking method.⁽¹²⁾

While factors, such as COVID-19 pandemic restrictions, contributed to the rise in the popularity of online banking, the biggest driver for the digital banking trend has been convenience — with 90% of Canadians asserting that new technologies made banking “a lot more convenient.”

The Financial Consumer Agency of Canada published a survey in 2022 that identified a few key digital banking trends. For instance, the most common method for accessing bank accounts and banking services is through a mobile app (76%) or through a web browser (72%).⁽¹³⁾ Perhaps that’s why in 2021, 55% of Canadians who opened and set up a new bank account did so digitally — up from 38% of Canadians who opened a digital bank account in 2020.⁽¹⁴⁾

More recently, BMO’s Digital Banking Survey, launched in April 2023, revealed that 81% of Canadians use digital banking tools for all or most of their banking, while 46% expect their digital banking usage to continue to rise in the next 12 months.⁽¹⁵⁾

Rise in the popularity of digital banking

While branchless banking is not the norm for most Canadians, it is becoming increasingly popular. Approximately 9% of Canadians report banking with an online bank that has no physical branches — that is more than 2.9 million Canadians who bank entirely online.⁽¹⁶⁾

However, the digital banking trend isn’t about to take over, just yet, just over half of Canadians (56%) confess they do not know what a digital bank is and how it operates.

Digital banks and online bank account promotions

Do you have a digital-only bank account?

Women faster to embrace the digital banking trend

There appears to be a slight difference in digital banking adoption among defined genders. More Canadian women (9%) have an online bank account, compared to 7% of Canadian men. The number of men and women with online bank accounts is expected to grow in the coming years; however, it’s predicted that the gap between defined genders and their adoption of the digital banking trend is expected to remain the same, with 15% of women expected to have a digital bank account by 2026, compared to 13% of men.⁽¹⁷⁾

Turns out, Canadian women appear to differ from their counterparts in other countries. In 19 of the 30 countries surveyed, men are more likely to have a digital-only bank account.

Digital bank account usage by defined gender

Digital banking trend most popular with 25 to 34-year-olds

People between the ages of 25 and 34 lead the way for digital banking, with 13% saying they have an online bank account. Tied for second are 18 to 24-year-olds and Canadians over the age of 65, with 7% of each cohort with an online bank account.

Digital banking trend by age

Are Canadians satisfied with their online and mobile banking services?

The majority of Canadians are happy with the online and mobile banking experience their bank offers; however, there is still a clear distinction between the two digital services:

• 93% are satisfied with online banking services
• 80% are satisfied with mobile banking services⁽¹⁸⁾

Safety and security are key issues when banking online, but 86% of Canadians trust their bank to offer secure digital banking services. A further 87% trust their bank to protect their personal information.⁽¹⁹⁾

Top Mobile Banking Apps

In the J.D. Power study released in 2022, BMO ranked highest in online banking satisfaction with a score of 628. Scotiabank ranked second with a score of 614 and RBC Royal Bank came third with a score of 613.⁽²⁰⁾

Meanwhile, in the J.D. Power 2023 Canada Banking Mobile App Satisfaction Study, CIBC and TD Canada Trust were the best performers, both scoring 641. BMO finished third with a score of 638.⁽²¹⁾

34 Money Apps to Help Save Money

What is the future of banking?

It’s predicted that Canadian banks will spend $7.73 billion on tech in 2023.

Interest in online-only bank accounts is also growing. In the Finder: Consumer Sentiment Survey Q1 2023, more than 1,845 Canadians were asked about their plans to open and use banking products. Almost 1 in 4 people (24%) said they planned to open an account with an online bank.

This consumer demand is expected to help drive the growth of the digital banking industry and it’s expected that 16% of Canadians (almost 5 million people) will have an online bank account by 2026. While, this represents a massive shift in how Canadians will bank, when compared to the global adoption of online banks, Canadians fall behind. By 2026, it’s anticipated that 28% of people worldwide will have a digital bank account up from an average of just 17% in 2021.⁽²²⁾

Mexico is set to see the biggest growth in digital banking adoption, with an additional 20% of Mexican adults planning to take out an online bank account by 2026. The quantity of digital banks in Brazil and Vietnam is also set to skyrocket, with an additional 18% of people set to open a wholly digital account in each country by 2026.⁽²³⁾

The future of banking is the digital banking trend

What is the future of banking? According to a global trends survey, the digital banking trend is only going to grow over the next few years.⁽²⁴⁾

Is in-branch banking a thing of the past?

The number of bank branches in Canada fell from 6,026 in 2017 to 5,711 in 2021 — a 5% decrease in just four years.⁽²⁵⁾ But that doesn’t mean in-branch banking is no longer in demand. While not as popular as mobile and online banking, two-thirds of Canadians (665) report using in-person bank branches.⁽²⁶⁾

Mobile banking on the rise

Mobile banking is a popular option for Gen Z and millennials in Canada. Figures from the Canadian Bankers Association (CBA) reveal that 65% of Canadians used a mobile app to do their banking in 2021, an increase from 56% in 2018.⁽²⁷⁾

Convenience is a key factor driving the uptake of mobile banking, and the top five most in-demand mobile banking features in Canada are:

1. Easy-to-understand transactions — 34%
2. Debit cards on file — 32%
3. Order replacement card — 30%
4. Change PIN — 29%
5. Manage third-party data access — 27%⁽²⁸⁾

But good old-fashioned customer service is still important. Turns out customer service is still the top reason why Canadians switch banks, with 39% of mobile banking users making the switch due to poor customer service. Following closely behind, were the search for lower fees (32%), to find better online banking capabilities (29%), to access better mobile banking capabilities (25%), and because in-person branches were near to the customer (23%).⁽²⁹⁾

Data shows that while digital banking trends continue to grow in popularity and adoption, Canadians still want access to key features offered by traditional in-person banks. While digital banking can offer many perks, the desire for helpful customer service, low fees and easy branch access are still important to many Canadians.