A reflection on Canadian banks

When I was a younger man in the IT industry there was one thing that always stood out for me — when I worked for a Canadian company, the graphics software that was pretty much always used was the Corel suite; when I worked for larger international companies we had the industry standards that people ask for by name, like Illustrator and Photoshop. I sometimes jokingly referred to that phenomenon as “using what will do” when your paycheck comes from Toronto and “using what you want” if it comes from south of the border. Corel wasn’t the worse thing out there, but there was always a sense of “making do” about it.

I find myself in much the same position now when it comes to banking. I had to close two accounts at CIBC this morning because of horrid customer service that left me stranded cashless for a long weekend; apparently someone at Risk Management saw some suspicious activity on my account and decided to lock things down. Of course this needed to happen on a Friday afternoon before a three-day weekend, and despite my indicating my mobile number on the forms when I opened the account the RM guy was unaware of it, so I didn’t get wind of this until the next day, when, at the market to buy some food, my card stubbornly refused to work. What saved me was that I had decided not to move my business account to CIBC because I really did not feel that the commercial banking rep I talked to knew what she was doing. My instinct at that point was to walk away, and it’s very fortunate that I did. At least I was able to get a couple of hundred bucks out.

Now obviously sometimes a security lockdown has to take place. However the way it was handled is really what led me to walk into my branch and shut down my accounts earlier today. When I called telephone banking I was told I needed to call risk management, so I did, but the office was closed since it was Saturday. I called telephone banking again, but was informed that there was nothing they could do about the block. I was never told that the bank had certain branches open on the weekend, for instance. I talked to 3 different people on Saturday and no one had the presence of mind to inform me of this pretty important piece of information, even though I specifically complained about being left cashless for the weekend.

As to what activity led to the lockdown, I was given a vague description which is consistent with logging on while I was using my company’s VPN. Which would probably explain why the “intruder” just logged in and logged out. CIBC’s online offerings are pretty poor TBH. I wasn’t able to renew my car’s license plates through bill payment for instance, and when I tried to use the link to order cheques I was informed that I couldn’t do that and had to go to the branch. Perhaps I should have paid attention to what’s being said on the internet about CIBC customer service, it seems to leave a bad impression with a lot of people.

The people at the branch were very apologetic and did what they could to try and keep me as a customer, but here’s a hint to anyone in a banking process position: when a customer is left stranded (and stewing) for 3 days before the bank even deigns to inform him as to why he can’t access the ample amount of money in his account, it’s really too late. He won’t be staying. He’ll march up to the counter, close his accounts, and take the bank draft with his balance over to an institution he feels he can trust.

[Oh, and something else. If you are an East Indian person, don’t try to pretend that you’re not when you’re on the phone. You’ll never quite get rid of the “South Asia” accent, and the irony of talking with someone about risk management and identity theft issues when you’re aware that they just gave you an obviously false name is rather unsettling.]

To come back to the earlier theme, however — I spent some time considering the alternatives and found that every bank that has branches in my city is pretty much equally bad when it comes to fees and interest. Why would I bother getting a separate savings account, for example, when the best I can earn is a fraction of a percent annually and am also charged fees that would make a blackmailer feel bad? On those terms, I might as well leave my money in a checking account that earns no interest but also does not charge $5/withdrawal PLUS a monthly fee. I would actually come out ahead in that situation, unless I had $10k to leave in the account. Which I wouldn’t, I would invest it properly instead. In a nutshell, the Canadian savings account is something that’s very much pointless. Even the tax-free savings account, which are theoretically a good idea, have practically zero yield in any of the Canadian banks and at Desjardins. What’s the point of a savings account being tax-free if the best you can get in terms of revenue is $50/year? That’s capital gains and only taxed at 50%, so you’re saving yourself income tax on $25/year. Whoop-dee-doo.

ING Direct is supposed to be a different kind of bank, but as I’ve mentioned before I’m not sure they know what they’re doing on the IT side, which isn’t encouraging for an online-only bank. Ultimately because the banking choices are so limited (and, let’s face it, the banks work together to make sure that high fees and low return are not something the customer can get around) it’s a lose-lose situation for the customer. But the banks are doing great! I certainly hope so; they’re mining the customer to exhaustion at this point. Of course you always have the option of getting into self-directed investments (stocks and bond purchases), and when you start scratching the surface of online brokerages you quickly come to realize that they’re practically all owned by — you guessed it — the big banks. Which goes a long way to explain why we as Canadians pay twice as much per stock transaction as people in the USA. That’s what my experiences at Etrade and Itrade have taught me, anyway.

So in the end there really are no good options for the Canadian banking customer. None. Forget about credit unions too; their investment products have yields that I would consider “pathetic” and their fees are pretty much the same as consumer banks. Why? Because they can charge that much. What’s the customer going to do, hide his cash under the mattress? What Desjardins offers is a rebate on your mortgage payments, funded no doubt by the arbitrage between the amount they get investing customer deposits and the (significantly smaller) amount they pay customers for those deposits. That’s nice if you have a mortgage. I don’t. I suspect that most Canadians have some idea on what they want from a bank, but it’s quite impossible to get what you want. Instead, you get what’ll do, and settle for a low-yield, high-fees account because there just aren’t any ways to get around that. Then again, unlike with software, with the FDIC’s at-risk bank list growing to record levels, things aren’t much rosier States-side.

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