The financial services industry is facing numerous threats, as startups and established players like Apple and Google are gunning to steal market share by providing easier, more convenient banking and payment options. It’s a challenge that Canadian Imperial Bank of Commerce CEO Victor Dodig is tackling head-on. His strategy is to work with some of these new entrants to deliver better services for clients, while strengthening customer relationships. Innovation alone isn’t enough to win, Dodig argues. Banks also need to be financially sound and strongly tied to their client base to prosper in this new era.
Since becoming CEO in 2014, you’ve talked about doing a complete reinvention of the bank. What do you mean, more specifically?
I’d say just reinventing the culture of how we’re trying to run our bank. I try to run it as a very flat institution. I try to be accessible so people feel like there’s a direct line to what’s going on as opposed to feeling like there’s this shroud of secrecy. It’s about flattening the structure and humanizing the bank. If we’re going to attract great people who want to work in a fun place, we have to do some of this.
How is CIBC a fun place to be?
Well, I was just in the lobby down there, and someone said they wanted to do a selfie with me. So I said let’s do it.
I hear you take a lot of selfies.
Much to the embarrassment of my 15-year-old daughter. But our Apple Watch app is a good example of something fun. We had co-op students basically work day and night to get that out first. Obviously they worked with leaders who could deliver it professionally, but they were allowed to be creative. And releasing that creative energy, particularly in the mobile and digital space, is something employees really value.
Getting back to culture—you’ve also talked about “rejuvenating” it. Why is that necessary at CIBC?
In the post–financial crisis world, we were really focused on building really deep, strong financial foundations and making sure we had a sturdy institution. But we also recognized that banking is a people business. That’s released a great amount of pent-up energy. I’d say we’ve finished the era of strengthening our bank, and now we want to focus on our client relationships.
And you’re part of that, too. I understand you’ve resolved to answer any client complaint that reaches your desk within 24 hours. Is that right?
Yeah, and we put a process in place. You can probably envision, like, piles and piles of letters. It’s not like that; it’s just the folks who are most aggrieved. The key thing for us is not to hide and say, “I don’t need to worry about this.” If it’s an acute issue, we’ll deal with it. We also never, ever take one of our colleagues and say, “I can’t believe you did something like this.” We try to take the issue and say, “How can we make this better?” That’s really important for the culture—to ensure it’s positive.
We all know new services are disrupting the banking industry, but bank CEOs have a tendency to downplay the threat. At the same time, they’re eager to play up their own digital initiatives. So can you help me square those two perspectives? How much do you truly have to worry about?
There’s always been some sort of innovation in banking, so I think that’s been something we’ve dealt with all the time. What’s changed now is these new technologies entering the fore are going to reshape the way people interact with their existing bank or people are going to choose a completely different banking alternative. And there’s a very real risk of being disrupted, so I don’t think this is something we should just kind of shove to the side. These new entrants are trying to create banking that’s easy, banking that’s convenient, banking that’s on a client’s terms, banking that’s frictionless and therefore really, really low cost. And we’re trying to do all of that within the existing footprint we offer. But the way our system’s set up today, it’s pretty technologically oriented. We’ve got a leading mobile platform, and we can run it at a relatively low cost. That puts us in good stead.
Are these new entrants competitors or potential partners?
It depends. We just launched our global money transfer service. With some providers, you have to pay a fee to send the money abroad. We’ve partnered with a company to allow our clients to send money online to 35 different countries for no fee, and we do the foreign exchange for them here. So it’s easy, it’s convenient, and it’s much more economical, particularly if the payments are small. That innovation is an example of what we’re going to be doing to make banking easier and more straightforward for our clients, and we’re working with partners to do that. We’re working on the same thing in terms of small-business lending—using data and technology to quickly get credit into the hands of growing enterprises.
What does having more partners mean for your relationship with your existing banking clients?
There’s this whole notion that the partners will drive a wedge between us and our clients. If we can continue to remain the core transaction account for our clients, I don’t think they can drive a wedge. I think, if anything, the partners should strengthen the relationship clients have with us. The partner we’ve used for global money transfer is an example of that: They benefit from being associated with us, but they know that those are our clients they’re working with. I don’t think you’d necessarily get competitive advantage by trying to out-innovate everybody else. I think you do that within the confines of a stable bank that works with partners.
But there are still areas, especially on the consumer side, where cost and convenience matters more than relationships, right?
Yeah, for sure: the smaller, unsecured lines of credit and some credit card business. With the small-business segment, speed matters more than price. In the consumer segment, speed matters, but price matters as well. That’s where the peer-to-peer lenders can actually drive a wedge, but we won’t let them do that.
How are you going to stop them?
On the small-business side, we’re already looking at a partner we want to work with. On the peer-to-peer consumer-lending side, it’s always a question of priorities: What do you want to talk about first? Even in the U.S., where peer-to-peer lending has taken off, it hasn’t necessarily proven to be nirvana for those providers. They’re experiencing loan losses, and they’re seeing that their business models require some adjustment. For us, some things are better observed rather than jumped on.
Won’t your profit margins compress the more partners you work with?
There’s always a risk, sure. I look at the music industry and what’s happened to it. In the end, the quality of your content matters a lot. That’s a big part of what we do as a bank: The experience we deliver to our clients is really, really important. If we’re working with partners, they may take some of the economics, but our clients will stay with us. I actually think the digital pie might grow.
There has been a lot of fallout in the music industry, though.
But I think good content is still able to create its value. And, well, what if digital transactions grow? Because smartphones will become more prominent in terms of how people pay instead of using cash. A digital transaction generates interchange fees, right? A cash transaction doesn’t. So that will help the pie grow. Even if we have to share it, that growth will be more than enough to compensate.
CIBC is the smallest of the Big Five banks, and you’ve been fairly clear that you don’t intend to be an empire builder. Where do you want to take CIBC?
I’m not looking to build CIBC into this global, gargantuan bank, because I actually don’t think that’s the way banking works. And that’s not the way you create shareholder value. If I were to draw you a picture of what I think our bank looks like, there’s a pillar of financial strength and stability, there’s a pillar of innovation, and there’s a pillar of relationships. They all go together. And those three pillars kind of hold up what’s at the very top: We’re here to help our clients. We’re here to keep their deposits safe, ensure their investments have good returns and help their businesses prosper. We’re the bank of commerce, right?
But what about CIBC’s footprint going forward? We’re seeing some of the other banks expand.
Just think about most businesses or most of the mid-size companies we deal with—98% of their business is in North America. Traditional banking is largely a regional business. We want to stay more closely linked to our clients rather than pursuing opportunities too far abroad.
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