As ING Direct becomes Tangerine, will no frills legacy survive?
Krystal Yee started banking with Tangerine when it was still called ING Direct and owned by the Dutch multinational company that brought no-fee, online-only banking to Canada.
“I wanted an option that was different from my main bank,” said, Yee, 31, who lives in Vancouver and works in marketing for an engineering firm. “I really liked how open and easy it was to use ING.”
She’s still with the upstart bank 18 months after it was sold to Scotiabank, despite fears the sale would strip away its low-cost, innovative edge and turn it into a stodgy mainstream bank with more expensive products.
So far, that hasn’t happened.
Tangerine CEO Peter Aceto says nothing in the bank’s culture or value proposition has changed since it was acquired by Canada’s third largest bank for $3.1 billion.
“Scotiabank said they understand our culture is different, our business is different and that’s what people like about it,” Aceto recalled. “(At the time) people would look at me as say, ‘Peter, you’re so naive.’
“Now, I can tell you and our customers can tell you, has anything changed other than the name? And I say, ‘No.’”
However, it has become tougher for Tangerine to stand out in a field where its mainstream rivals now offer online banking along with more aggressive pricing.
Rate comparison websites showed some competitors were offering better savings rates while others were charging lower mortgage rates than Tangerine the week of April 21. Indeed, Tangerine customers would have found a better deal on a five-year variable mortgage rate at Scotiabank. The deal is temporary and comes with some restrictions.
Keung’s website shows Tangerine’s high interest savings account rate was offering 1.30 per cent interest, slightly better than the big banks, which were all at 1.05 per cent though some require a minimum $5,000 balance. ING doesn’t require a minimum balance.
“Offering a higher rate than the big banks and no fees as well as some other advantages, such as mobile cheque deposit and a nice user interface, still keeps Tangerine in the discussion,” Keung said. “But there are certainly better options rate-wise.”
Aceto says mortgage rates can be tricky to compare because mainstream banks will sometime post special rates that are available only to certain qualified customers.
“Value is not just about rates,” Aceto adds, noting things like services and fees are part of the equation. Smålån i Norge
Some people choose ING/Tangerine simply because it’s not a big bank, Keung said, and the company’s name change and ad campaign shows it’s working hard to hang onto that image.
Long time customer Yee said the new name initially struck her as frivolous.
“After I got used to it I came to realize it does embody what they stand for,” she said. “You think of all the other bank names, they’re very serious. This one is a bit more fun and lighthearted, which is the feeling I get when I think of the bank. So it actually does work.”
She keeps an active account at President’s Choice Financial, Tangerine’s only competitor in the online-only space, because it offers unlimited cheques, something Tangerine does not. Her mortgage is with Vancity credit union and her RRSP is at TD Canada Trust.
But her business with ING had grown along with the company, which initially offered only savings accounts. Yee recently opened a THRIVE chequing account, partly because it offers better rates on overseas debit card transactions than competitors.
She also likes Tangerine’s new mobile app that lets her do all her banking from her smart phone, including depositing cheques by simply snapping a picture of them.
For Aceto, the name change is both an opportunity and a challenge, one he would have preferred to avoid.
The name change was foisted on the Canadian unit under the terms of its sale in September, 2012. ING’s parent, ING Groep NV, opted to exit the Canadian market after it was forced to sell its U.S. operations as part of a 2008 bailout by the Dutch government.
“We’re changing our name because we have to,” Aceto said. “It wouldn’t have been my preference. It takes a lot of time and energy and it’s expensive. And it’s disruptive for your customers.”
It has also contributed to Scotiabank’s profits.
Tangerine has 2 million customers and continues to gain new ones at roughly the same rate as it did before the ownership change, Aceto says.
David McVay of McVay and Assoc., a financial services market research firm, says Tangerine's share of the Canadian retail banking market has declined from 2.11 per cent to 1.87 per cent between since Oct. 2012 and this February. This is mostly due to the decision to exit the mortgage broker market after the purchase by Scotiabank.
However, Tangerine's share of deposit accounts has risen over the same time period to 3.74 per cent from 3.67 per cent, McVay wrote in an email note.
Aceto says Tangerine continues to invest in new technology aimed at putting it out in front of competitors. A long awaited credit card is scheduled to hit the market in 2015 combined with an improved smartphone app.
There is one little difference to Tangerine’s service offering. Customers can now use Scotiabank’s ATM network to access their Tangerine accounts.
For Yee, that’s kind of a minor point.
Like many younger customers, Yee does all her banking online and pays for almost all her purchases with plastic.
“I don’t really carry cash, so I just use my credit card or debit card for everything,” she says. “You get unlimited transactions. It keeps a record of everything I spend. I don’t even have to ask for receipts.”