Why Canada’s changing market calls for a new retail banking playbook

As demographic, economic and competitive forces reshape Canada, retail banks must adapt to remain relevant and grow.

In brief

• Canada’s retail banking market is rapidly shifting.
• Banks need to rethink relevance, reach and loyalty.
• Personalization, workforce change and AI can help drive long-term growth.

Demographics. Economics. Politics. Any way you look at it, Canada is changing. As uneven growth, rising concentration, sustained margin pressure and other forces reshape the market, retail banks must rethink how they operate — now.

That begins by acknowledging this isn’t a trend. What we’re experiencing is a structural shift for the industry overall. Retail banks that meet this reality head on can capture more money in motion across the customer journey and thrive over the long term.

Strong banking systems balance competition with scale and profitability to win Canadian market share

Canada’s demographics are changing. As the population ages, areas like wealth transfer, home equity loans and more will become increasingly important to banking clients. And as aging outpaces immigration, customer growth will depend on productivity rather than an expanding labour force.

To better serve their customers and capture long-term loyalty, retail and consumer banks need to truly understand what their customers are facing. That understanding must connect to the broader environment in which Canadians live, work and bank.

Canada’s retail banking market is becoming increasingly competitive. An unprecedented surge in new entrants and M&A activity has shaken up the landscape over the last two years. After decades of dormancy, Canadian Schedule 1 bank M&A has surged in both volume and value. Meanwhile, Canadian credit unions are slowly consolidating over time. 

Although Canada’s retail banking system is still concentrated, competition is no longer defined by Schedule 1 banks. Growth is now influenced by nontraditional and new market entrants that offer different approaches, operating models and customer experiences:

All of this change means banks will need to think differently about their own relevance and reach to succeed and thrive in the long term.

We recommend an integrated strategy that seeks to rally the entire organization around a common purpose and then adapt individual functions to best serve that goal.

That means Canada’s retail and consumer banks should consider:

• Take a very targeted approach, innovating where the model requires differentiation.
  When you know more about your customers’ demographics, you can focus more strategically on drivers that support loyalty, encourage people to either solidify their primary relationship or switch to another institution. This work should include deciding where to lead, partner, buy and focus in the market.
  
  
• Make every interaction an opportunity to build trust, improve loyalty or drive clients to switch.
  Personalization will continue to be a core determinant of banking success for years to come. This relies on data, digital and AI. With an always-on approach and real-time insight, you can create a truly data-driven customer journey, generate meaningful leads and meet customers or potential customers exactly where they are, with the customized services they need.
  
  
• Develop a clear vision for the workforce of the future.
  As the operating model evolves, you’ll need to consider what people are doing today, what agentic AI will support tomorrow and how to manage that change at scale across the enterprise.
  
  

How we can help

We help banks understand how their industry, competition, regulation and customers are changing. Then, we develop and deploy the operating model, personalization, workforce and AI-driven tech transformation necessary to succeed over the long term.

Summary

Canada's retail banking landscape is being reshaped by demographic change, economic pressures and evolving competition. Financial institutions that align their strategies, capabilities and customer experiences with these shifts will be better positioned to strengthen relationships, respond to changing needs and achieve sustainable growth.