By Lynne Olver
Canadian Western Bank, which operates primarily in the
provinces of Alberta, British Columbia, Manitoba and
Saskatchewan, did a "soft launch" of its online bank this week,
President and Chief Executive Larry Pollock told Reuters on
Thursday.
"We're just testing the market," Pollock said, noting that
the online bank had been planned for six or eight months.
"I guess there could never be a bad time or a good time,
it's just something we're testing for now," he said.
"We don't know how much money we're going to get ... we
don't really know what to expect."
Called Canadian Direct Financial, it offers savings
accounts and guaranteed investment certificates. New customers
need a bank account at another Canadian financial institution
to get started.
"It will give us access to geographical markets that we're
not in," Pollock said. "We're in the four Western provinces
only, so by using the Internet we can access markets right
across the country."
The Edmonton, Alberta-based bank already operates online in
its direct-to-consumer home and auto insurance unit, where
Pollock said half of all auto policies are now sold online.
Various Internet banking options have sprung up in Canada
in the past decade, with insurance companies, retailers and
credit unions getting involved. Many of them lure customers
with high interest rates.
But customers can switch in and out of high-interest
savings accounts very quickly, Pollock noted, and if the
financial institution pays a high rate to customers while
investing the funds in low-yielding securities, "how do you
make money?" he asked.
"If we launched this and got C$2 (billion) or C$3 billion,
we wouldn't know what to do with it, we'd be earning a negative
spread on it as well," Pollock said.
However, the beauty of online deposit-taking is that growth
can be controlled, he added. Really good rates will attract
lots of money and low rates won't.
"It's a convenient way to supplement your liquidity if you
need to ... you can crank the rate up, get some money, turn it
down, stop it," he said. "It's sort of like turning the tap on
or off."
Canadian Western, the country's seventh-largest bank by
market value, has reported a 16 percent rise in net income in
the nine months ended July 31, but it is the country's
worst-performing bank stock in 2008.
($1=$1.06 Canadian)
(Reporting by Lynne Olver; editing by Rob Wilson)
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