What banking deserts mean for some of northern Ontario’s most vulnerable residents

Banks in the north are closing, and online services aren’t a solution for everyone. So what options remain for the “financially excluded”?
By H.G. Watson - Published on January 3, 2019
a rural CIBC branch
CIBC recently announced that it would be closing its only branch in Terrace Bay, a community of 1,500 people on the north shore of Lake Superior. (Google Maps)

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After leaving an abusive partner, Jane Williams, 56, had to open a new bank account, so she went to the CIBC in Atikokan. At the time, it was one of three local banking options — crucially, it wasn’t the one she’d been using before.

“I just didn't want him knowing my business,” says Williams (not her real name). She wanted to do her banking discreetly and safely.

Today, many women in Atikokan no longer have that option. The TD and CIBC bank branches closed last year; only a small RBC branch remains. If Williams wants to bank in person, she has to travel 150 kilometres west to Fort Frances — a $96 round trip by bus. Switching to RBC would mean facing a gap in direct-deposit payments, something she can’t afford. And, so far, online banking hasn’t proved feasible: Williams would prefer to have someone explain how to use the system. But in-person services are no longer available in her town.

So she relies on debit-card cashback and costly ATM withdrawals until she can get a ride to Fort Frances. “It costs, like, three bucks every transaction you make,” she says. “It adds up.”

Williams is what experts refer to as under-banked or partially financially excluded. While she has some access to the financial products she needs for daily life, she still faces barriers to inclusion. People without access to banking services often end up paying higher fees and interest because they are forced to use fringe financial services, such as payday lenders.

Canada has better overall rates of financial inclusion than many countries, but it’s unclear how many Canadians are financially excluded or under-banked. A 2013 report on postal banking from the Canadian Centre for Policy Alternatives notes that the number could be as high as 15 per cent of the population.

Over the past four decades, Ken Hartviksen, a business professor at Lakehead University, has observed the decline of brick-and-mortar bank locations across northern Ontario. He estimates that between 10 and 12 banks have closed in just the past five years. “It doesn't sound like much if you’re in a metropolitan area,” he says. “But you have got to realize the distances that are involved here.” For example, CIBC recently announced that it would be closing its only branch in Terrace Bay, a community of 1,500 people on the north shore of Lake Superior: starting in August, customers will have to drive more than 200 kilometres to reach the nearest CIBC location.

The disappearance of financial institutions can affect the community as whole, says Hartviksen: banks are “part of the fabric of a smaller town,” and bank managers often rival local politicians in terms of prominence. But it’s some of the north’s most vulnerable groups — women and seniors — that will feel the most severe impacts.

When a woman is leaving an abusive partner, explains Donna Kroocmo, executive director of the Rainy River District Women’s Shelter of Hope, one of the first things lawyers advise her to do is set up a separate bank account. “Because if she's seen at the local bank that he deals at, he's going to wonder, ‘What were you doing there today?’ Questions get asked that she doesn't want to have to answer,” she says. “So it's always safer if she sets up her own account at a different branch.”

Many banks are now pushing web banking as an alternative to in-person services, and many consumers are now managing their financial affairs online. According to data collected by the Canadian Bankers Association in 2016, more than two-thirds of Canadians polled took care of their banking primarily online or on their phones. “Rapidly changing customer preferences and emerging technologies have propelled banks to invest heavily in new ways of providing secure, convenient, around-the-clock service to clients, who are consistently choosing these methods of conducting their banking,” CBA spokesperson Aaron Boles told TVO.org in an email.

But Kroocmo says that most of her clients can’t afford personal computers or smartphones. “So if they need to or want to do online banking, they have to go to the public library. That's not safe. That's not confidential.” Those who do own smartphones, she notes, may avoid using them for fear of being surveilled by the partner they are trying to leave.

Older Ontarians may also find it difficult to make the transition to online banking, Hartviksen says — and the region’s population is aging. (CBC reported in 2017 that, in northeastern Ontario, seniors outnumbered children years before the national statistics reflected the same trend.) “It's more than just simply personal preference,” he adds. “A big part of their social network is the routine of getting fixed up, going out and going to the doctor, the dentist, and then passing through the bank.” Financial-literacy initiatives, he notes, are usually aimed at students — and that leaves older populations vulnerable.

Terrace Bay mayor Jody Davis says that “a lot of seniors — not all of them, but a good majority of them — aren't familiar with internet banking and the use of computers.” He believes that his constituents would benefit from educational resources focused on online banking.

A CIBC spokesperson told TVO.org that most of its clients already use web banking and that its staff will work to inform its other customers about their digital options. “We remain committed to meeting the needs of our clients across Northern Ontario and will continue to operate one of the largest branch networks in the region moving forward,” said Trish Tervit, director of public affairs at CIBC, in an emailed statement.

A new federal bill, Bill C-86, would require banks to notify municipalities in writing six months in advance if they plan to close branches. But as Danny Whalen, the president of the Federation of Northern Ontario Municipalities, said in an email to TVO.org, that won’t stop the banks from leaving town.

Some communities have experimented with other banking models, such as credit unions — financial co-ops controlled by members. “We have strong northern credit unions, and we as municipal leaders should promote them and encourage our residents to consider them as a viable banking option,” said Whalen.

Postal banking — which sees local Canada Post outlets provide banking services — has been championed as a solution to financial exclusion by the Canadian Union of Postal Workers, among others.                

But Hartviksen is skeptical that either could represent a viable alternative to the Big Five banks, which dominate Canada’s financial landscape. He says that credit unions, for example, tend to lack sufficient capital to invest in the kind of advanced online-banking systems that many customers have come to expect. “I don't see any fix for small-town Canada,” he says, adding that as brick-and-mortar retail locations close, people will simply be forced to adapt.

That’s not to say that online banking couldn’t help improve access for some vulnerable communities. But, says Jerry Buckland, a professor at Winnipeg’s Menno Simons University who studies access to banking, we’d first have to determine how best to serve northern and Indigenous communities — and the research isn’t there yet. “There is a need for more research because it's hugely important, and there are models out there that maybe aren't as reliant on the bricks and mortar,” says Buckland.

Williams wants to learn more about online banking services. It would make her life easier if she understood, for example, how to use e-transfers. “I’d prefer to go to the bank, and they could tell me how I get set up with that there,” she says. “It's a lot easier in person than it is through the phone.” So she’ll have to wait until she can get a ride to Fort Frances.

Ontario Hubs are made possible by the Barry and Laurie Green Family Charitable Trust & Goldie Feldman.

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