Recently, Scotia Bank announced that it intends to purchase ING Direct Canada from its Dutch parent company ING Groep NV, which is divesting assets to repay billions of Euros in bailout money it received from the Dutch Government during the financial crisis. The sale has upset many ING Direct clients who had moved to the online bank attracted by high interest-rate savings products and a promise to charge no fees. News reports on the ING Direct sale attracted a flood of comments from clients who are worried that Scotia Bank might lower interest rates or institute service fees.

Such fears are understandable because it is not uncommon for the big banks to jack up fees after acquiring an erstwhile competitor. For instance, Scotia Bank acquired E*Trade Canada a few years back and online trading commissions for small accounts went from $19.99 to $24.99 and the high-interest rate Cash Optimizer accounts was scrapped entirely. TD Waterhouse’s acquisition of Ameritrade Canada offers yet another example: trading commissions on US stocks went from $10 to $29.

Scotia is making the right noises about the acquisition saying that it is “committed to preserving everything that ING Direct Canada’s customers have come to love about it”. One hopes that Scotia will maintain ING Direct’s high-interest savings, RRSP and TFSA accounts, high-interest GICs, no-fee chequing account, low-cost mutual funds and keep the existing no-fee structure. Offering clients access to Scotia’s banking machines would be an icing on the cake. As long as Scotia delivers on its commitment, customers will likely not care that ING Direct is owned by a big-five bank and ING Direct by any other name will sound just as nice.

This article has 35 comments

  1. That all sounds fine if you trust Scotia to keep its word. So many times we are told one thing, and it ends up being something completely different.
    Personally I don’t trust Scotia, or any of the big banks for that matter, to keep their word.
    I have accounts with ING Direct, but will probably start looking for alternatives.

    • You answered you own question: Scotia is paying for this unit, and if they don’t keep it the same, people will vote with thier feet, and go to Ally or somthing similar!

    • @JasonR: I think Scotia will keep its commitment because in the two examples that I cited, I don’t recall any explicit commitment to keep things as is. Having said that, they may very well decide to change their mind once the acquisition goes through. If they do that, it will be time to move accounts out to competitors.

      One thing does grate me though. ING Direct is still running ads mocking the big banks. Maybe they should be cutting back now that they are going to be part of one.

      • I sincerely hope that they do. I like ING and will continue to keep my accounts there. Unfortunately I think given a bit of time Scotia will come up with some reason why fees and such are ‘needed’.

  2. I’m a bit mystified by the people who say they’ve already cancelled their accounts. It is certainly possible (maybe probable) that ING’s offerings will change eventually. If that’s the case, then by all means leave. But to make this decision now seems emotional rather than rational.

  3. Very True. I have an ING account, and have no intention of leaving unless they change things, and it would be stupid of Scotia to change things. The clients that have ING accounts, have made a choice to go to an unconventional bank, for higher interest rates, or free banking, or something that Scotia doesn’t offer – and Scotia will be paying good money for nothing if they make ING another Scotia Branch. Pete

    • I think that Scotia will keep current ING offerings; it makes no sense not to do so. It’s not as if ING clients do not have other options. PC Financial and BMO IGA offer free chequing accounts. Ally, People’s Trust etc. offer competitive high interest accounts. Discount brokers offer very good GIC rates.

  4. In taking over ING, Scotia has bought their way into the high interest savings account business. I can’t see a business case for transforming ING into a regular bank. Like Peter says, the ING customer is looking for something not offered by the big banks, e.g. high interest on deposits. The customer base is obviously concerned with value. My sense is that as compared to regular bank customers, ING clients are more likely to move if faced with changes they don’t like. To be honest, even before the Scotia deal, I had been pulling away from ING because they stopped offering the best rates. At Ally, the same money gets 1.80% vs. 1.35% at ING. In a near-zero rate environment, giving up close to half a percent is a pretty big deal.

  5. I think we should definitely care who owns ING Direct. Scotia is unlikely to tinker much in the short term, but they have a duty to their shareholders to maximize profits. In the long term, ING Direct will be run along with their other units in a way that they judge to be complementary (i.e., to maximize profit). This reduction in competition will be detrimental to customers to some degree, but it is difficult to predict how much or in what way. For now it makes little sense to close an ING Direct account. At least wait until a better option pops up or ING Direct changes for the worse.

    • I agree that less competition is not good for customers. However, the big banks seem to view the online banks as a no-frills service and not as direct competition and Scotia has an incentive to maintain current services since CIBC offers similar no-frills banking through President’s Choice and BMO through Sobey’s.

      Still, news reports yesterday indicate that Scotia (along with TD) is one of bidders for Ally Canada. It would indeed be much less competition if Scotia ends up owning both ING and Ally. So, I’m hoping TD will be the winning bidder for Ally.

  6. I go to where the best rates are. For years ING was right up there, but they are not at the top now. I have changed to Hubert Credit Union, better rates, same sort of Internet bank.
    I tried to open a joint account at Ally and just gave up/

  7. To be honest with you guys I dont care who owns ING Direct Canada, the only thing I really care about is NOT HAVING FEES.

    If scotia bank respects ing customers by no charging fees then I will stick to them, however if they charge me even a dollar I will close my accounts in 1 sec.

    Jairo.

  8. I don’t see many changes in the short term, Scotia will keep its ING offerings and rival PCF in the process.

    Most people should avoid banking fees, although I suggest those that actually do are in the minority.

    I hope another big bank picks up Ally. I put my money on RY or TD.

  9. As has been mentioned before, I really doubt there will be many changes in the beginning. There may be some changes later, but almost every company makes some changes even with existing management. I personally feel this acquisition merger and the after math will run smoothly and Scotia will be able to retain a large majority of clients and probably pick up new clients as well.

  10. I started moving away from ING some time ago just because their high interests rates are getting lower and lower. I get much better rates from Achieva for money that I want to park for a period of time. Their high interest savings rate is still 2% while ING is about 1.4% or so. The GICs are also far better. If you don’t do a lot of transactions it is much better than ING. I move money to and from my bank to Achieva with no fees, but there are some fees for certain things.

  11. To be fair to ING Direct, I don’t think one should compare bank accounts with CDIC coverage with bank accounts with credit union deposit insurance coverage.

    Having said that, ING Direct has not been top of the pack for a long time now even among institutions with CDIC coverage. In fact, 1.35% on savings accounts is just slightly higher than 1.25% that one can get with high interest savings accounts available at discount brokerages.

    Also, institutions like People’s Trust offer 3% on TFSA accounts, significantly better than the 1.4% that ING Direct offers.

  12. I expect that Scotiabank will have to introduce fees of some sort on the ING Direct accounts, if for no other reason than to discourage current Scotiabank customers from switching over to low/no-fee ING Direct accounts.

    Regarding Ally, I would assume that the US government would like to sell its stake in the company sooner than later. The company put its subprime residential mortgage unit into bankruptcy protection in May. Ally’s high interest offerings, I think, are a side effect of government ownership and access to cheap wholesale credit. If it were free of government ownership, I’m not so sure if it could continue to offer significantly higher interest rates on savings accounts and GICs than other banks.

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  14. It’s silly to think Scotia will introduce fees to ING’s no-fee chequing account, or dramatically reduce interest rates on savings accounts. Those are ING’s unique selling propositions, and won’t be going away anytime soon.

    I suspect Scotia will introduce a credit card or two (which was already in the works at ING) and more mutual funds to add to the Streetwise funds.

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  17. Why should ING Direct Canada now owned by BNS be run any differently than PC Financial which is owned by CIBC? CIBC has always been very “hands off” with PCF. BNS will likely follow suit with ING Direct Canada, other than changing it’s name.

  18. I think most depositors are missing the point. Depositors had a right to be officially informed in writing by ING Direct that they intended to sell their business to Scotia Bank. I am one of thousands of unfortunate British Expat depositors that chose to deposit money with the off shore branch of a British based Building Society (Trust Company) prior to the October 2008 crash.
    This Building Society decided to sell its offshore business along with all its assets and depositor acounts to an Icelandic bank which ultimately went bankrupt mainly as the result of lending out large sums of money with little or no collateral. The Building Society in question failed to advise many depositors of their intention to sell its business to an Icelandic bank. The Parental Guarantee that was in place to protect depositors assets trned out to be utterley worthless. So much for trusting the banking industry.

  19. I have moved some money out of ING Direct – as a warning shot, ha! But I noticed that they announced combining some offerings. That is, ING Direct customers would be able to use their online trading platform. If they offer the free ETF purchases currently available at Scotia in a TFSA, I will stick around for that.

    Though sad to see this happen. I worked on the advertising creative for ING Direct Canada and the US for a few years. Loved the company, people and their mission.

  20. Brian, Scotia is much safer than ING D that went bankrupt – ING in Europe. They had to be bailed out. This sale was a condition of the bailout terms.

  21. Scotia will play it cool for a few months. may be a year or so. Then it will find “good reasons” to explain why circumstances have forced them to change. like to adjust to Canadian realities, market conditions, even government regulations, obligation to be acting fairly and at par with the other banks. We’ll talk about that in about 18 to 24 months after te htakeover.

  22. ING DIRECT is possibly one of the best banks out there. There are various different accounts available with each having a generous interest rate. I currently have a Tax-Free Investment Savings Account (TFSA) and gain a 1.4% interest rate on my balance each month. In addition, the interest rate is compounded and tax-free. They also offer great rewards for referring friends. For example:

    Using the Orange Key that I posted above when you sign up for an ING DIRECT account with a 100$ deposit will net us both 25$ as a gift. You can also open a chequing account and deposit your cheques directly by taking a picture with your smart phone. I think this is really cool and convenient. Not to mention they offer a 100$ free sign-up. ING DIRECT is also known as Capital One in the USA, and the code if still valid under “Reference Code”.

    This is definitely a bank that everyone needs to try for themselves. You won’t be disappointed. Customer service is great each and every time that I have called them up. They refer to you by your first name as well, and make sure everything is solved.

  23. I have no history with ING Direct. I love my PC Financial. It has all the qualities you mentioned above!

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