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Digital banking has long been considered the ‘future of banking’. We’ve seen numerous market entrants look to bring customer-led propositions to market to bring the experience customers have come to expect from all their online services.

By Sarah Carver, Head of Digital & Trevor Belstead, CIO Wholesale Banking & Post Trade, Delta Capita

This expectation has increased with the pandemic, which effectively operated a digital-first experiment, forcing banks and customers to embrace it. Over the past year, consumers have got used to doing almost everything online.

This has led to a fundamental shift in customers’ expectations with them now expecting this level of ease on everything, including their banking. In parallel, banks have seen the potential for both the NPS improvement and reduction in cost to serve through increased self-service by investing in their digital channels.

Digital banking is not a new trend; branch usage has been in a gradual decline as banks have continued to invest in digital channels and reduce branch density. However up until now this customer shift has been a gradual process and the experience (or lack thereof) hasn’t been sufficient to make customers switch en masse to digital challenger banks as their prime account. Albeit many have dipped their toe in the water with Monzo, Starling, Revolut amongst others as a secondary account. However, this shift has sped up over the last year with 27% now having an account with a digital-only bank in the UK.

So why are people opening digital-only accounts? Convenience is, as expected, reason #1 with 26% citing this, closely followed by users wanting a ‘secondary account’ and finally ease of transferring money. However, it’s not all about functionality and servicing; 1 in 10 consumers are still drawn predominantly by the brand, citing the ‘cool cards’ as a reason to get an account. This is a more challenging one for the heritage banks to contend with given their brand values driven by trust, security, steadfastness rather than a challenger which can ooze coolness with a neon or metal card and informal website copy which connects with customers on a more personal level.

How can heritage banks respond?

• Ensure you are not held back by your legacy stack: This is the number one challenge we see with our clients. Where, in the desire to digitise and create that perfect customer experience, there’s a sidestep around their legacy technology. Without tackling this challenge, the spaghetti junction of systems can prevent the organisation from doing anything quickly or add a burden of cost which limits where the spend should be going, which is differentiating that front-end customer experience. It’s perhaps not the most glamourous part of the digital transformation for an organisation but it is a critical one.
• Validate tactical tech: At the start of the pandemic, banks had to react and adapt in a very agile and quick manner. Depending on the level of digital maturity many had to quickly spin up digital banking solutions and embed new tech to deliver to their customers. However, now it’s critical to take a step back and ensure that all tech is strategic and integrated in a way that ensures it is future-proofed. This is a particularly challenging area given in some cases there has been large investments made but now is the time to ensure that what you’ve got is not just ‘good enough’ given digital banking will only grow over the coming years.
• Really take the time to understand your USP: Partnering has become the standard in the industry with an increased appetite to partner or buy rather than build in-house. This has hugely expedited delivery and has also ensured organisations aren’t investing unnecessary budget in what is ultimately non-differentiating services. However, there is still a need to invest in research and understand your target customers. Stepping back with a critical lens is important because if you streamline your digital journey but it’s still essentially a non-differentiated vanilla offering, you’re not going to see the adoption you expect. This can be through many different guises, new product or service offerings, brand positioning such as sub-brands to target different segments and critically understanding and utilising your data to speak to your customers in a far more targeted way.
• Do you have the right business model: The evolution to digital banking is not just technology, it is organisational and business focused as well. To really achieve a digital bank, the organisation itself must become digital and agile across the board. Traditional banking models that were previously used in the branch cannot just shift as is to meet the digital ecosystem the bank needs to operate in. The organisation needs to look at its business model across the board, starting at customer servicing, product development, operations, and technical delivery.

Driven by the accelerating expansion of smartphone capabilities − alongside consumers’ increasing levels of trust − the opportunity for FinTech’s is unravelling at varying speeds across different international markets. Siri Børsum, Global VP of Finance Vertical Eco-development & Partnerships at Huawei Consumer Business Group, explores the ways in which different markets are racing to adjust to this digital revolution, and how smartphones are at its very centre.

When we look at the markets prioritising FinTech’s and their development, across the board we’re seeing waves of innovation, a surge in consumer trust, and a solution to supporting the unbanked. It’s clear that FinTech’s are changing the game, although some markets have recognised this faster than others.

Europe – record-breaking investment, but some serious catching up to do

Let’s take a look at Europe as an interesting example. Considered one of the fastest evolving continents in the FinTech sector, Europe’s capital investment reached a whopping €30 billion between 2014-2019 – Europe’s largest share of equity investment. This fed the growth of online and mobile banking startups, and now, online banking is becoming one of the most popular payment methods in Europe. Investment in this space shows no signs of curtailing, with data showing how the pandemic contributed to the acceleration of cloud services and similar solutions for the industry.

The Nordic FinTech scene, in particular, has shown immense strength. As stated in the FinTech Mundi report, some of the biggest names in financial technology came from the region. Northern Europe alone is home to 993 FinTechs, with several of its countries punching above their weight globally. The FinTech Mundi report also revealed that three Northern European countries (Lithuania, Sweden and Estonia) feature in the Global FinTech Index Ecosystem’s top ten, and all but Iceland feature in the top 50.

Yet, alongside the FinTech investment that we’re seeing in Europe, there’s the sobering realisation that we’re still very far behind. Europe’s FinTech development remains slower than other markets, with a plethora of challenges that need to be addressed. From consumers’ trust in traditional financial systems to relatively low interest rates depriving a mass-market adoption of alternative lending, lucrative investment opportunities are more complicated here − even when we consider the huge number of potential investors.

Banking and mobile technology still feels new in Europe. QR code payments, for example, saw an accelerated uptake as a result of the pandemic. But even now, they’re somewhat futuristic in this market compared to elsewhere, where a QR code payment is standard practice − and it’s been this way for a long time.

China’s flourishing FinTech sector, with smartphones at its core
So, if Europe isn’t leading the digital revolution through its investment and prioritisation of FinTech’s, who is? The answer is China. Thanks to the staggering rise of smartphones and online shopping, China’s FinTech revolution is in full swing, especially in the field of digital payments.

Historically, China has demonstrated fertile ground for a FinTech revolution – it boasts a growing and underserved SME market alongside escalating e-commerce growth. Combine this with a timely explosion in online and mobile popularity (we’re talking about 1.3 billion mobile internet users), and it’s clear why the Chinese market has spearheaded the boom.

We can trace the progression China has made back to 2016, by which stage, 40 per cent of consumers were already using new payment methods rather than traditional ones − 35 per cent of which were using FinTech’s to access products. Going back to QR codes, mobile payments in this way have been commonplace in China for a decade, while Europe’s most common payment method in 2010 was still debit and credit cards.

Now, China is leading in the digital payments and alternative lending sectors, both crucial to the progression of the FinTech industry, and it’s predicted to stay in the lead until at least 2025. Why? The country’s total digital payments transaction value is likely to hit over $4,185 billion by 2025, compared to the world total of $10,520 billion.

China ‘s FinTech success: all-inclusive technology
So, what’s the point? Arguably, the most important question when assessing the possibility of FinTech’s is: what are the benefits to the end-user? How will FinTech’s improve our lives? Technology must be used to enhance our lifestyle and drive change in the areas where we need it most.

This is something that FinTech’s are confronting head-on. As more players enter the market, more solutions are becoming available to consumers. China’s FinTech sector for example is driving innovation which is leading to better technology and enhanced consumer experiences. Because of the market’s approach to alternative lending, accounting for 86 per cent of the global share in its transaction value, China can offer smaller FinTech players the chance to compete in a flourishing industry. This, in turn, promotes competition for innovation, which drives choice for consumers.

Markets that are prioritising smaller organisations’ access to funding are also the ones to see that investment returned – China’s growth rate shows no signs of slowing, with estimations that the country will account for a global market share of 88 per cent of Alternative Lending by 2025. The demand for alternative payment solutions will only continue to grow, meaning that as more organisations launch a greater choice of services, we can drive the prospect of global Financial Health into existence. As is always needed when addressing a lack of inclusion, smaller players must disrupt the industries previously dominated by traditional systems.

Open Banking creates innovative technology to connect the dots
From Europe to China, one thing is clear: FinTech startups are driving the financial revolution. And, when looking at achieving Global Financial Health, there’s an obvious solution at our fingertips. It’s never been more important to champion the smaller FinTechs and facilitate technologies such as Open Banking. This is something we’re committed to at Huawei, partnering with FinTech providers to support their development and growth while also offering our mobile users’ access to a choice of the services that they need the most.

Open Banking is a product of the growing competition and consumer-centric model in the FinTech sector, and a bridge to connect the technologies needed to meet customer expectations. It has the potential to help banks learn about customers’ patterns of behaviour, financial health and investment plans and goals, enabling them to create better services and products.

Industry leaders are being advised to make strategic partnerships to make the most from Open Banking, identifying new capabilities from partners that can help to enable compliance and operational readiness. Through forming third-party partnerships and gaining access to new resources including data-sharing, organisations can create more competitive products, services and experiences for end-users. We believe that we’re only at the start of an Open Banking future and better global financial health, and more competition in the FinTech sector will only help to drive this journey.

Driving global financial health for all
Financial Health means all individuals, businesses and organisations around the world having access to a choice of the financial services that work best for them. It’s our vision for the finance industry, and a top priority with AppGallery.

To drive Financial Health, FinTechs and banks around the world need access to a global audience, as well as the full-spectrum support, advanced technological capabilities and commercial opportunities needed to help them grow.

After three years, AppGallery is the third-largest app marketplace globally, with over 540 million MAU, so banking and FinTech app developers can trust that they’re tapping into a truly global audience from launch.

It’s through partnerships, competition and mobile technology that we, as an industry, can achieve global financial health together, bringing better solutions to every home, business and organisation.

Siri Børsum
Global VP of Finance Vertical Eco-development & Partnerships
Huawei Consumer Business Group

By Ian Yates, CTO of treasury management FinTech Neo

Relentless phishing emails, fraudsters impersonating healthcare officials and organisations, exposed networks – the rapid pivot to home working and the resulting cybersecurity threats continue to be a headache for small businesses. Yet, while the pandemic exacerbated a number of these vulnerabilities, most have been present long before the COVID-19 era.

Setting the scene: Cybersecurity before Covid-19

Even in the years before the pandemic, SMEs were often just one click away from a cybersecurity breach, largely as a result of their often-weak technological defences. This is due to a combination of a smaller awareness of the threat as well as limited resources to put into cybersecurity. Consequently, cybercriminals and would-be fraudsters are able to take advantage relentlessly – a recent report suggests that small businesses are the target of over 40% of cyber-attacks with an average loss per attack of more than US$ 188,000.

The often-limited cybersecurity tools many SMEs use to protect their operations mean they are the “weakest link”, and criminals can use this to exploit their connections to larger companies in the supply chain.

In 2019, it was estimated that one out of five SMEs had fallen victim to a ransomware attack. Phishing attacks have also reached their highest level in three years with small organisations receiving malicious emails at a higher rate. While SMEs are juggling a number of issues and priorities, they cannot afford to cheap out on cybersecurity.

The perfect storm: Covid-19

There’s a common assumption among small business owners that their company is too small to be targeted by a cyber-attack. Unfortunately, this is not the case. The pandemic has provided cybercriminals with an unprecedented opportunity to exploit confusion, uncertainty and hastily put together security measures as the workforces hastily pivot to remote working.

A recent study from the legal firm Hayes Connor Solicitors shows that many firms are not doing enough to protect their businesses. For example, one in five UK home workers has received no training on cyber-security, and two out of three employees who printed potentially sensitive work documents at home admitted to putting the papers in their bins without shredding them first.

With hundreds of millions of people around the world forced into managing sensitive data while working remotely, 2020 has proven to be a turning point in terms of attitudes to cybersecurity. Most technology and software systems were built to be accessed primarily on-site, so their security systems are geared accordingly.

But the shift to remote working has led to workers increasingly using personal devices to ensure business continuity and many communications are now taking place outside company firewalls on novel applications. This can significantly increase cybersecurity risks for SMEs as applications for remote working are often the target of malicious actors.

In 2020, there was a 400% increase in cyber fraud in the USA alone, with statistics reflecting that small businesses – and especially the sole traders, and self-employed – were the most vulnerable and while also lacking good access to relevant security services.

It goes without saying that the pandemic has strained the finances of most businesses and increasing investment into security can be difficult for SMEs at a time when many struggle to keep their cash flowing.

How technology can help – if used strategically

There’s a number of simple things businesses can do to protect themselves by taking advantage of available technology. It is widely known that human error is the weakest link when it comes to cybersecurity, so the bigger challenge for companies is to prevent unauthorised access, hacking or fraud arising from multiple access points that now exist.

An achievable starting point is simply setting out a clear cybersecurity policy and ensuring everyone in the business is well aware of protocols and best practises. This would also involve establishing clear rules on how devices are used, how teams share documents and so on.

Tailored and controlled access can be another effective way of improving cybersecurity. By making this as granular as possible, senior managers can control the features their team members can access. If unauthorised access were to occur, it would make it easier for the security team to identify and address the source without the risk of system-wide contagion.

Any system needs to incorporate the latest security and encryption protocols, even if a business feels it is too small to be worth a cybercriminal’s time. This can include multi-channel two-factor authentication, four-eyes checks, a complete audit trail of all activity, continuous backups and much more. These protocols need to be reviewed thoroughly, tested, challenged, and updated regularly to ensure SMEs are less likely to become easy pickings.

Ian Yates
CTO
Neo

A webinar in partnership with Infosys Finacle, held on February 11, 2021, with 150+ participants.

The blurring difference between retail and wholesale banking

The digital transformation journey for corporate banks has been in some ways similar to that of retail banks. In the last 4 years, the one factor that has really helped retail banking to scale on the digital transformation journey is the emergence of FinTechs, RegTechs, and InsurTechs trying to get into the banking business. At one particular time, they were gobbling up 30% of the banking deposits, 25% of the banks’ revenue and in cases such as niche payments or peer-to-peer wallet-based transactions, they were taking away almost 50% of the transactions. In India alone, more than 2 billion transactions in the retail space happen through the Unified Payment Interface, of which, over 60% of transactions are carried out by non-banks like Google pay, WhatsApp, PhonePe and Paytm. While this is happening in retail banking, BigTechs like Amazon have begun unbundling corporate banking as well.

Amazon has started to offer corporate banking services to its partners, including lending, insurance, extending revolving credit lines for vendors, and end-to-end supply chain financing for its network. It has already granted over $10 billion in loans to more than 20,000 SMBs but this is just the start. It is seeking to take the challenge to banks with better user experience, simplicity and ease of doing business. In different pockets of the world, Amazon has started creating a marketplace with their seller network, targeting almost 340,000 SMBs tying up with organizations like Flexiloans. They plan to scale this globally, through their access to the supplier network, which speeds up loan approvals. Amazon will soon lend at 150 to 250 basis points lesser than market rate because they don’t have infrastructure investment or branch network and everything is digitized, which are very attractive terms for SMBs.

In parallel, the debilitating impact of the pandemic from last year, is taking its toll on revenues for corporate banks. This is forcing banks to look for newer sources of income, while dealing with shrinking profitability and rising bad loans. The biggest risk, however, lies in the unprecedented twin challenges of liquidity and solvency due to the pandemic. The impact from all these challenges is forcing a business model reimagination in banks, making them accelerate their digital transformation agendas on an urgent basis, at scale.

The differences between retail and wholesale banking are blurring, except for the clientele that they service, in the sense of both moving towards a marketplace model. By setting up digital marketplaces or platforms, banks can be far more involved in client journeys that put them in a better place to service their customers in multiple ways. An overwhelming majority of unicorn companies across the world have platform business models, and it is time for banks to move from pipeline-based models to platform-based ones, like DBS Bank in Singapore.

EXCERPTS FROM THE PANEL DISCUSSION

Speaker 1: Manish Dhameja, Chief Wholesale Banking Officer, Sohar International

Speaker 2: Raju Buddhiraju, EGM, Chief of Wholesale Banking, Commercial Bank of Qatar

Speaker 3: Rajashekara V. Maiya, Global Head of Business Consulting Group, Infosys Finacle

Moderator: V. Ramkumar, Senior Partner, Cedar Management Consulting International

Effect of pandemic on the accelerated of digitization in Corporate Banks

Manish: The pandemic had indeed accelerated the digital agenda, both for imbibing technology by individuals, and corporates. This has also actually helped banks to use this opportunity to partner with FinTechs, to try and create a much more convenient value-added experience for the client in such a way it becomes cost effective, as well as value accretive.

The right strategy for corporate banks to prioritize and sequence the digitization agenda

Raju: One thing the pandemic has taught businesses across industries and sectors is that you really need to run a very thin cost architecture, if you want to succeed under different conditions. Thin cost structures are only enabled by technology-based solutions. Technology empowers institutions to provide a standardized customer experience to various customers and technologies like the cloud helps companies in moving to an operating expenditure model and scale quickly, which is necessary in disruptive times. With the earlier concerns on moving data to the cloud now cleared even by banking regulators, it is now inevitable that banks move to cloud-based solutions.

Changing expectations from a customer standpoint in corporate banking

Manish: The FinTech revolution has led to increasing customer expectations in a significant way, which has also led to raising the bar for banks to perform in a big way. For corporate banks to be successful, they need to move from a pipeline-based model to a platform-based one, following the principles outlined in SATS – Speed, Accuracy, Transparency and Secure environment. All wholesale banking transactions should pass the SATS test, to have a retail banking like experience. The second principle for corporate banks to consider, is going beyond just lending and being growth partners to their clients, especially in testing times.

This principle can be further extended by providing clients with technology tools, like forecasting tools for liquidity, so that their working capital needs can be reduced. Being a growth partner for a larger customer means not just financing the company, but also financing the company’s ecosystem, including its supply chain and vendors. The final transformation principle would be to become trusted advisors to corporate customers, using the vast storehouse of historical data combined with technology tools available to the bank. Doing all these things would add value to a client and help them leapfrog into actually creating a differential competitive advantage.

Role of blockchain in changing the landscape of corporate banking and digitalization

Raju: International trade is a $16 trillion market per year, but it is mired in bureaucracy, paperwork and multiple other bottlenecks, but the messier the problem, the better chance for disruption. This is where technologies like blockchain and distributed ledgers have potential in speeding up complex transactions, and it also feeds into the need for instant gratification amongst customers.

Getting your corporate customers to walk with you, in your digitalization journey

Manish: How do you align the organisation mindset to the client mindset? I think one first starts with what’s the purpose of the digital agenda and how do I make my business and IT strategy based on the type of client experience I want. For truly successful digital transformation, while employee IQ is important for implementation, employee EQ is more important for servicing client needs.

CLOSING NOTE

Digital transformation in corporate banking has for the most part trailed behind retail banking – but not anymore. It is evolving at an unprecedented pace, thanks to the pandemic catalysing digital transformation across business models, and accelerating technology adoption. The rise of digitally nimble BigTechs and FinTechs offering corporate banking services have further brought in a paradigm shift in digital disruption. Partnerships with FinTechs will remain critical for banks in providing value-added experiences to its corporate clients. Mainstream adoption of advanced technologies such as APIs driven corporate connectivity, Cloud, Blockchain etc. will be crucial to gain flexibility, speed to market, operational efficiencies, and a competitive advantage.

Four ways in which banks can support their corporate customers embrace digital transformation in their treasury operations.

By Rahul Wadhavkar, Head of Product Management – Commercial Banking Products, Infosys Finacle

The treasury is a significant source of value for a corporate. Hence any plan aimed at serving corporate customers better must necessarily factor improving the efficiency of treasury operations and transforming that from a cost center to a value center.

By and large, the corporate treasury function tends to trail most areas on the digital journey vis-à-vis other functions. Hence there is considerable scope for transformation. For banks keen on lending support to corporate customers, digitization of treasury operations is a good place to start.

Broadly, they can help their clients with the following:

• Make the difficult transition to adopting the latest technology across the treasury business
• Build a digital treasury that can interact seamlessly with the banks’ environment for efficient operations
• Go from a “data approach” to an “information approach”
• Improve risk management

Adopting the latest technology across the treasury business

Even today, a staggering number of businesses use Excel as their primary treasury management tool. A financial services industry analyst firm reported that 51 percent of companies earning annual revenues of less than US$ 250 million primarily (or exclusively) used spreadsheets for managing treasury operations¹. This is inadvisable for several reasons: it takes a huge amount of effort and time to gather and manipulate data in a spreadsheet, which gets worse as the number of banks and bank accounts increases; there’s a greater risk of errors due to “fat finger” typing, breakdown of macros and formulas, or simply, manual oversight; last but not least, spreadsheets are a serious security risk since they lack strong authentication². Migrating to a modern treasury management system may be easier for some firms, and harder for others, but almost all will require their support from their banks’ to see it through. The transition is also desirable from the banks’ perspective, because they will no longer have to struggle to support clients at vastly different levels of technical maturity.

The SME (small and medium enterprises) segment is in focus for most banks globally. Steadily growing in importance, these businesses are demanding treasury solutions suited to their unique needs, for example, tools that can be run on mobile and tablet devices. FinTechs are responding by creating specialised products for SMEs; even as banks help small businesses adopt treasury management solutions, they will themselves have to invest in some of the innovative FinTech offerings in order to align with their clients.

Building a digital treasury that can interact seamlessly with the banks’ environment for efficient operations

Open Banking regulations, such as PSD2, are enabling innovation and interoperability across various banking ecosystems. While open banking action is seen mainly in the consumer context, APIs are finding their way to the corporate side to create an interactive environment between a bank and its clients. It is almost like there is a virtual ecosystem between the bank and its corporate customer, with clear data and information tracks, and everything working seamlessly together. This improves operational efficiency and gives corporate treasurers access to near real-time information that they can use to make better decisions while managing cash flow or risk.  The good news is that a recent survey of 200 treasurers in Europe found that 35 percent were already using, or planning to use, APIs to enable integrations that would allow on-demand or real-time data exchange³. Strong API connectivity would also enable banks to extend traditional liquidity management services with investment analysis – something that only a few sophisticated banks offer at present.

Going from a “data approach” to an “information approach”

The true value of data comes about by turning it into information. A number of leading banks have evolved from offering mere data management services to providing better insights through information management. For example, instead of simply managing a client’s payments data, they are offering structured information reporting enabling the client to reconcile accounts faster and directly impacts the company’s bottom line.  Corporate customers will push their banks to provide better, more competitive solutions in this area in the years to come. The abovementioned survey hints as much with 52 percent of respondents expressing their interest in exchanging information in real-time, and 47 percent being keen on  real-time liquidity and real-time payments and collections⁴.

Improving risk management

Managing risk is another one of the bigger priorities for corporate treasurers. There are many ways in which banks can assist them in this area. For instance, there is an opportunity for banks to help clients manage counterparty credit risk – which they’re largely doing on their own – by enabling better tracking and monitoring of counterparties based on past behaviour, economic conditions, and market news and developments. Banks can leverage technology to convert this data – that in many cases they already have – into actionable information.

In addition, banks can offer specialised liquidity management products to the broader commercial client base but more specifically to the SME segment. With accurate timely liquidity forecasts, complete with investment options they can help these businesses not only avoid a cash crunch, but also explore avenues to earn higher yields on surplus cash.

Endnote

The fundamental goals of corporate treasury have not changed over the years. However, what has changed is that treasurers are able to achieve their objectives more effectively thanks to the treasury management solutions available to them from their banks. Treasury products tend to be very commoditized, but banks can create a competitive advantage for themselves  by building a support structure for clients across a spectrum of technological maturity,  and helping them embrace the tools of digitization faster. Not every client will adopt these changes at the same speed or intensity, but the endeavour should be to take all, big or small, forward in their journey of digital treasury transformation.

Sources:

1) https://treasury-management.com/blog/excel-in-data-management-why-it-still-has-a-role-to-play/

2) https://hazeltree.com/whats-the-big-issue-with-spreadsheet-based-treasury-operations/

3) & 4) https://www.journeystotreasury.com/treasury-insights-2020

Increasing clients per advisor and better advisory to each client – striking two birds with one stone

Industry at a leapfrog moment.
In 2019, the average wealth-per-adult reached a new record high of USD 70,850. About 1% of global adults are millionaires; they collectively hold 44% of global wealth. The number of affluent individuals (with assets of $250,000 to $1 million) is also increasing steadily; about 4 million new individuals are joining this group each year.

Wind in the sails.
An increase in the number of wealthy individuals is driving growth in the total investible assets around the world. Amidst these tailwinds, the wealth advisory departments continue to be a lucrative business for financial institutions. In 2018, the revenues were a record high of $694,000 per advisor in the USA. The fact that the biggest wealth management departments (by assets managed) happen to be closely related (if not subsidiaries & internal departments) to financial institutions with a long operational history. It seems like the incumbent financial institutions continue to be the trusted financial advisors and wealth managers for the global wealthy. However, their trust and continued patronage are likely to be put to test in the near future.

Rise of the new-age customers & competition.
In addition to the growing numbers in the ultra-high net-worth individuals (UHNWI) group, the great wealth transfer – the anticipated passing-on of $30 trillion in wealth from the elders to their younger heirs over the next few years, is poised to be a watershed moment for financial planners and wealth managers. The new-age investors tend to be generally tech-savvy, data driven, and well-informed about economic scenarios and opportunities. They are known to demand full-transparency, faster service, access to a full spectrum of products, and greater personalization of advisory and services.

While addressing the renewed customer expectation in the new decade, the incumbents must also compete with the new-age specialist investment firms. These FinTechs, with their digital-only propositions, are offering their platform and services (nearly) free of cost. While one may doubt their long-term profitability and viability, their ability to disrupt the established order of business cannot be ignored.

Wearing the strategic hat of versatility
It is obvious that each investor comes with a different set of needs and expectations. And, profitability-at-scale can be achieved only when the advisors and relationship managers can increase the number of clients and further grow the total asset under management (AUM). So, the question is ‘how to add new clients, whilst ensuring deeper engagement with each one of them at the same time.’

To address this conundrum, the forward-looking financial institutions are leveraging technology to create a digital platform capable of delivering omnichannel experiences for customers, data-driven insights for advisors, and automation of back-office operations. Such a platform will be vital to scaling the client-base, offer a broad set of products (across asset classes) and deliver on the promise of speed and convenience.

Improving customer experience (CX).
It is widely acknowledged that CX innovation helps in engaging and retaining customers. It is also a valuable differentiator between the financial institutions to earn customer loyalty. The CX reimagination usually includes a channel (often, a mobile app) for clients to monitor their portfolio of banking accounts, investment portfolios, and real-time valuations of their assets and liabilities.

Boosting advisor productivity.
Financial institutions must strive to empower their financial advisors with digital tools to understand their clients better, anticipate their needs, and offer quality-advice quickly. The platform must also unburden them of the repetitive and administrative tasks, so they can focus on advisory services. The digital dashboard (usually, an application accessible from a tablet or a laptop) must help advisors to manage and interact with their clients better. It must support common tasks such as risk-evaluation, client onboarding, portfolio monitoring, performance alerts, deviation notifications, portfolio rebalancing and reporting. The dashboard must also facilitate easy communication and collaboration between advisors and their clients, facilitate document management, schedule meetings, take notes and accelerate the process of approval management.

Streamlining front to back office operations.
Businesses today run at a fast pace. Financial institutions must embrace digitization and automation to step-up the overall efficiency of their wealth management offerings. The effective digitization of key back-office tasks like order management, transaction reconciliation, product cataloging, and commission calculation is key to providing a seamless CX for the clients.

Making the smart moves.
While technology can unlock new possibilities and accelerate the business transformation, the vision and strategy to drive it will differentiate the industry-leaders from the laggards. Various institutions are pursuing innovative initiatives to defend their clientele and growing their revenues further.

A popular strategy is to expand to an emerging customer-segment. Speaking about this trend at a recently organized webinar, Mr. Anthony Jaganathan, Senior Vice President, Head of Operations, Wealth Management at Emirates NBD opined that, “the wealth management offerings traditionally catered to the UHNWI and HNWI segments. However, over the last few years, the mass-affluent individuals and households are also demanding access to asset-classes and services that were hitherto unpopular in this category”. This democratization of access to wealth management services seems to be a universal demand and it’ll serve the incumbent institutions well to explore this opportunity expeditiously.

Another growth-hack is to bundle wealth products with premium banking services so that customers get an integrated experience. Axis Bank, a leading private bank in India, has found emphatic success with this go-to-market approach. In the context of entry of new-age competition, Mr. Satheesh Krishnamurthy, Executive Vice President EVP & Head – Private Banking, Premium & Third Party Products, Axis Bank said, “we believe the entry of new players will expand the market for everyone and it’s good for everyone in the ecosystem. Also, each institution can carve their own niche by leveraging big-data analytics and upskilling advisors to engage better with their clients”.

In the face of the changing business landscape and emerging opportunities, it needs to be seen how soon and how well the incumbent financial institutions adapt to the new-normal or concede ground to the new-age and specialist players. Either way, exciting times lie ahead.

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An article by Abhra Roy, Product Head – Wealth Management, Infosys Finacle

Sources:
• Global wealth report 2019, Credit Suisse
• Great Wealth Transfer, Forbes