Banks have been using computers and therefore ICT services for ages, notably to register transactions. If during the last five years, technology has been revolutionizing retail banking through the use of new communication channels, but also allowing clients to pay without any contact, FinTech has not yet completely transformed the Private Banking and Wealth Management branches of financial services, where human relationship still plays a big part. But more and more opportunities are emerging, and private banks all over the world are diving right into it… for the benefits of their clients.
Answering the new generations’ needs
Nowadays, people are increasingly using digital channels to contact their banks and purchase financial products. In Asia Pacific, one of the fastest growing regions for consumer adoption of digital financial services solutions, 82% of high-net worth individuals expect, according to a 2014 Capgemini study, their wealth management relationship to be conducted entirely or mostly through digital channels. Also, for 38% of HNWIs in Asia, digital contact with their wealth manager is more important than direct contact. These figures actually bring down the myth that many still believe in: «private banking clients prefer and expect face-to-face interaction».
Today, more than 70% of HNWIs use social media websites such as Facebook: communication and interaction though these new media channels have therefore become crucial when it comes to developing a lasting trust relation with clients. «Private banks need to be aware of the fact that the new generation was raised with technology. Therefore, technology will eventually replace schmoozing» according to Serge Krancenblum, President of LAFO (Luxembourg Family Office Association).
Moreover, digital significantly helps with client knowledge and private banks are notably starting to segment client by life stages, rather than current assets. As a matter of fact, the needs and expectations of young entrepreneurs are quintessentially different from the ones of seniors and retirees. Intimate knowledge actually provides a new value to private banking, and a customer centric approach is therefore essential.
More autonomy on the one hand…
Clients are in the driving seat. To answers their new needs, Credit Suisse Private Banking Asia Pacific launched an app in March 2015, which allows clients to receive personalized intelligence depending on their portfolios, and have access to tools to analyze their risk exposure and even trading tools. Actually, it can be considered as a new private banking service delivery model, putting emphasis on mobile: ATAWAD. Benjamin Collette, Deloitte EMEA Wealth Management and Private Banking Co-Leader can only agree: «Players should take digital maturity and client perception of personal relationships into account when going forward with their business models. A new generation is emerging that places a high importance on web platforms and accessing information from wherever they are located at any time of the day».
With online channels now being one of the most important sources for investment decisions, customers, especially in Asia and the US, are increasingly willing to make decisions themselves. Europe is still a bit behind, relying a bit more on their asset managers and private bankers…a change that might actually be more cultural than anything else, but things are moving exponentially in this direction. Digital apps such as the one developed by Credit Suisse Private Banking give the clients more flexibility and grant them a decision-making feeling through one single click or tap. In Europe, BNP Paribas Wealth Management has been recognized many times for its digital network app «Next Generation Program 2016», which aims at sharing expertise and developing knowledge of finance and wealth management online, but also through workshops, therefore combining digital and physical encounters. «BNP Paribas is determined to respond to the specific needs of its clients in innovative ways» underlined BNP Paribas Wealth Management Co-CEO Sofia Merlo.
Just like a diversified portfolio, customers now expect multiple channels not only to communicate with their private banker, but also to be their own actor when it comes to market opportunities.
…and tailored advice on the other
The KYC – Know Your Customer – trend is more alive than ever and especially in the banking sector following the financial crisis, which resulted in flat assets and a decline in investments. Customer knowledge, experience and personalization of services are the keys to bring a new value to clients, moving towards a new business model, or at least a new service delivery model. According to Hans-Ulrich Meister, Head of Private Banking & Wealth Management and also CEO Region Switzerland, Credit Suisse: «Digital technology needs to be used to deepen the relationship with the current and next generation of banking clients». His counterpart from the Americas Region adds: «It empowers clients, gives them better access to knowledge and expertise from across the bank. It enables greater collaboration with clients, giving relationship managers deeper insight into their clients’ preferences and investment objectives».
Yet, according to Marc Debois, Head of New Markets, ING Private Banking Luxembourg: «Human relations are still extremely important for HNWIs who look for personal advice, a specific portfolio, and even to be comforted in times of crisis… which cannot be achieved with standardization».
Besides finding the right balance between personal touch when it comes to complex transactions and the convenience of digital for daily operations and reporting, several challenges lay ahead of Private Banking departments, notably when it comes to cybersecurity in a digital world and a changing legal environment with the end of the banking secrecy. Moreover, technology allows new players to enter the market and they are already enhancing competitiveness and competition. Digital is definitely reshuffling the cards.