Q&A: Banks won't have an 'Uber moment', but change is needed

Standard Chartered, one of the world’s top global banks, recently began a significant technology revamp for its wealth management business, in partnership with financial software specialist Temenos.

It was a timely announcement, with banking customers demanding an increasingly sophisticated technology approach from their financial services providers.

We spoke to Ben Robinson, Chief Strategy & Marketing Officer at Temenos, to understand more about the project, the future of wealth management and the role of technology in this evolving sector.

Why is the wealth management sector changing, and how does technology come into it?

We are currently seeing a reshaping of the wealth management industry due to a great transfer in wealth from the older generation to the younger generations. As a result, we are seeing increasing demand for greater efficiency from these younger generations - X and Y, most of whom are digital natives who expect fast, accurate and personalised services across a spread of digital platforms. Technology is becoming central in wealth managers’ efforts to deliver on those client expectations.

Are wealth managers behind the curve in terms of their digital offering and client demands?

Over a third (34 per cent) of HNW clients now demand some form of digital communication from their wealth manager – a figure indicative of growing demand for digitally driven services. Keeping up with expectations will always be a challenge, particularly during a time of significant generational change, and banks have been improving their digital infrastructure for years. What is key is for banks and financial institutions, is to accelerate their efforts and ensure the digital infrastructure they go on to create is both comprehensive and integrated – from back office all the way to winning new clients.

What will happen to the industry incumbents, if they don’t improve technologically?

Success, or even survival, for industry incumbent wealth managers will depend on how rapidly and how well they can respond to an increasingly complex set of customer demands. Whilst this is a fantastic opportunity, there are also various challenges. Around half (48 per cent) of HNW clients rate cyber risk and hacking as a top concern related to the use of technology. In addition, financial institutions must ensure they are able to modernise their technological approach without alienating older clients, who are still the foundation of their business.

How might embracing digital offerings benefit banking and financial services, from a business perspective?

Whilst the benefits experienced will differ from case to case depending on the objectives, in a nutshell, by embracing digital offerings, banks and financial services will be able to automate many of their back office functions – thus enabling greater efficiency and speed of fulfilment. From a business perspective, this will lead to higher productivity and greater agility, allowing wealth managers to really focus on differentiating their level of customer service. The hope is that this will lead to lower customer attrition and increased revenues in the long term.

Can you explain more about the scope of project with Standard Chartered, and what prompted the decision?

In partnership with Temenos, Standard Chartered is deploying a unified, global platform to support the delivery of its wealth management investment offerings in over 30 countries. This is aligned with Standard Chartered’s plans to significantly grow its Wealth Management business over the next five years. The implementation of Temenos’ WealthSuite will simplify operations, provide scalability and reduce operational costs and risks, as well as optimising customer experience. We believe these were all key drivers behind the decision.

Why are so many large banks, like Standard Chartered, announcing digital transformation programmes and increasing investment in IT?

Many banks are facing challenges stemming from their incumbent systems, which have not been built to cope with the move to mobile and digital channels. Data is typically locked up in silos, transactions are processed by batch runs, and the difficulty in implementing updates and change often means that banks are not able to respond timely to fast changing customer demands. We see a growing realisation among banks that a core banking change is necessary in order for them to remain relevant to their clients’ demands and expectations for a digital experience.

Some have suggested that an ‘Uber moment’ is looming for financial services. Do you agree, and how does the challenge compare with other sectors?

It is clear that a digital shift is underway, but it is a stretch to suggest that an ‘Uber moment’ is on the horizon. The industry knows the change is coming and referring to Uber is a simplistic comparison that relates to a very different industry – one that was less prepared for wholesale disruption, and had less time to react. Banks have been overhauling their technology infrastructure for a long time, and we are already seeing them respond to these threats – almost all of the banking giants now run fintech start-up incubators and are actively testing new financial technologies.

Will AI and robo-advice replace the need for wealth managers, one day?

The past few years have seen a rise in use of robo-advice and cognitive technologies to passively manage funds – and something has to be said for the resulting benefits on offer i.e. a feasible, low-cost investment solution that is also within reach of new investors starting with small nest eggs.

However, whilst these methods can help clients make some tailored decisions, they are unlikely to replace the need for face-to-face contact in the short and medium term. Over 40 per cent of wealth managers believe that a mix of digital and offline ways of communicating is ideal. Traditional human advisers are able to deliver the personal, hands-on service that many investors still demand, in order to create customised plans.

So, while there is a clear market for digital tools, we expect these to complement the personalised service of a human wealth advisor – paving the way for ‘bionic wealth management’.

Ben Robinson, Chief Strategy & Marketing Officer at Temenos

Image source: Shutterstock/Oleksiy Mark