Technology and banking evidently go hand-in-hand in the current banking landscape, across the process chain to front-end capabilities. PBI’s Sruti Rao talks to established and emerging technology players to identify the key technology trends in Asia’s wealth management space and the optimum solutions required for the future.
In order to remain relevant, it has become imperative for wealth management firms to embrace investment in technology both in enhancing their core banking processes and in reaching out to their clientele in the most efficient manner. This has incessantly become a global trend, however each bank’s investment strategy on technology may vary in whether front-end service channel enhancements are prioritized to back-end infrastructure.
This was the approach adopted in Asia, according to Peter Scott, general manager Asia Pacific at Avaloq, the integrated banking solutions company. A long-time expert in the wealth management technology solutions space, Scott observes that banks in the region have prioritized modular build-up of their front-end and back-end needs seperately. However, this staggered approach may not be the most effective way for banks to establish the smooth, front-to-back infrastructure that they aim for.
Scott comments: "Asia as a market tended to mature a little later than the European markets, and they tended to focus on front-end applications to integrate with their previous back office system, or they bought a back-office system which didn’t neatly couple together. Many banks can now see the cost implication of going to a multiple application basis, and the benefit of going with a single system."
As the general manager opines, the modular approach of incorporating various platforms into the system, may not be the most effective solution in the long-term. Rather, banks should look at streamlining their architecture into one coherent system to reap the most operational benefits from the technology.
Scott: "When you look at the way in which companies approach the problems in wealth management, they have tended to focus on either the back-end or the front-end they haven’t really looked at it in a holistic way. So they have not built an architecture that addresses the whole solution front to back in a highly integrated way. This does give [the bank] an advantage, as it allows you to introduce more products much more quickly, and implement and distribute those products through a variety of digital channels."
"I think a trend we are going to see more investment in, is where banks are looking to consolidate, whether that is through CRM or through your back-office processes and your front-end systems into one coherent data analytic capability."
Larger banks have taken to this unified infrastructure approach, highlighted by Avaloq’s successful account acquisitions of key banks in the space. In December 2013, HSBC announced the rollout of Avaloq Banking Suite solution across their global offices, to integrate their front, middle and back office system.
John Armstrong, chief operating officer at Global Private Banking at HSBC, comments: "Through the implementation of the Avaloq Banking Suite we will significantly improve our operational efficiency, levels and consistency of customer service, while also improving our cost structure. These are integral factors in ensuring that our private banking business maintains its high quality standards, which is fundamental to an enriched private banking client experience."
The Banking Suite solution gained further traction this year with the first Chinese bank, the Agricultural Bank of China, signing up in January of this year, for its Hong Kong branch. The responsiveness of this integrated offering to large banks in the region highlights the success and quick adoption of this trend to established players in the region.
Size does matter
According to Peter Scott, banks with assets under management of $10 million and above have the scale to invest in such integrated solutions for optimum proficiency. However, in the case of smaller institutions, a modular approach can be taken to update their system gradually through ‘progressive renovation’.
Nonetheless, the full benefit comes from an integrated front-to-back solution, argues Scott, and that will still be the trend of the future. "If we have institutions like Deutsche and HSBC, which are clearly major players in this space, move to a front to back approach, it signals a very clear direction of the type of transformation achievable and sits within a risk profile that is comfortable."
Avaloq is of the belief that such niche players offer opportunity for business process outsourcing (BPO), with emerging opportunities in significant Asian markets like Singapore. Scott says: "There is high potential for BPO in Singapore to help the smaller entities. Back office is key to the bank. We have industrialised the process for the back office component to allow banks to differentiate themselves through the front-end capability or through their products."
Catering to the changing demands of the wealth marketplace, the industry has seen influx of new technology players offering fresh and specific solutions to cater to emerging trends. One of these is Dragon Wealth, a financial technology company that specializes in front-end servicing.
Providers like Dragon Wealth interpret the market through the perspective of front-end servicing. Empowering relationship managers with the right information to deliver most effective service is a key aim of the start-up technology firm. As Bert-Jan van Essen, co-founder and managing director of Dragon Wealth Asia, explains, they have the ability to classify customers into peer groups as a key differentiator for RMs to enhance their advisory capability.
Bert-Jan van Essen says: "In our offering we marry the external data sources of the customer to the internal data available in the bank. The accumulation of such data is then processed into peer groups to understand what people similar to them in their likes and interests are investing in."
Dragon Wealth research shows that close to 50% of clients in Asia prefer to validate their investment decisions through peer-to-peer interaction. The importance placed on what peers are investing in by clients here, deduces the opportunity incorporation of external data from social media outlets would have for wealth managers. Van Essen adds: "We let clients understand what their peer groups are doing. By enabling this, the client is able to make better decisions on their portfolio and thereby helps the relationship manager in personalising the advice to their clients more effectively."
The future of the technology ecosystem
New entrants in the technology space, not only provide niche servicing for banks in addressing specific service gaps, but also imply a future of a more saturated pool of technology providers. How this will evolve into a more synthesized ecosystem of players, is a space to watch, but the fact still remains that technology trends have evolved the banking space.