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Asia’s PBs slow to automate

Banks in Asia are slowly digitizing the client wealth experience, but costs and cybersecurity are concerns.

Banks in Switzerland are far ahead in adopting technologies in the wealth management sector, but in Asia, private banks are taking their time to get into the tech wave, said Santiago Schuppisser, wealth management product manager at Switzerland-based bank software company Avaloq.

Schuppisser thinks that costs are stopping a lot of banks from implementing new technology. “Now it is still too expensive. Many banks have to deal with legacy systems and maintain them, spending sometimes more than half of their budgets on this.”

Additionally, when a bank’s critical functions move to cloud-based platforms such as Avaloq’s, cybersecurity is a huge concern.

Schuppisser declined to discuss information security, but said, “Security in general and cybersecurity in particular are very important to us, as we are hosting very valuable and confidential data.”

Digital forces

Thomas Beck, CTO, said private banks up to now didn’t need to automate core tasks.

But wealth management digitalization is being driven by several forces, including pressure on bank margins, regulatory requirements, and, as wealth is handed off to the next generation, a younger internet-savvy client base.

Additionally, as banks take on more clients per advisor, “the advisor needs to automate to focus on the relationship with the client. I also think that private clients want to have more knowledge on how their wealth is evolving on a daily basis, anywhere, anytime”.

The more self-service capability the client is handed, the stronger the push for automated processes – a trend that is apparent in retail banking, Beck said.

Private banks are a different segment. Those that manage a large discretionary base typically don’t need to outsource as much to the client as retail banks do.

But bank margins are under pressure and the situation is changing, Schuppisser believes.

“We see a lot of private and corporate banks moving away from the higher risk lending business and reshaping their business models towards a wealth management services model,” he said.

Among the firm’s bank clients in Asia are Maybank, HSBC and DBS. For example, the firm has worked with DBS in Singapore on several fronts, providing software that speeds up the time needed to bring new products to the market, to deliver real-time information and to report on portfolio performance, according to a case study from Avaloq.

Avaloq’s key competitor is Temenos Group, another Swiss company. In Asia, Temenos worked with Bank of Shanghai in China to replace its legacy banking system with an integrated solution for global activities while “improving operational efficiency, risk management and compliance and the quality of management information”, the firm said.

Both companies claim that banks using their respective software platforms tend to increase return on capital.

 

Part of the Bonhill Group.