The greatest threat to the status quo comes from “challenger banks”, with their roots in payments, and which hope to use their e-wallets to tap into the savings of the region’s middle class to offer wealth management services.
KPMG, in its “Digital Wealth Management in Asia Pacific” report, highlights Alibaba’s Ant Group, Tencent’s WeChat Pay, Softbank’s Grab, and Gojeck in Indonesia, whose main investors are Google and Temasek.
Although these firms are yet to establish themselves in the wealth management and private banking space, their vast customer reach from digital payments adoption and the support from their investors puts them in a key competitive position in this space, as Asian governments extend them financial services licences, according to the report.
Unlike the traditional players, most fintechs are focusing on developing specific, targeted offerings, and with supportive governments, they have been rapidly growing in number.
“Although currently at a nascent stage within wealth management, payments firms have strong plans to grow in Asia-Pacific, using their e-wallets to help the region’s vast middle-class population in channeling its savings into wealth management investments,” said Bonn Liu, head of asset management for Asia-Pacific at KPMG China.
In addition, a handful of “wealthtechs”, such as AutoWealth (Singapore), Kristal.AI (Singapore and Hong Kong), Lufax (mainland China), Stashaway (Singapore) and Welnvest (Singapore), have also entered the wealth management arena and are expanding beyond their home-bases. However, “with a lot of their solutions being B2B, most of these firms are emerging as potential partners and tech solution providers to the incumbents, instead of pure competitors,” noted the report.
Nevertheless, wealthtech players are pushing the boundaries in wealth management across most markets with their advanced client-facing capabilities, such as intuitive and comprehensive dashboards and intelligent portfolio recommendations, which are available to both investors as well as financial institutions, noted the report.
Yet, with the growing threat from challenger banks and pressure from wealthtechs, traditional international and local banks are trying to expand their digital offerings and channels, collaborating with emerging technology firms as well as upgrading in-house capabilities at the same time.
Among local players, DBS leads the pack with its digital services although others such as Bank of China, CMB and UOB are increasing their investments in acquiring digital capabilities, virtual banks and forging Fintech partnerships. They have used their large scale, existing client base and domestic presence to retain market share in wealth management.
Leading foreign banks are looking to grow their client-facing teams and build scale in the region, and bringing their wealth management products and services. Citi, Standard Chartered Bank and UBS are ahead while HSBC lags in wealth management digital capabilities, according to KPMG. Their main edge lies in their global capabilities, and access to international markets and products.
The report found that Singapore and Hong Kong remain the most supportive and developed markets for wealth management in Asia, despite the growth of opportunities to tap increasing middle class wealth in mainland China and India.
Strong growth in a relatively small ultra-wealthy population, as well as in trusts and family offices are key features of the Singapore market, which has been further invigorated by a rising wave of tech-savvy consumers embracing digital banking.
Meanwhile, Hong Kong is enjoying a shift towards onshore wealth management supported by strong government inducements as global financial regulators clamp down on offshore bank secrecy. It also has the greatest range and most advanced features of digital private banking and wealth management services in the region, with most leading banks actively collaborating with fintechs, according to KPMG.
“Pro-investment regulatory environments in markets such as Hong Kong and Singapore have been attracting a large amount of individual wealth and corporate capital from around the world. Despite competition from the big technology giants banks still have a competitive edge in this regard,” said Simon Gleave, KPMG China’s head of financial services for Asia-Pacific.
Targeting the younger generation, who demand technologically advanced and highly customised banking and wealth management solutions, is likely to be the main growth driver, especially as the Covid-19 pandemic has pushed many wealth management clients to online channels for remote interaction, particularly in Hong Kong’s mass affluent segment of younger tech-savvy clients, according to KPMG.
With more wealth being transferred to the next generation via family succession, and new wealth being created by young entrepreneurs using technology, this client segment is likely to be another key growth driver for Hong Kong’s wealth management industry. Wealth managers in the KPMG report highlighted that “multi-channel delivery”, “self-service investment platforms” and “instant messaging apps” are the top three capabilities to attract the younger generation.
“There is a clear gap in Asia for a powerful, compelling, sophisticated-yet-easy-to-use digital wealth management offering aimed at the region’s emerging and growing wealthy,” said Larry Campbell, head of financial Services strategy, KPMG Asia Pacific.
Banks should also strengthen their advisory teams and use their presence in Hong Kong to tap the growing affluent classes in the rest of the Greater Bay Area as well as develop low-cost and efficient services for the expanding middle-classes in mainland China and India, according to the report