Work in progress: The digitalisation journey so far for Asia's private banks / Rebecca Isjwara

Work in progress: The digitalisation journey so far for Asia's private banks

Published on 16th September 2019

In a bid to improve RM efficiency, offer more convenience to clients, and stay ahead of technological disruption, Asia’s private banks have increasingly relied on and invested in their digital capabilities and solutions.

In July, Asian Private Banker distributed its 2019 Mid-Year Private Banking Technology Snapshot Survey in the region to gain a clearer, aggregated understanding of where firms stand in respect to their digital transformations and what their priorities are going forward.

Our COO/CTO survey respondents represent private banks with a combined Asia AUM of almost US$950 billion — a decent chunk of the market.

To stay ahead of technological disruption and new fintech-based market entrants, private banks have begun to look towards emerging technologies commonly used by bigtechs, such as voice-enabled assistants, AI, and cloud computing.

According to respondents, the two most popular types of emerging technology are portfolio tracking capabilities (25%) and automated, personalised communications and advice (25%), followed closely by cloud computing (19%) and AI-driven portfolio analytics (19%).

Examples of industry heavyweights’ foray into emerging tech include UBS working with Amazon to introduce its services on the Echo device and the Alexa voice-enabled assistant, and HSBC utilising the services of tech vendors such as Google, Amazon Web Services (AWS), and Microsoft to upload data to the cloud.

In a survey conducted in May, three-quarters of private banks in Asia said that their tech budgets have increased year-on-year, so Asian Private Banker asked banks what these funds have been earmarked for.

Private banks continue to prioritise KYC and client onboarding technology to assuage the pain points of stringent and costly account opening-related regulations. Appway alone has already consulted the private banking arms of numerous institutions, including Credit Suisse, Deutsche Bank, HSBC, BOCI, and LGT to streamline and shorten onboarding times.

Client communication also emerged as a priority amongst banks who understand that convenience, particularly in the Asia region, is important to clients (see Q5). According to Asian Private Banker’s AppMap, two-thirds of private banks in the region currently support instant messaging either through their respective mobile apps or via third-party messaging platforms.

Automation does not only improve accuracy across the board and benefit the bottom line but also frees up time for front-office staff to focus on more client-centred responsibilities.

Unsurprisingly, owing to the nature of the tasks, three-quarters of the respondents said back-office processes at their respective institutions are at least 41-60% automated. Comparatively, only two-thirds of middle-office processes and one-third of front-office processes enjoy a similar degree of automation.

Automation is improved predominantly through robotic process automation (RPA) or bots, which Bank of Singapore has used to automate 30 processes so far, with 56 more in the pipeline. The lender did state, however, that its automation journey will end in 2020. Meanwhile, Deutsche Bank has deployed bots for trade processing and is currently developing nine automated processes for its APAC WM division. BNP Paribas’s global markets division, in partnership with Bank of Singapore, has also recently developed a bot to overcome market inefficiencies relating to secondary market equity derivatives trading.

As more private banks in the region offer digital advisory services, Asian Private Banker sought to understand to what extent these offerings are personalised.

As it stands, only a few features have full personalisation baked in while a large majority (86%) of informational content, such as news/research and investment ideas, are only “somewhat personalised”.

Firms like UBS GWM have explained to Asian Private Banker that increasing levels of personalisation through its digital platform was among its top priorities and that it is engaged with its Hong Kong and Singapore clients through ‘co-creation and client insight sessions’ to improve the potency of its tailored insights and services.

Meanwhile, fintech accelerators — such as DBS’s Startup Xchange — are tapping into the region’s fintech ecosystem to create holistic views of clients and improve upon personalised solutions.

Private banks in the region have been working hard to balance regulatory and data safety requirements with client demand for convenient communication channels.

According to respondents, clients prefer using text messages, mobile messaging services, and phone calls equally (each 29%), compared to face-to-face meetings at 14% — highlighting that clients indeed favour more convenient forms of communication.

However, text messaging has raised regulatory concerns — a higher frequency of messages as well as broadcast texts from RMs require more documentation and supervision — while phone calls often classify as compliant so long as they’re recorded and archived but speech-to-text technology is yet to be perfected.

Accordingly, banks have preferred to launch RM-client communication services via third-party instant messaging platforms. Credit Suisse chose Apple Business Chat as its first compliant RM-client communication platform, while UBS and DBS opted for WhatsApp and WeChat.

Private banks have also prioritised convenience through client-facing apps, and Asian Private Banker asked respondents for their app-related development plans across four key areas.

While private banks are split in terms of the development phase and prioritisation of advisory, chat, and portfolio management tools, all have either rolled out or are developing mobile transaction execution.

In terms of what is most widely available, trade execution is currently a feature of 57% of respondents’ mobile offerings, followed closely by chat at 50%.

Regarding digital advisory, launches can be expected in the near future as 29% of respondents are currently developing the function. Of the digital advisory platforms already on offer in Asia — such as UBS Advice or CS Invest — Deutsche Bank’s dbXpert is the newest, having launched in May.

An expensive talent war and challenging market conditions saw many private banks having to tighten their purse strings to maintain ballooning cost-income ratios. With ongoing ambitions to extend their reach across the region amid the talent and margin squeeze, lenders continue to bolster their frontlines, but many only do so alongside the development of ways to increase RM efficiency.

While only 17% of respondents said that their RMs have access to client portfolio analysis tools, the remaining 83% indicated that they are currently developing the feature. Meanwhile, customer relationship management (CRM) is the most available function for RMs and has already been rolled out at half of surveyed banks. Market forecasting tools were the lowest item on banks’ priority lists, with 50% saying that they had no plans to develop the function.

Existing digital RM tools include DBS’s RM Mobility, Bank of Singapore’s RM Navigator, and Bank of East Asia’s iPortfolio Analyzer. This March, HSBC also inked a deal with BlackRock Solutions to offer the latter’s portfolio risk assessment platform, Aladdin, to the bank’s clients.

Banks have reams of transactional data at their disposal but are still a long way off from being able to sufficiently harvest and utilise behavioural data.

Overall, respondents said technology at their respective banks is 40% ready to carry out meaningful and efficient gathering of behavioural client data.

The readiness spread indicates that the region’s lenders are at very different stages regarding the collection of such data, but the trend towards harnessing such information for decision-making purposes is strengthening. Both DBS and Bank of China Private Banking, for example, have articulated the growing role behavioural data is playing in enhancing front office productivity and, ultimately, the client experience.

With many banks increasingly offering more personalised services, Asian Private Banker asked to what extent and how transactional and behavioural client data was being utilised.

The survey highlighted that a majority of banks use descriptive transactional (88%) and behavioural (63%) data, but have some ways to go when it comes to diagnostic, predictive, and prescriptive analysis.

Of note is the fact that neither transactional nor behavioural data is yet used for prescriptive means. In order to better provide personalised advice, banks will need to improve their prescriptive — what clients should do — analytics capabilities.