With fintechs and a technologically advanced population, Asian private banks look highly competitive—if they can surmount the Covid crisis.
The old-world culture of private banking has long had observers wondering if it would be able to adapt to the modern age of finance, with some even going so far as to declare “the death of private banking.” Such bold predictions seem plausible, given the multiple challenges private bankers face in 2020, including trade wars and Covid-19.
Yet uncertainty breeds ingenuity, and it seems the reports of private banking’s demise may be exaggerated. Asia, with the advantage of nimble fintechs and a young, tech-savvy wealthy clientele, may have a leg up on older centers like London, New York and Zurich.
Asia’s private banks face three key challenges going into this uniquely difficult period: digitizing, achieving multiple channel flexibility and accommodating themselves to more-effective financial crime compliance (FCC) in a more regulated world.
The pace of digitization is picking up, as executives have had to accustom themselves to digital communication and collaboration as a consequence of Covid. Businesses trying for the first time to operate remotely have learned the hard way that they are not ready. In Singapore, for example, bankers have had to dodge watchful police as they duck back into closed offices to retrieve paper records urgently needed for analysis or compliance.
“When we started our transformation journey four years ago, technology was one of the critical elements,” says Cédric Lizin, regional head, Private Banking, Asean and South Asia, at Standard Chartered Bank (SCB) in Singapore. “With the SC Private Bank application—the first if its kind—we changed the existing internet banking experience from a portfolio view to an advanced banker-client platform.”
Besides viewing their portfolio and past transactions, Lizin explains, “SCB clients can interact with their bankers and share information securely via chat within the application. This allows banker and client to discuss investment ideas and exchange views on the go.”
Preparing for Future Disruption
“Digitization needs to leverage service ecosystems, so it does not just deliver low-touch services to enable a broader customer reach but also addresses the complexities of FCC.” says Alan Morley, a New York–based financial crime risk management consultant.
Some banks are already using machine learning to replace labor-intensive and poorly performing risk-management functions–some of which report false positives in excess of 90% of cases–with automated solutions that can steadily improve the effectiveness of policing, says Morley.
From now on, he predicts, we can expect analysts to look closely at banks’ digital readiness as a leading indicator of likely resilience in the case of a future disruption.
“Unlike some of our competitors, we have continued to be able to open accounts for clients amid the abrupt challenges of Covid-19,” says Lizin at SCB. “Lockdown and travel constraints pushed us to accelerate specific digitization efforts such as e-instructions, where there are no longer hard copies being exchanged between departments; the verification of a client’s ID prior to onboarding, via video call instead of face-to-face; and the use of email confirmations or e-signatures from clients instead of wet signatures on hard copies.”
The SC Private Banking app also proved useful, Lizin says, when “sending paper statements, was challenged by closed access to postal services in some countries, given lockdown constraints.”
Is this a new world, however, or just a traumatic episode? Will the changes being propelled by the response to Covid-19 be permanent or just temporary adjustments?
“To my amazement,” says Morley, “I recently heard a senior banker in a webinar say, ‘We are just waiting for things to get back to normal.’”
We are looking at an entirely new normal, he argues. “Massive growth in young wealth, especially in the emerging world, has created a ready-made demographic for digitized wealth management.”
Not everybody is getting the message, however, Morley warns. “With some honorable exceptions,” he says, “traditional private banking, unlike retail banking, has been slow to address this. A few were fortunate, saw the writing on the wall and invested time and effort in making key changes.”
