Matthew Hardeman reports on the wave of anxiety washing over wealth managers from San Francisco to Shanghai
Tech companies are willing to take on the most difficult challenges we face today. Google is reported to be considering how it could revolutionise America’s dilapidated power grid; the Tesla Hyperloop may supplant high-speed rail; and Google (once again) wants to float balloons over Africa to give the continent wifi. Suddenly, it doesn’t seem so revolutionary that tech firms might also move into banking. But bankers are worried.
Ask Tan Su Shan, head of consumer banking and wealth management at DBS, one of the largest financial services groups in Asia, where the landscape is already changing in this area. ‘I worry about the rise of the non-bank players in the wealth space — from Alipay to Tencent, and possibly a Facebook Bank or Google Bank of the future — [and] how quickly the digital revolution is changing the wealth management landscape, and how these digital players could disintermediate banks very quickly.’
Some non-bank players are prominent already. Tencent, China’s largest listed internet company, is expanding into online payments and e-commerce. Alipay — the online payment arm of Alibaba, China’s biggest e-commerce company — is already there. Tan says it’s time to take notice: ‘Alibaba is now offering wealth management products to their clients, just for example.’
Nor do Google Money or Facebook Bank (Facebank?) sound far-fetched on the face of it. They even have a nice ring to them, and given the penetration both companies already have — over a billion active users of Facebook, six billion daily Google searches — they have ready-made audiences. This naturally makes banks wary. ‘It’s a risk,’ says Michiel van Selm, a director at PwC who is based in Singapore. ‘People have been talking about this for quite some time.’
Tan, an Oxford-educated banker and nominated member of the Singaporean parliament, recently gave a talk at a TED conference titled ‘The Evolving Nature of Banking’. She doesn’t just understand the evolution but is making it happen, too, putting digital front and centre at DBS. Its mobile apps are the best-liked in the banking world, according to a recent study, while a recently announced partnership with IBM is allowing DBS to use its very own supercomputer (named Watson) to digest the cascade of data produced by its clients’ transactions.
‘There are very, very few other firms doing this right now,’ says Sebastian Dovey, managing partner at Scorpio Partnership, a wealth management consultancy. And the implications are vast.
Dovey gives an example of what banks can do: ‘We have a huge amount of data — nearly 15 million cross-reference points on the client data that we have now — so we can pretty much tell you [about] a 33-year-old Chinese female business owner who uses X, Y and Z financial providers… what they like, what they dislike and what they are prepared to pay for next.’ And who should have this sort of data but Google, Facebook et al?
Just because they can doesn’t mean they will, of course. ‘The good news for the banks is that they [the tech giants] can’t be bothered right now,’ says Dovey.
‘The Googles and Facebooks of the world still appear to see better value in their core businesses and elsewhere, and if they start in this sector they will probably attack retail first.’ This would keep them safely away from the complex regulatory minefield that is modern private banking.
Instead, it will be a few smaller, pure-play digital firms. UK investment upstart Nutmeg, for example, which allows you to control your investment portfolio online, has previously been featured in Spear’s.
The most likely beneficiaries of all this digital data and access will be the companies who already have financial and digital relationships with these customers, ie banks.
Slowly but surely the approach has begun. In the last twelve to eighteen months, the 25 largest private banks have already spent nearly $1 billion on front-end digital ‘redevelopment’, according to Dovey.
Banks needs more than just clever apps, however — they must get their relationship managers to understand the true power of data and how they can use it to reflect and guide their clients’ choices.
Where change is happening, however, it appears much of the impetus is coming from the clients themselves, who are already accustomed to technology in all aspects of their lives. ‘As our clients become more technologically savvy and empowered, they are increasingly looking for simplicity, relevance and speed when it comes to wealth management,’ says Tan. That means, in part, non-traditional banking.
As great as the possibilities for digital development in wealth management are, however, don’t expect to see robots entirely replacing relationship managers any time soon: HNWs pay for the human touch.