Steve D’Souza, global head of Private Banking and Wealth Management at Fenergo, outlines a future of private banking where digital leads the way.
The exclusive, high-end services offered by private banks are provided to high-net-worth individuals (HNWIs) who receive benefits such as tailored products or services and face-to-face meetings with a dedicated investment advisor.
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This ‘white-glove’ service starts during the onboarding process: opening accounts AML (Anti-Money Laundering), KYC (Know Your Customer), due diligence and ID checks – processes that tend to be done manually and can prove costly and time consuming.
However, there is a new type of private banking client emerging. By the end of 2020, it’s estimated that 50% of the global workforce will fall in the millennial bracket. The next few years will also see the emergence of the baby boomer inheritance mountain, where large amounts of assets will move across generations.
With a shift in the target demographic for private banks on the horizon, private banks and wealth management firms will need to embrace digital to ensure the needs of new and existing clients are met across the entire client lifecycle.
Embracing digital capabilities
Digital innovation and new technologies offer opportunities for the private banking sector. For example, transitioning regulatory and compliance workflows from manual to digital provides improved efficiency, cost savings and lower time to revenue, in addition to a more positive customer experience.
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By GlobalDataAccording to a 2018 Accenture report, over half of HNW clients over the age of 40 said they would leave their private bank if an integrated and seamless channel wasn’t available. This demonstrates the level of customer demand for a hybrid approach to communicating with their bank.
By embracing digitalization private banks will be able to move resources to profitable tasks and accelerate client onboarding through increased process automation and the introduction of client self-service channels.
The current client experience challenge
It’s essential that customers experience frictionless, personalised interaction with their financial institution from the beginning as this sets the tone of the entire client relationship.
Across the financial services industry, however, banks are facing an increasing regulatory burden. Private banks and wealth management firms, in particular, are under significant pressure, given there are specific transparency expectations when it comes to onboarding HNW clients.
Heightened regulatory demands around sanctions, politically exposed persons (PEPs) and beneficial ownership transparency has contributed to requests for more documentation, delays and poor customer experience with private banking and wealth management clients.
The onboarding process for these individuals can be long, repetitive and inefficient, leading to poor customer service. First impressions count and a smooth client onboarding process is essential for HNW clients who are used to receiving an efficient, streamlined client experience.
New clients can be contacted up to ten times for documents that often need to be submitted in-person. They may also be asked for up to 100 individual documents to complete the onboarding process.
Once received, these documents need to be manually assessed and analysed to ensure authentication. An additional challenge is outsourcing these processes which comes with risk. Accountability will remain with the institution requesting the checks, with recent GDPR requirements around the transfer of data outside the EU adding to this.
What sort of digital?
Digital onboarding across the entire client lifecycle may seem like the simple solution for old and new clients. Face-to-face meetings will be less frequent with the ability to provide documents remotely via online portals. Client interaction will also be limited to when information or data is required at appropriate times.
Advanced technologies and capabilities such as natural language processing (NLP), machine learning (ML) and optical character recognition (OCR) will free up the middle and back office who will no longer need to deal with repetitive, manual processes such as scanning documentation. These technologies will allow private banks and wealth management firms to extract the required information and text from scanned documents which can then be cross referenced against other data sources internally and externally.
The benefits of digital onboarding
Private banks and wealth management firms can fast track time to revenue, reduce costs, improve efficiency levels and focus on more profit-driven tasks if they embrace new, innovative and highly automated technologies that can help reduce regulatory risk and streamline the compliance burden during the onboarding process. Private banking clients will reap the ultimate benefits by experiencing a new customer experience and onboarding process through these end-to-end workflow improvements.
