DIGITAL TRANSFORMATION – AS TWO WORLDS COLLIDE, HOW CAN THE OLD GUARD WORK WITH THE INNOVATORS THAT OPERATE AT THE SPEED OF DIGITAL?

Wealth Management & Private Banking

Wealth Management & Private Banking

fintech-circle-innovate-240-x-120.jpg             scorpio.jpg

Expert: Nicole Anderson from FinTech Circle

Moderator: Alex Johnson - Scorpio Partnership

Key message

Winners in the industry will be those who blend the human touch and technology as we go through an age of change.

Headlines

  • Previous thoughts on FinTechs taking over financial services have dissipated as it is now more about collaboration
  • It is important not to forget that the old guard has scale, expertise and brand while FinTech represents agility, client-centricity and high risk appetite. These attributes need to be combined in an effective way.
  • There is a segment of the market which cannot access advice, but automation will facilitate this
  • Challenges exist and these include internal resistance to change in terms of the people, technology, sourcing, and legal aspects.

Key themes

The expert presented on some of the key themes emerging in the industry.  

There is a large appetite in the wealth industry for technology, but the wealth sector is facing challenges due to being the least tech-literate sector in the financial industry. The problem here is not that the technology does not exist; rather the adoption process is difficult for many incumbents. Success is dependent on the culture of the organisation and whether or not they have the skills which are needed to embed the new technology. 

For the last 3 years, FinTech has been more than just about optimisation – it has been about hitting the front office for profit generation. Acquiring clients has been the main focus for many firms. In the near future, rapid growth is anticipated as the investment opportunity is now in nascent peer to peer (P2P) lending. We could also expect a search for new technology to support compliance and on-boarding. 

There is a lot of capital going into FinTech but there is also a lack of understanding caused by people thinking the whole industry landscape will change. Previous thoughts on FinTechs taking over financial services have dissipated as it is now more about collaboration. 

There is a common misconception that FinTechs move at the speed of light. However, it actually takes 2-3 years to get to ‘go to market’ status. There is also a common misconception that large financial institutions are slow-moving. 

However, it is just the case that small increments of movement seem even smaller for these establishments. Over the past 30 years, the industry has seen entrants falling by the wayside while agile incumbents gained shares – this time it will be different or will it be the same? 

Fundamentally, clients need to be understood by the wealth industry and millennials cannot continue to be stereotyped. This generation is the most indebted of all, and it is the first generation that is earning less than the previous one. However, they will be inheriting large amounts of money. They are not going to turn to social networks for financial advice as they recognise it is a different type of purchase. 

Only about 30% of wealth firms are digitally engaged. Where will this be in 30 years? The winners who will come out at the end are those who blend human and technology offerings. It is important not to forget that the old guard offers scale, expertise and brand while FinTech represents agility, client-centricity and high risk appetite. These attributes need to be combined in an effective way. 

Of course, challenges exist and these include internal resistant to change in terms of the people, technology, sourcing, and legal aspects. 

There is a segment of the market which cannot access advice, but automation will facilitate this – FinTechs have a great B2B opportunity to partner with wealth firms. Customer acquisition is the biggest problem for these digital firms, as it is for Nutmeg, and those without cannibalisation will move the fastest - D2C robo advisors could work with Tesco and Sainsbury’s as the client base is already there. Banks are encouraged to open up their infrastructure – will this help FinTechs? 

“The sky is the limit for robo advisors who want to offer richer advice.” 

“It is counterintuitive but as you go up the wealth scale, tech engagement increases because it saves time.” 

Moving on to big data, a comment was made on how it becomes everybody’s job and there is a need to be involved in understanding clients. Because IT departments are separate from client-facing teams in big incumbents, larger firms are missing out on opportunities to develop offerings which align with their clients’ needs. 

Digital-only banks claim seamless solutions, but there will be a need for call centres when problems arise. In the future, we will see more reporting moving to tech. There is already a FinTech company which consolidates reporting from different custodians for clients. 

For large incumbents to maximise returns and efficiency, they will have to engage with many different FinTech firms to hit all angles.

 Conclusion

The complementary features of large incumbents and FinTech companies means they both stand to gain from B2B collaborations.

 

 


Top