Temenos MD for APAC Surveys the Evolving Wealth Management Landscape and Digitisation
Martin Frick, managing director of Temenos Asia Pacific, last met with Hubbis face to face in September last year, when he was dashing hither and thither around the 28 APAC countries he covers. He ‘met’ with Hubbis more recently from his home office to update us on the growth of digital banking solutions powered by AI and automation and targeted at the mass affluent of Asia, the expansion of robo-advisory across the region, including amongst the growing ranks of ‘Neo’ banks, and the growing emphasis on front-end digitisation and delivery amongst the firm’s core banking clients. Temenos, he reports, is particularly well positioned to exploit the key wealth management trends he is witnessing across the region and has the range of solutions, the scale and ambition to keep its Asia growth trajectory in place, despite the chaos caused by the global pandemic.
Temenos AG, listed on the SIX Swiss Exchange under the ticker ‘Temn’, is a world leader in banking software, partnering with banks and other financial institutions to transform their businesses and stay ahead of a changing marketplace. Over 3,000 banks across the globe, including 41 of the top 50 banks, rely on Temenos to process both the daily transactions and client interactions of more than 500 million banking customers. Temenos offers cloud-native, cloud-agnostic front office and core banking, payments, fund management and wealth management software products enabling banks to deliver consistent, frictionless customer journeys and gain operational excellence.
Temenos software is proven to enable its top-performing clients to achieve industry-leading cost-income ratios of 26.8% and returns on equity of 29%, 3X better than the industry average. These clients also invest over 51% of their IT budget on growth and innovation versus maintenance, which is 2X the industry average, proving the banks’ IT investment is adding tangible value to their business.
Major trends emerging
Frick opens the discussion with an overview of what he sees as some of the major trends in APAC, which has notes had been enjoying constant, rapid expansion of economic power and private wealth, virtually non-stop for two decades.
“The growth in wealth management, meanwhile, is not in the number of institutions but in AUM in the more established markets, as well as frontier markets opening up, such as Vietnam, Myanmar and others,” he reports. “In fact, we sold our first wealth solution in Vietnam this year, and our second in Thailand; in both markets and plenty of others in this region, we are witnessing strong expansion of the mass affluent space.”
He notes that the insurance market is also expanding apace, partly driven by the need to address shortfalls in retirement funding and rising longevity. “There is a fundamental shift in the way retirement funds are managed as the investment opportunities in funds and other vehicles are more limited, so this is a means of achieving both security and investment at the same time. Hence, we get significantly more requests from insurance companies that want to have wealth solutions for themselves.”
A broad regional strategy
As to the major markets for Temenos currently, these remain the strongest centres such as Singapore, Hong Kong and Australia. “In those more mature markets,” he reports, “the deals that take place are on a larger scale, whereas perhaps in the other SE Asian markets there is a lot of demand and interest but smaller size projects. They tend to start pretty small, and gradually build to more and more complex products and solutions.”
Asia today represents some 20% of Temenos global revenues, and it has had great growth over the last five years, he reports.
He remarks that the evolution of the company has seen it coming from the core banking side, as well as now significant growth into portfolio management systems and in the front office digital banking space.
Moving from the back to the front-end
“Today,” he reports, “we are selling more digital front office solutions, and artificial intelligence solutions to achieve better portfolio analysis, and we certainly see a major trend in this region for investment in solutions shifting from the back end to the front end. In fact, we have a lot of wealth offerings coming up that don't even have a back end, such as for a Hong Kong client , a new digital bank, but they are a distribution channel and they work on a major segregation between distribution and manufacturing, a trend that is becoming more and more evident in the more developed markets.”
He expands on this, commenting that the new breed of virtual banks, for example in Hong Kong, do not have client advisors, and they don't have manufacturing capabilities for wealth products. “They essentially white-label wealth products for other manufacturers like the traditional private banks and distribute this product in a fully-automated way. And another good example are robo-advisors, again focusing on delivery not manufacturing. We see this a lot in both Singapore and Hong Kong.”
Growing ranks of mass affluent
Frick remarks that the true drivers for Temenos growth in the region are the mass affluent end customers, not the HNW and UHNW space.
“The digitisation taking place to reach out to these clients has two aspects,” he reports. “The first is the channel of communication allowing client advisors to interact with the client, and the second is data management, using big data and AI to better analyse the portfolio of clients, to analyse client behaviour, combining those findings with portfolio information and resulting in better and more relevant proposals for the clients.”
Frick comments on what he sees as the Temenos USP and competitive edge in the region. “We enter the market from different angles,” he reports, “so we have an explainable AI capability that helps customers provide a service to their end clients for analysing their portfolios, and that can be used as a microservice where our customers don't need to have the rest of the Temenos stack in-house.”
He adds that whereas with many of the competitors, the customer must buy the whole suite, front to back, but they do not offer the same type of progressive component, or modular-type solutions that Temenos offers. “Moreover,” he says, “we have the scale, with major private banking clients worldwide and across APAC, with 700 people in-house to leverage, offices in 14 countries, clients in 28 countries, and 470 clients worldwide. As I see it, none of our competitors comes anywhere close to this presence and reach.”
A holistic approach to empowering the RM
He also tackles the question of whether the relationship manager is actually really becoming empowered by technology, truly leveraging digital to advance his or her capabilities and skill and becoming as a result more efficient and more productive.
“We had already seen traction before the pandemic,” he reports. “Certainly, the virus has accelerated the adoption of digital communications protocols, secure chats, encrypted messaging, remote video conferencing and so forth. Our digital front office tool, is popular as a secure chat, secure video tool, while there are significant advances in data aggregation and assimilation, resulting in more granular analysis.”
But at the same time Frick observes that RM enhancement is also about far more analogue changes, such as how RMs are engaged and then incentivised, and less so about technology.
“I remain a robust proponent of the hybrid model, as technology is one element of wealth management that must be paired with the human element and reinforced by the appropriate management vision and remuneration structures,” he reports. But this relates primarily to the HNW and UHNW market, whereas in the mass affluent and retail markets, the distribution is clearly more of a self-service model, as economically and logistically there is no choice other than to serve people through AI and robos.”
He expands on this commenting, noting that particularly the HNW and UHNW private banking clients still expect the human contact for the nuances of each service category or product group, and they expect their wealth managers to tailor these to their needs and profiles, which thus far chatbots are not yet able to do. “At some point,” he says, “wealth management clients in Asia therefore want the reassurance of decisions made with the support of their advisors.”
That is why Temenos believes the hybrid model for wealth management will prevail in the decades to come.
“Humans will make vital decisions and deliver bespoke advice,” he explains, “while robots and software will mine data, provide intelligence, and automate some of the cumbersome administrative processes. In short, as we see things, humans and machines will be working side-by-side in Asia’s wealth management sector for a long time to come.”
Banking on Asia’s banks
Frick also reports that the firm’s core market is the banks and private banks, not the IAMs and family offices. “We focus first on global, regional or universal banks that want to have a mass affluent and retail offering in these markets. A good example is Military Bank in Vietnam which decided to go into that segment, and now use our technology on top of their existing core banking; this gives them what we can describe as a 360 degree view of the clients in portfolio management, and the ability to then accurately offer simple products like mutual funds, ETFs and other investment products.”
In a press release dated July 8, Temenos reported that Military Commercial Joint Stock Bank (MB) had selected Temenos Infinity Wealth to deliver digital wealth management services to Vietnamese private banking customers. “MB will integrate Temenos Infinity Wealth, the leading omnichannel digital banking product, with Temenos Transact core banking product to gain a single, end-to-end wealth management solution,” Frick reports. “Temenos’ cloud-native, API-first technology will allow MB to be first to market with differentiated services for mass affluent, HNWIs and UHNWIs in Vietnam’s untapped investments market. The implementation will be supported by our partner, Syncordis.”
Infinity into Vietnam
He explains that Temenos Infinity Wealth combined with Temenos Transact delivers the broadest functionality from back-office processing to front-office portfolio management. Temenos’ AI-powered technology will improve automation and allow MB to optimise manual processes and deliver frictionless customer experiences. “Infinity Wealth will also centralize MB’s data and provide a 360-degree customer view so the bank can provide greater levels of personalisation,” he adds.
MB has been a customer of Temenos since 2010, when the bank deployed Temenos Transact to handle increasing transaction volumes and support its growth. The bank was originally established in 1994 to provide credit to military enterprises. MB is now one of the top five commercial joint stock banks in Vietnam with chartered capital over USD730 million and USD11 billion assets under management.
Frick notes that according to a report by New World Wealth, Vietnam’s wealth market is predicted to grow by 200% between 2018 and 2028. It is believed that its 20,000 people have investible assets in excess of USD1 Million and hold more than USD $210 billion in ordinary cash accounts.
“We are excited to extend our relationship with MB as they endeavour to become the leading provider of private banking services in Vietnam. Vietnam’s wealth market is poised for remarkable disruption and growth,” Frick comments.
Brokers galore in Asia
“And,” he continues, “we focus heavily on the securities brokers, which in this part of the world remain numerous. For example, in Thailand, there are still around 75 different securities brokerages, some very small, some of them reasonably big. And obviously with all the opportunities consumers have today to use a robo-advisor or to find very cheap trading platforms, these firms are adapting their business and delivery models to the new age, and are embarking further into wealth services. Phatra Securities in Thailand is a good example, where we are helping them boost their portfolio management proposition and delivery on top of their existing back end.”
He notes that also in this category of brokerages are Chinese, Taiwanese and Korean brokerages that have expanded across Asia. “This is another very interesting segment for us,” he reports, “although we have never thus far focused on the Korean or Japanese markets, which are dominated by local providers.”
While Temenos is forging ahead well in SE Asia, Hong Kong and Australia, the firm is making selective progress in India, especially in the asset management space with its Temenos Multifonds’ solution. “The asset management industry is developing well there,” he reports, “but many of the other solutions are offered by local players in wealth management with international competitors making fewer inroads.”
Frick’s Key Priorities
Frick explains that the mass affluent space in SE Asia remains the key priority, followed by digitisation of the front office in the more mature markets like Singapore, Hong Kong, and others. “We will be launching a lot of new product around these spaces this year,” he explains, “especially around the explainable AI capabilities for portfolio analysis, communication engagement tools, and solutions for complex client onboarding and the automation of complex client onboarding.”
A solid platform for growth
Frick reports that the Temenos market position in the region is solid and growing. Of the 20 biggest private banks in Asia Pacific, he says half use Temenos. “Our difference is our ability to tackle the problems and offer a cloud-native, cloud agnostic end-to-end digital banking platform,” he reports “be it a front office solution, a channel solution, a back-end solution – or modularly renovating step-by-step as we do for some bank clients. And we have outstanding cloud technology and API solutions, compared with the competition.”
He closes the discussion by remarking both on the frustrations of being an MD covering 28 countries that he cannot visit, but also of the positives that he and colleagues have taken from the situation in 2020. “We have adapted really fast to this new reality and we are well prepared for the times ahead. We know we can access our clients and service them properly, but of course we all hope for a resumption of some sort of former normality. The drivers of evolution in the wealth industry regionally remain intact and the opportunities ahead are both challenging and exciting.”
Frick is Swiss and hails from a small town named Wil, near Zurich. “That is where we have our family home now,” he says, “it is more or less right in the middle between Zurich and St. Gallen. It is a different world from Singapore - my hometown has 17,000 people living there, which is about the same as on HDB government-built apartment block in Singapore. It's a very different upbringing from the one our two children have here today, which is also very good, but in different ways.”
Educated in Switzerland, Frick later completed his MBA in the US. He worked for several years as a software developer with Raiffeisen Bank in Switzerland, before moving to the private bank, Clariden Leu, which was later bought over by Credit Suisse.
"Raiffeisen then asked me back," he recalls, "and after fixing an IT project for them, I moved over to build out a project portfolio on the business side, which was fascinating, all about assets and liability management, building a treasury solution for them. Raiffeisen then acquired an IT company, merged their internal IT and the CEO at the time asked me to go back into the technology side." He later moved to UBS and then at the age of 40 decided to move to Asia and where he held senior roles in the technology sector.
In 2014 he became the Managing Director for Temenos in Asia Pacific. "It has certainly been an exciting time for the past 11 years out here," he recalls. “I might have added to my key priorities earlier a comment that I would certainly like to travel again before long. We have been here since March 14 without leaving Singapore, and while we like it very much we are itching to travel again and me of course for work as I am in charge of 28 countries, so I was more or less in an airplane all the time.”
“At first,” he adds, “the lockdown allowed me a more balanced work and home life, more normalised hours, more time with the family. But honestly, I would now prefer perhaps a blend of this new model and the older life, but not too much of either extreme, and perhaps no more racing through five countries in two days. Like most others, whatever transpires, I will be doing more virtually going forward, it has allowed me to be very targeted and more selective with my business than I used to be. Perhaps that is my biggest lesson learned actually from this whole COVID mess.”
Frick has 16-year-old twin boys who go to school in Singapore. "They are big into sports, like me, but some of these activities of course have been hampered by the virus," he reports, "for example rugby and ice hockey. I also love sports and still play ice hockey myself as well as soccer when time and the pandemic permit.”
When he was younger and living in Switzerland, Frick was also a keen and accomplished snowboarder and loved paragliding. "Singapore is not the best place for either of those activities, as you might imagine," he notes, "and anyway I stopped paragliding when the boys were born - under strict instruction! I managed to get fitter during the lockdown, and intend to hold onto that, despite the restaurants opening up again, and of course the variety and quality of food here in Singapore is outstanding.”
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