Helping Asian Wealth Management Communities interact

Strategy & Practice Management

Using software to cut through red tape requirements

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Local and regional private banks are likely to seek out new software processing solutions, as they seek to retain clients and cut compliance costs. Nicholas Hacking and Adrian Williamson of ERI believe their OLYMPIC Banking System has the answer.

Banks and insurance companies have hit the headlines in recent months for their support of fledgling financial technology companies. One recent example was DBS Bank (Hong Kong)’s announcement of an inaugural DBS Accelerator Programme, in which the bank financed a set of start-up fintech companies. Other financial organisations such as MetLife are pursuing similar strategies.

Why is this? Nicholas Hacking of ERI has some suggestions to make.

“In part it gives these organisations marketing, and demonstrates they are supporting the leading edge of fintech, and doing things to look like a very modern institution,” says the director of sales.

However, there is more to it than pure branding. “There is also an element of looking to see if there are other ideas out there,” he adds. “It’s similar to the way big pharmaceutical companies go out and sponsor small start-ups, which they may end up buying if they succeed. The same principle applies.”

The use of financial technology is proving to be increasingly important in private banking, as it can help cut costs. That is an appealing ingredient at a time when compliance expenses are spiralling, along with bankers’ salaries.

At the same time, Asia’s ever-rising HNW wealth growth has not fully converted into rising private bank AUM, which has pressurised the balance sheets of many organisations in the region. “We are clearly seeing some private banking organisations withdraw or reduce their exposure to this market because they have not been able to make the returns they were expecting,” says Hacking.

However, this creates opportunities for vendors such as ERI. “There is a solid foundation of business here that will grow, although perhaps not at the hyped levels of previously. We need to be here to support our existing and growing client base to build on that.”

Compliance push

Hacking’s belief rests in large part on the fact many regional private banks are not cutting edge when it comes to their digital platforms. This could stand them in trouble as the world continues to digitalise.

Countries like India are increasingly looking to mobile banking ahead of physical branches, while younger HNW individuals are very comfortable with online tools.

The likelihood is that more people will want their wealth managers to boast sophisticated digital solutions.

Additionally, local and regional private banks are keen to use technology to catch up with the greater reach and branding of their international peers.

“A lot of [HNW] money is in local banks and regional banks,” says Adrian Williamson, ERI managing director for Asia Pacific. “Outside of Singapore almost every country has its own leading banks, which obviously want to retain the funds that they have rather than lose them to the international private banks. They don’t want to have had a client from the cradle, only to lose them to Credit Suisse or JPMorgan as soon as they make it big.

“So there is a huge opportunity there to put in systems to cater to the new requirements of the HNW individuals in their country.”

Ultimately, there are a few common factors that drive a private bank’s potential uptake of a new software system. One of the most important over the past few years have been the need for these institutions to meet the costs of increasing regulatory and compliance requirements in an efficient manner.

This need exists in international centres, and is likely to increasingly gain traction in emerging markets too. “What the financial regulator asks for in Singapore is very advanced in terms of compliance. Other regulators in the region may not be as demanding today but one day they will end up copying what the more advanced regulators are doing,” says Hacking.

“The other obvious driver is shrinking margins. They continue to create an issue for banks, particularly in a low interest rate environment,” he adds.

“Even in the supposedly most advanced countries there are still a lot of processes that are not particularly efficient. For example, many fund purchases still have to be done by fax, even in the world’s centres. There is still a lot of room for improvement.” 

Adrian Williamson

Director - Asia at ERI Banking