“Banks need better tools to more effectively develop business with their customers”

Private banking and wealth management businesses looking to expand their respective portfolios in Asia face several challenges today - increasing competition, more demanding clients and stricter regulatory pressures. As this market matures, customers demand more sophisticated products from financial institutions. As a result, these institutions are increasingly looking to leverage on the latest advancement in financial technology to boost operational efficiency and successfully capitalise on new opportunities for sustainable growth.

Speaking on wealth management space, Scott felt consolidation is inevitable in the near future, “Institutions with assets of less than $10 billion in the wealth management business will find cost to income pressure a big challenge. Either these institutions will need to invest in technology to improve their processes and asset base, or consolidate as businesses. Globally, smaller financial institutions will likely exit the market or sell to others. I expect to see more wealth management consolidations in 2014.”

Wealth management institutions are being forced to invest in technological solutions that can empower relationship managers with better advisory capabilities and sustainable and targeted relationships. Often institutions begin with developing the relationship management capability at the front-end first, and then integrate it at the back-end.

“The three key areas where banks are investing in technology today are, firstly, towards transformation programme for their back offices to be compliant with regulatory requirements. Secondly, we are seeing banks invest in digital channels to engage with their customers and provide more sophisticated interactions. Thirdly, the focus is on relationship management. Banks need better tools to more effectively develop business with their customers, through provision of targeted and relevant investment proposals,” Scott pointed out.

Banks need solutions that can help them adapt to the changing regulatory environment and market realities, whilst helping them more effectively manage relationships with their clients.

“Avaloq has a holistic approach in design, making it possible for institutions to effectively renovate the front-office function in a modular fashion and progressively carry modernisation to the back-office. We believe this will be a trend that we will see more of in near future,” Scott said.

However, penetrating into the Asia Pacific market has not been an easy task for providers of wealth management technology. The strict regulatory environment poses as a roadblock for companies aiming to make inroads into countries such as China, where wealth management institutions are still struggling to build sustainable growth. The wealth management business in China largely focuses on trading, asset management and risk management, supported by proprietary IT systems or local wealth management solutions.

Currently, wealth management technology providers focus primarily on developed pockets within the Asia Pacific region that has a higher concentration on wealth management and private banking institutions such as Singapore, Australia and Hong Kong.

Avaloq is no different, having increased its foot prints in the region over the last few years. The group already has customers in Singapore and Australia, and recently acquired its first Chinese customer – helping Agricultural Bank of China’s Hong Kong branch to implement Avaloq Banking Suite. The implementation project could prove to be an important milestone in the company’s roadmap towards increasing its presence in Asia Pacific, as the company has had to invest in specialised product features for the Asian market, including support of specific structured investment products and credit related management capabilities.

Having established its brand in Singapore in 2008, with DBS Bank being one of its earliest clients, Scott said, “Singapore has close similarity to Switzerland. Both countries offer a wealth of local expertise, a sound and stable government, and a regulatory environment that supports investments.”

Interestingly, Avaloq’s approach is a relatively new one, with the company offering business process outsourcing (BPO) services as well as software services. It has already established the BPO process in Switzerland and Germany, with plans to expand it to the UK and Singapore. To date, over 50% of Avaloq’s revenue comes from BPO and software services.

*Peter Scott started his career with Barclays Bank. Thereafter he has held several roles with SWIFT, including global business development director. Prior to joining Avaloq, Scott was global head of banking at Sun Microsystems Corp, and was also head of retail and wholesale banking at Misys.