EXCLUSIVE: Industry Debates Digital Transformation In Swiss Private Banking - Conference

Tom Burroughes Group Editor 4 August 2015

EXCLUSIVE: Industry Debates Digital Transformation In Swiss Private Banking - Conference

It is a standard argument that technology is changing banking, but just how far or fast is this happening and what priorities must be set? Figures from the Swiss industry recently debated the topic.

The air is thick with talk of “digital transformation” of business but just how much is really happening in the sometimes dusty corners of Swiss private banking? Are business leaders really making the most of what technology has to offer in delivering great service and also using it to mitigate some of the pain of rising costs?

These were some of the questions fired at panellists speaking at the WealthBriefing Summit in Zurich on 18 June. The speakers were Martin Engdal, market strategist and director of solution marketing, EMEA, Advent Software; Paco Hauser, chief operating officer, director, professional services, Appway; Dr Robert Rümmler, senior manager, IT advisory practice at EY; and Holger Spielberg, managing director and head of innovation, digital private banking for Credit Suisse. The panel was moderated by Stephen Harris, chief executive, WealthBriefing. (To see a previous report of a session at the conference, click here.)

Sponsors for the event were Advent; Appway; smartKYC; DART Talent and Executive Search; Standard & Poor’s MMD; ProFundCom.

The presence of Spielberg on the panel, representing as he does the Alpine State’s second-largest bank, was a particularly useful one for the audience. Spielberg does not come to the bank from a conventional financial sector background. He previously held the position of head of mobile payment and retail services at PayPal and worked at various start-ups and risk venture companies in Silicon Valley. He said Credit Suisse doesn’t distinguish between change and the ongoing running of the bank.

“It is a continuous journey and not a project that stops next year. The challenge is combining futures while tackling legacy issues,” he said. “In the current hype about fintechs, banks need to think about who you want to be in the future. We look at fintech to speed up our processes…we know what we want to do and where we are going.”

Spielberg argued that what he called “second-phase” fintech firms will go deeper into the business and processes of wealth management firms.

Asked about the kind of priorities that banks set on tech spending when competiting against other business areas, Spielberg said of IT spending: “It is not an option for us not to do it.”

“We want to reshape the relationship between the client and the bank. We want to understand clients much better than we do and have much better matching of RMs,” he said, noting that clients are now far more willing to use tech to explore investments and financial situations for themselves. “The world is changing….people Google their symptoms and then they go to their doctors.”

Room for change
Appway’s Hauser pointed to the issue of being able to reconcile different tech spending demands at the same time and leave room for innovation: “In Switzerland there are two or three main drivers of core systems and if they eat all the money there is nothing for change.”

The mindset towards fintech by bankers in Switzerland needs to change, he said.

“When we talk to big US banks at the top level they want to know how tech fits in to their systems…a Swiss executive would not ask that question. The top management needs to grasp the idea that technology strategy is crucial to the future of banking.”

Hauser was asked about the willingness, or the lack thereof, of banks to pay for pilot projects to test the feasibility or attractiveness of a technology. The case for having them depended on the nature of the project, size of the customer, and other factors, he said.

Appway does pilot and full projects, he said.

“Seeing is believing – that’s the main point of our projects….A lot depends on the key stakeholders and who is asking for the pilot project,” he said, adding that Appway does charge for pilot projects because there are considerable benefits to clients. It doesn’t charge for licences for pilots.

Advent’s Engdal devoted some time to looking at the different ratios of spending on “running the business” as against technological improvements. Engdal said large, all-service firms were spending more on running the business while niche players spent a higher share on IT improvement. Among those firms spending strategically on IT, they were more successful as businesses, he said.

He noted that in the US there is more focus on improving the client experience; in Europe, banks “are struggling”. They are having to deal with such developments as the MiFID 2 regulations and more strategic, development-based spending may have to wait.

There needs to be more return-on-investment analysis on tech implementations, said Engdal. Firms need to understand what they can gain from the cost of spending on IT. A lot of spending on IT is about enabling a bank to grow without expanding its costs – to be more scalable. It takes time to quantify this.

“There has been a lack of technology knowledge at the board level although this is changing,” he said.

It is imperative for technology to make advisors more effective. At the moment they only spend 40 per cent of their time with clients, added Engdal.

Switzerland rising
EY’s Rümmler said it is not a huge surprise that IT spending as a proportion of total spending is high for wealth managers. IT spending in Switzerland stands at 16.6 per cent of total spending, having risen not only in relative but also in absolute terms over the last few years.

In 2009-10, wealth managers were channeling more than two-thirds of total IT spending to day-to-day bank operations; this situation has improved and now the amount of “keep-the-lights-on” spending has fallen to 63 per cent. “That is a good development and one that evidences greater flexibility in change management. However, there is still a substantial focus on regulatory work and protecting client data,” Rümmler said.

“In the digital economy there is a greater need for the availability of information 24/7 and for more channels.” He added: “It is difficult at times to distinguish between ‘change’ and ‘improvement’. Most organisations will fall into one of two categories: those that focus on keeping the lights on and those that work on improvements”.

Comparisons with other sectors
Rümmler argued that bankers haven’t seen anything like the radical changes happening in other sectors. “If you look at the wealth management industry, regulation has meant that the wider industry has not seen widespread disruption,” he said. Contrast and compare that situation with the impact of firms such as Amazon on retailing, he said.

On a positive note, Rümmler went on: “Wealth managers have the opportunity to work together with fintechs…where there is a big opportunity in two areas: client engagement and using data to tap new revenue streams.”


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