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Digital Transformation of
U.S. Private Banking
The unrelenting digitization of business, amid continuous regulatory
change and soaring operational costs, is materially impacting
U.S. private banks, requiring them to rethink their business models
and accelerate their push to meet the ever-rising expectations of
digitally savvy high-net-worth clients.
Executive Summary
Even as they struggle to generate new wealth in
a mature market amid ever-growing regulations,
U.S. wealth managers face a wave of digitization that will completely transform the way they
interact with the wealthy, and especially the
young wealthy. Across age groups, wealthy
Americans are tech-savvy, digitally connected
and accustomed to unprecedented levels of
personalized engagement with Web commerce
leaders. Digital technologies have enabled
consumers to access information, interact and
collaborate with peers and conduct transactions
on an anytime/anywhere basis through mobile
smart devices. As these experiences become
embedded in their daily lives, wealthy investors expect a similar experience in the wealth
management area. Specifically, they want more
tools that help them make investment decisions
and provide flexible ways to interact with their
financial services advisors.
For private banks, however, the implications
of digitization go beyond meeting customer
demands. The SMAC StackTM (social, mobile, analytics and cloud) can transform private banking
business models by enabling an integrated and
cohesive enterprise architecture that powers new
business capabilities beyond what is delivered by
the existing assortment of disconnected digital
technologies. A successful transition to process
digitization will create efficiencies by automating back- and middle-office tasks. It will also provide an analytical boost that helps banks better
understand their customers changing needs and
proactively create offerings and services. For
advisors, a robust enterprise architecture will
provide them with easier access to client data,
allowing them to deliver high-value advice.
Customer centricity has always been the essence
of private banking. Now, banks need to extend
customer centricity with the power of digital
technologies. Banks can better understand their
clients digital journeys by collecting and analyzing the data generated by their digital behaviors and online activities, which we call a Code
Halo 1 (the digital information that accumulates
around people, organizations and devices). By
getting to know customers by analyzing their
Code Halos, banks can begin offering more
personalized products and services that meet and
anticipate customer needs. Doing so will mitigate
the risk of losing mindshare and market share,
create operational efficiencies, drive product
cognizant reports
Understand
Create
Drive
Worth:
<$500,000
Worth:
$500,000$2m
Worth:
$2m$4m
Worth:
+$4m
Today
56%
49%
53%
62%
76%
Future
77%
71%
73%
85%
92%
Discovery
Consideration
Use social to
Use social to
stay up-to-date
seek advice or
Both
on financial
gather info to
trends or
make a financial
companies
decision
21%
63%
32%
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Other central
functions (including
restructuring)
Human
resources
Operations
& IT
2%
4%
1%
17%
0
4%
13%
57%
Communications
& marketing
Accounting,
finance
& control
20
Asset &
product
management
40
Since 2010, wealth managers costs have increased in nearly every function.
-20
2%
MyPrivateBanking also found that wealth management Web sites fall short on social media
Reducing costs
Meeting regulatory requirements
Attracting new clients
Second most
important driver of
technology budgets
Retaining/attracting advisors
Retaining clients
Base: Nine private banks; respondents were allowed to select more than one response.
Source: Aite Group, 2013
Figure 4
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2013 2016
2013 2016
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Footnotes
1
For more on Code Halos, read Code Rules: A Playbook for Managing at the Crossroads, Cognizant
Technology Solutions, June 2013, http://www.cognizant.com/Futureofwork/Documents/code-rules.pdf,
and the book, Code Halos: How the Digital Lives of People, Things, and Organizations are Changing the Rules
of Business, by Malcolm Frank, Paul Roehrig and Ben Pring, published by John Wiley & Sons, April 2014,
http://www.wiley.com/WileyCDA/WileyTitle/productCd-1118862074.html.
Pierre Bouquieaux, Leveraging Technology to Capitalize on the Transfer of Wealth to
Generations X & Y, Temenos, February 2014,
https://www.temenos.com/en-us/market-insight/private-wealth-insight/future-of-bankingwhite-paper/.
2013 Millionaire Outlook Executive Summary: Gen X/Y Millionaires Not Sitting Idle,
Fidelity Investments, 2013,
https://fiws.fidelity.com/app/literature/log?literatureURL=9584382.pdf.
Brent Beardsley, Jorge Becerra, Federico Burgoni, Bruce Holley, Daniel Kessler, Federico Muxi,
Matthias Naumann, Tjun Tang and Anna Zakrzewski, Global Wealth 2014: Riding a Wave of Growth,
BCG Perspectives, Boston Consulting Group, June 9, 2014,
https://www.bcgperspectives.com/content/articles/financial_institutions_business_unit_
strategy_global_wealth_2014_riding_wave_growth/.
New Report: Standstill in Wealth Managers Social Media Activities, MyPrivateBanking, Nov. 29, 2013,
http://www.myprivatebanking.com/article/report-social-media-for-wealth-management-2013.
Wealth Managers Websites Getting Better - Top 3: ABN AMRO, Barclays and Coutts,
MyPrivateBanking, Nov. 8, 2013,
http://www.myprivatebanking.com/article/report-websites-for-wealth-management-2013.
Michael Leibel, Tech-savvy Investors Want Digital Solutions, but Firms Lag Behind, BCG, June 23, 2014,
http://www.reuters.com/article/2014/06/23/wealth-investment-tech-idUSL2N0P40PY20140623.
Ibid
The Financial Services Industry Reaches an Inflexion Point, Temenos Group and Deloitte, 2013,
https://www.temenos.com/en-us/market-insight/retail-insight/inflexion-point/.
How Client Data Can Transform Sales, CEB Financial Services, May 21, 2013,
http://www.executiveboard.com/blogs/how-client-data-can-transform-sales/.
10
Liz Moyer, A New Wave of Apps for Wealthy Investors, The Wall Street Journal, July 11, 2014,
http://online.wsj.com/articles/a-new-wave-of-apps-for-wealthy-investors-1405110956.
11
Sharlene Goff, Scramble to Improve Mobile Apps as Private Banking Warms to Web,
Financial Times, June 9, 2014,
http://www.ft.com/intl/cms/s/0/ac5cc7d4-ea7b-11e3-8dde-00144feabdc0.html#axzz3C4vhiYu0.
12
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Liz Moyer, A New Wave of Apps for Wealthy Investors, The Wall Street Journal, July 11, 2014,
http://online.wsj.com/articles/a-new-wave-of-apps-for-wealthy-investors-1405110956.
13
Tom Groenfeldt, Morgan Stanley Takes On Big Data With Hadoop, Forbes, May 30, 2012,
http://www.forbes.com/sites/tomgroenfeldt/2012/05/30/morgan-stanley-takes-onbig-data-with-hadoop/.
14
15
16
Bernard Marr, Amazon: Using Big Data Analytics to Read Your Mind, Smart Data Collective,
Feb. 6, 2014,
http://smartdatacollective.com/bernardmarr/182796/amazon-using-big-data-analyticsread-your-mind.
17
Credits
Author and Analyst
Akhil Tandulwadikar, Senior Researcher, Cognizant Research Center
Design
Harleen Bhatia, Design Team Lead
Chiranjeevi Manthri, Designer
About Cognizant
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