Professional Documents
Culture Documents
Digital Transformation in
European Private Banking
To create a distinctive customer experience, improve risk monitoring
and regulatory compliance, and generate new operating efficiencies,
European private banks need to double-down on digital technologies.
Executive Summary
European private banks are battling reduced profits
and the unraveling of bank-client confidentiality,
which has long been the backbone of offshore
private banking. Several factors including a wave
of regulations following the global financial crisis,
customers flagging trust in banking institutions
and an increased demand for transparency are
forcing banks to invest in rewiring their back-end
systems to improve data management, analytics
and reporting.
Changing behaviors among customers are
additional game-changers for European private
banks, including the rise of tech-savvy, connected
millennials, rapid adoption of digital technologies
and demand for new kinds of services. A further
challenge is posed by the rise of new competitors from outside the traditional banking sector
that provide lower cost, transparent and tailored
services powered by digital technologies, such as
social, mobile, analytics and the cloud (i.e., the
SMAC Stack).
In this new digital era, European private banks must
transform in order to innovate, deliver a meaningful customer experience and sharpen their
competitive edge. By incorporating the SMAC Stack
into their business and technology models, banks
can be better equipped to offer a strong customer
experience that meets client expectations for
simplicity and convenience. Advisors, for example,
can be more productive and interact with
customers anytime and anywhere, across multiple
channels. Digital tools and automation can also
improve risk monitoring and compliance.
Banks embarking on a digital transformation
must also focus on gaining complete knowledge
about customers by leveraging what we call a
Code Halo the digital information surrounding
customers, organizations and devices. In addition
to harvesting the insights that can be gleaned
from this invaluable information, banks must also
improve data security, manage organizational
change and address their legacy infrastructures.
A Period of Transition
The European private banking industry has yet
to recover from the 20082009 financial crisis, even as its counterparts in North America
and Asia have returned to profitability. Industry
profits in 2013 were roughly 20% less than precrisis levels1 and continue to be affected by lower
interest rates and increasing regulatory costs.
cognizant reports
&RPSHWLWLRQIURP1RQWUDGLWLRQDO3OD\HUV([SHFWHGWR,QFUHDVH
&KDQJHLQSHUFHQWDJHRIVXUYH\UHVSRQGHQWVLQGLFDWLQJZKHWKHUHDFKRSWLRQLVDFRPSHWLWRU
2QOLQH:HDOWK0DQDJHUV
1RQILQDQFLDO3OD\HUV
2QOLQH%URNHUV
6SHFLDOL]HG:HDOWK0DQDJHUV
$VVHW0DQDJHUV
)LQDQFLDO$GYLVRUV
&XUUHQW
)XWXUH
3UHPLHU'LYLVLRQVRI5HWDLO%DQNV
/DUJH:HDOWK0DQDJHUV
1RWH1XPEHUVPD\QRWWLHGXHWRURXQGLQJ
7KHVXUYH\LQFOXGHGIDFHWRIDFHLQWHUYLHZVZLWK&(2VDQGVHQLRUH[HFXWLYHVIURPZHDOWKPDQDJHUV
DFURVV(XURSHDQGDQRQOLQHVXUYH\RIDQRWKHULQGXVWU\SURIHVVLRQDOV
6RXUFH-30RUJDQ2OLYHU:\PDQ)XWXUHRI(XURSHDQ:HDOWK0DQDJHPHQW6XUYH\
)LJXUH
cognizant reports
cognizant reports
Current
weekly usage
56%
41%
33%
4.9
hours
Meeting
Face-to-Face
36%
24%
20%
4.5
hours
Telephone
Calls
40%
19%
19%
3.9
hours
Secure Web
Portal
46%
31%
30%
3.5
hours
Social
Networking
47%
23%
22%
3.2
hours
Written
28%
17%
16%
3.0
hours
SMS
40%
25%
19%
3.0
hours
Instant
Messaging
44%
19%
19%
2.6
hours
VOIP (Skype)
33%
19%
28%
1.9
hours
Asia Pacific
Americas
Europe
Provide
Offer
Support
cognizant reports
0RVW9DOXHG)DFWRUV'XULQJDQ2QJRLQJ5HODWLRQVKLS
3HUIRUPDQFHRIYDULRXVIDFWRUVLQGHOLYHULQJDJUHDWFXVWRPHUH[SHULHQFHGXULQJUHODWLRQVKLS
ZLWKDZHDOWKPDQDJHU
*OREDO
$VLD3DFLILF
(XURSH
&RQFLHUJHVHUYLFHV
0HHWLQJRWKHUFOLHQWV
,QYLWHWRILQDQFLDOHYHQWV
,QYLWHWR
QRQILQDQFLDOHYHQWV
7UDQVDFWLRQUHZDUGSRLQWV
/R\DOW\VFKHPHV
'LVFRXQWVRUGHDOV
$FFHVVWRVHQLRUPHPEHUV
3UHIHUHQWLDOUDWHV
3URYLGLQJIHHGEDFN
8QLTXHLQYHVWPHQW
RSSRUWXQLWLHV
'LIIHUHQWDVSHFWVRIDGYLFH
1HZUHOHYDQW
SURGXFWXSGDWHV
'LVFXVVQHZGHYHORSPHQWV
5HJXODUFRPPXQLFDWLRQ
5HVHDUFKFDSDELOLWLHV
6WDWHPHQWVDQGUHSRUWLQJ
&OLHQWIRFXVHGVHUYLFH
3HUIRUPDQFH6FRUH
7KH$PHULFDV
5HVSRQVHEDVHZHDOWK\(XURSHDQFXVWRPHUV
6RXUFH13*:HDOWK0DQDJHPHQWDQG6FRUSLR3DUWQHUVKLS$XJXVW
)LJXUH
For an industry driven by high-touch and highquality service, digital solutions will provide new
ways to engage with customers and deliver a
highly personalized, seamless and integrated
experience. These technologies can reduce
response time, facilitate on-demand service,
and provide real-time investment information
and reports in a digestible format for customers. For instance, Citi Private in View platform
provides customers with all the details of their
portfolio and allows them to drill down to better
understand portfolio performance, notifications
and the latest research. It also offers a single
point of contact to interact with bank reps and
secure cloud storage for personal and account
documents.26
Private banks are expanding their concierge
services and lifestyle management menus for
UHNW clients. Digital technologies can help
deliver those services effectively to customers and
add new types of services. For instance, Barclays
developed a digital platform to provide curated
experiences in lifestyle areas such as travel, arts
and culture. By analyzing what customers choose
and how they interact with these experiences, the
bank can better understand client preferences
and associate those needs and desires with
relevant offers.27
cognizant reports
6
1'
%2
6PDOO3ULYDWH%DQNV
,)$VDQG)DPLO\2IILFHV
)$VDQG)DP
) LO\2IILFHV
KDYHDPXOWLFXVWRGLDQUHODWLRQVKLS
KDYHDPXOWLFXVWRGLDQUHODWLRQVKLS
GRQRWXVHDQ\EDQNLQIUDVWUXFWXUH
GRQRWXVHDQ\EDQNLQIUDVWUXFWXUH
SHUIRUPSURFHVVHVPDQXDOO\ZLWKa
FXUUHQWO\SHUIRUPDOOWKHLUEXVLQHVV
KDQGOLQJWUDGHDQGSRUWIROLRPDQDJHPHQW
DQGUHSRUWLQJPDQXDOO\
RSHUDWLRQVPDQXDOO\
KDYHFOLHQWVZLWKPXOWLSOHFXVWRGLDQ
KDYHFOLHQWVZLWKPXOWLSOHFXVWRGLDQ
UHODWLRQVKLSVDQGIDFHFKDOOHQJHV
ZLWKGDWDDJJUHJDWLRQ
UHODWLRQVKLSVDQGIDFHFKDOOHQJHV
ZLWKGDWDDJJUHJDWLRQ
5HVSRQVHEDVHDFURVV6ZLW]HUODQGDQG/X[HPERXUJ,)$VIDPLO\RIILFHVDQGVPDOOSULYDWHEDQNV
PHGLDQRIHPSOR\HHV
6RXUFH,'&DQG&RJQL]DQWVXUYH\
)LJXUH
cognizant reports
Improving Compliance
A more strict and continuously evolving global
regulatory environment requires banks to be
more cautious about cross-border transactions
and tax laws to avoid hefty fines and damage
to their reputation. Digital technologies can
help banks by providing a real-time view of risk
exposure, as well as timely alerts. Advisors tablets
can be equipped with risk management tools to
check and report on potential risk and compliance
issues early in a transaction, which saves time and
reduces risk for customers, advisors and banks.
Similarly, customers can be given tools that allow
them to assess their risk, and automatically alert
advisors to deviations. Such a setup can prevent
violations during portfolio construction, trade
execution, etc.
Increasing Transparency
To increase transparency, banks need to improve
their reporting and communications on fees,
investment decisions and products. However, few
banks are making an effort to provide such information. For instance, bank fees differ for portfolio management services, making it difficult
for customers to understand the charges. With
regulations such as MiFID II coming into effect
in the next few years, private banks must strive
for greater transparency in their fee structures.
As digital banks allow customers to compare fees
and provide other tools that promote transparency, customers will be empowered with tools
that calculate total costs (divided into advisory
fee, transaction charges, service charge, etc.)
Key Considerations
Digitization is not a one-time effort or investment but rather a long journey toward creating
a better way to interact and transact with clients.
Achieving this transformation requires private
banks to better understand their clients by leveraging Code Halos, revamping the existing IT
infrastructure to support new technologies,
managing change, and improving data security
and customer privacy.
Leveraging Code Halo thinking
Offering individualized services and providing a
richer experience requires a deeper understanding of customers. Private banks can leverage the
data surrounding customers, organizations and
devices to gain deeper insights about customers
through their digital behaviors. By using advanced
and predictive analytics, banks can harness
Code Halos to learn more about prospects and customers in terms of their financial goals, needs (based on their life stage),
tastes, interests, etc., as well as discover
new correlations and business opportunities.
These insights can be used to better target
prospects, as well as cross-sell and upsell to
Quick Take
mBanks Digital Technology Innovation
European private banks are still in the very early stages of digital transformation; however, some of their
retail counterparts such as Polands mBank have been at the forefront of adopting new technologies
to deliver superior customer service.
mBank started in November 2000 as an online retail bank. In 2012, when mobile technology was catching
on with customers, the bank overhauled its back-end systems to offer customers the latest digital
services and mobile capabilities, optimized for multiple devices and operating systems. The banks
transactional architecture is on par with the top online retailers; for instance, customers can transfer
money using SMS and Facebook, and experts are available 24x7 to help customers through video chat
or voice. The banks mobile installment loan process is automated, and money is transferred to customer
accounts within minutes of providing customer details and credit scores. The banks personal finance
management tools offer budget management and provide a complete spending history, along with
forecasts that are enhanced with graphics.32
cognizant reports
Revamping IT Infrastructure
Most banks still rely on legacy technologies that
require manual intervention and do not fully
support new Web services that enable delivery of
real-time information to customers and advisors.
Further, fragmented data infrastructures and
cognizant reports
Footnotes
1
The Future of European Wealth Management: Imperatives for Success, J.P. Morgan Asset Management and Oliver Wyman, November 2014,
http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/2015/jan/The_Future_of_European_Wealth_Management.pdf.
Steve Johnson, European Private Banks Struggle to Regain Traction, Financial Times, Nov. 2, 2014,
http://www.ft.com/intl/cms/s/0/93b724b4-604f-11e4-88d1-00144feabdc0.html#axzz3PLFWrpcf.
James Shotter, Switzerland's Private Banks Come to Terms With Past, Financial Times, June 9, 2014,
http://www.ft.com/intl/cms/s/0/479f9220-ea78-11e3-8dde-00144feabdc0.html.
The Complexities of Private Banking and Wealth Management, International Banker, Jan, 15, 2014,
http://internationalbanker.com/banking/complexities-private-banking-wealth-management/.
Emma Dunkley, Online Wealth Managers Invade Private Banks Territory, Financial Times, Oct. 13, 2014,
http://www.ft.com/cms/s/0/89e0a09c-4fc3-11e4-908e-00144feab7de.html#axzz3PSE6xD1i.
Retrocession fee is the amount paid by asset managers to the distributors, usually from the clients
money without notifying the client.
New EU Rules Force Wealth Firms to Disclose All Underlying Costs, Citywire, Jan. 16, 2015,
http://citywire.co.uk/wealth-manager/news/new-eu-rules-force-wealth-firms-to-disclose-all-underlying-costs/a793207?ref=wealth-manager-most-popular-list.
Why MiFID II is Europes Latest Regulatory Headache, World Finance, Aug. 29, 2014,
http://www.worldfinance.com/wealth-management/why-mifid-ii-is-europes-latest-regulatory-headache.
Steve Johnson, European Private Banks Struggle to Regain Traction, Financial Times, Nov. 2, 2014,
http://www.ft.com/intl/cms/s/0/93b724b4-604f-11e4-88d1-00144feabdc0.html#axzz3OdB9HVCy.
Wealth Report: Europe, The Julius Baer Group, September 2014,
https://www.juliusbaer.com/files/user_upload/your-private-bank/investment-excellence/research/
european-wealth-report/documents/Wealth_Report_Europe.pdf.
10
Daniel Schafer, Rising Wealth in Europe Attracts Rivals From the Americas, Financial Times,
Nov. 23, 2014,
http://www.ft.com/cms/s/0/ae716994-561e-11e4-93b3-00144feab7de.html#axzz3LIlKZmOk.
11
Assets Managed by Robo-Advisors Will Skyrocket to $255 billion within Five Years,
My PrivateBanking Research, 2014,
http://www.myprivatebanking.com/article/robo-advisors-report-2014.
12
cognizant reports
10
Professional Wealth Management: Gazing into The Future of Wealth Management, WealthX.com,
March 18, 2014,
http://www.wealthx.com/articles/2014/professional-wealth-management-gazing-into-the-future-ofwealth-management/.
13
Breaking the Wealth Taboo: Making Succession a Success, Coutts, July 2013,
http://www.coutts.com/files/pdfs/reports-and-publications/wealth_succession_report.pdf.
14
Daniel Schafer, Crisis Fallout: Margins Suffer as Rich Hoard Their Cash, Financial Times,
May 7, 2013,
http://www.ft.com/intl/cms/s/0/8d4840b6-9d39-11e2-a8db-00144feabdc0.html#axzz3OdB9HVCy.
15
Global Wealth: Riding a Wave of Growth, The Boston Consultancy Group, June 2014,
http://static.pulso.cl/20140609/1955712.pdf.
16
17
The Future of European Wealth Management: Imperatives for Success, J.P. Morgan Asset Management and Oliver Wyman, November 2014,
http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/2015/jan/The_Future_of_European_Wealth_Management.pdf.
Tackling Transparency, Scorpio Partnership & SEI, Oct. 23, 2014,
http://www.scorpiopartnership.com/knowledge/report/tackling-transparency-wealth-management/.
18
The Future of European Wealth Management: Imperatives for Success, J.P. Morgan Asset Management and Oliver Wyman, November 2014,
http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/2015/jan/The_Future_of_European_Wealth_Management.pdf.
19
Ibid.
20
The Future of European Wealth Management: Imperatives for Success, J.P. Morgan Asset Management and Oliver Wyman, November 2014,
http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/2015/jan/The_Future_of_European_Wealth_Management.pdf.
21
Futurewealth Report 2012-13: Stepping into the Communication Age, Scorpio Partnership, 2013,
https://www.seic.com/ScorpioPartnership.FuturewealthPT2.USversion_Final-web.pdf.
22
Wealthy Shifting Financial Matters to Mobile Channels - Chinese HNWI Digital Winners Worldwide,
MyPrivateBanking Research, Nov. 25, 2014,
http://www.myprivatebanking.com/article/global-survey-of-mobile-disruptionin-wealth-management-2014.
23
24
2014 Futurewealth Report Part 3: Enhancing the Customer Service Curriculum, Scorpio
Partnership, Aug. 20, 2014,
http://www.seic.com/enUS/banks/13892.htm.
25
Citi to Launch New Private-bank Client Technology, Euromoney, Feb. 21, 2014,
http://www.euromoney.com/Article/3311782/Citi-to-launch-new-private-bank-client-technology.html.
26
8 of the Best Perks Private Banks are Offering to Win Clients, Citywire, July 18, 2014,
http://citywire.co.uk/wealth-manager/news/8-of-the-best-perks-private-banks-are-offering-to-winclients/a762618.
27
cognizant reports
11
Amazon Building 24/7/365 Video Tech Support into Kindle Fires, Gizmodo, Oct. 25, 2013,
http://gizmodo.com/amazon-building-24-7-365-video-tech-support-into-kindle-1381717261.
28
Big Data in Wealth Management: The Search for Customer Insight, Celent, January 2014,
https://site.teradata.com/Microsite/Big-Data-Wealth-Management/Download/1d5b1e941490969acdf9
bca9787bd7b206ac176dc68c138df48d6a71e40ce63da510eaa6bd314190.pdf.img.ashx.
29
Swiss Independent Wealth Managers: Challenges & Opportunities Ahead, WealthBriefing and
Coutts, Sept. 15, 2014,
http://lpgroup.ch/pdf/Coutts_IWM_Report_2014.pdf.
30
31
mBank: The Worlds First Mobile Social Bank Within a Bank, Financial Services Club Blog,
June 19, 2013,
http://thefinanser.co.uk/fsclub/2013/06/mbank-the-worlds-first-mobile-social-bankwithin-a-bank.html.
32
The Rise of the Digital Bank, McKinsey & Company, June 2014,
http://www.mckinsey.com/insights/business_technology/the_rise_of_the_digital_bank.
33
34
References
Matthew Allen, Generation Y Challenges Private Banking DNA, Swissinfo, Oct. 20, 2014,
http://www.swissinfo.ch/eng/generation-y-challenges-private-banking-dna/41057076.
Destination Europe: Alluring for Investment Banks? - Analyst Blog, Nasdaq, Nov. 24, 2014,
http://www.nasdaq.com/article/destination-europe-alluring-for-investment-banks-analystblog-cm416787.
End of Bank Secrecy in Europe. What Happens Next? Alliance Business Advisors, 2014,
http://alliance-dubai.net/our-services/dubai-business-news-newsletter/newsletter-december-2014/
end-of-bank-secrecy-in-europe-what-happens-next/.
Insights from a Mobile Banking Innovator, The Financial Brand, June 9, 2014,
http://thefinancialbrand.com/40287/mbank-mobile-banking-innovation/.
Global Wealth Management Outlook 201415: New Strategies for a Changing Industry, Strategy &
PWC, 2014,
http://www.strategyand.pwc.com/media/file/Strategyand_Taking-Wealth-Management-Digital.pdf.
cognizant reports
12
Credits
Author and Analyst
Vinaya Kumar Mylavarapu, Senior Researcher, Cognizant Research Center
Design
Harleen Bhatia, Design Team Lead
Meenakshisundaram T, Designer
About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process
outsourcing services, dedicated to helping the world's leading companies build stronger businesses. Headquartered
in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep
industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With
over 75 development and delivery centers worldwide and approximately 211,500 employees as of December 31, 2014,
Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked
among the top performing and fastest growing companies in the world.
Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.
World Headquarters
European Headquarters
1 Kingdom Street
Paddington Central
London W2 6BD
Phone: +44 (0) 207 297 7600
Fax: +44 (0) 207 121 0102
Email: infouk@cognizant.com
Copyright 2015, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any
means, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein is
subject to change without notice. All other trademarks mentioned herein are the property of their respective owners.