COVID-19 Is Accelerating Private Banking’s Digital Evolution

By Marion Owczarczak-Fogli, Managing Director Alpian

Private banking is a service with trust at its core. A private bank must earn the trust of its clients, proving the strength of its security systems, its pedigree, and, crucially, the advisors that will be providing personalized financial guidance.

This trust has traditionally hinged on face-to-face interactions and the personal assurances that advisors provide their clients. In a pre-COVID economy, even while our professional lives increasingly took place across digital mediums private banks had, by and large, resisted the urge to modernize through digitization. In fact, recent research shows that in the first quarter of 2020, only two in three clients were very satisfied with their private banking provider’s digital service[1]s.

The pandemic has challenged this more conservative mindset. Face-to-face meetings have had to fall by the wayside as advisors guided their clients through choppy economic waters brought on by COVID-19. But in doing so, the industry has realised that face-to-face meetings are not a necessary part of a trustful relationship, and high quality, personalized advice can be just as valuable when delivered remotely over phone or digital platform.

While many institutions and clients are taking their first steps in entirely remote wealth management services, this was an area of the industry under development well before COVID-19. Back in 2017, KPMG found that 47% of wealth management CEOs expected their organization to digitally transformed into a ‘significantly different entity’ by 2020.

We live in a world where technology facilitates transactions and interactions in every sector, and this was being exploited to develop private banking services and bring them in line with the increasingly digital lifestyle of clients and what they truly wanted from their banking services.

At Alpian, we developed our platform after conducting our own market research showed that clients who would be best served by a private bank were open to changing their provider to a digital service, even before the pandemic. Talking to a representative sample of people in the mass affluent market in Switzerland, those with investible assets between 100,000 – 1,000,000 CHF/EUR, we found 40% of people were actively looking to switch their private banking provider, and 70% of respondents said that they would be open to using a bank with no branches at all, which works solely via a smartphone app.

We have therefore created a company that focuses entirely on our customer’s needs and is tailored to their lifestyles. While other companies are taking their first faltering steps onto digital platforms, we have been able to create processes without being weighed down by any legacy except compliance. This allows us to place the customer’s interest in all our decisions.

We saw that the industry needed to adapt to the needs of the modern client. While clients’ lives had become increasingly digitalised, private banking and wealth management had wrongly resisted. What clients really value is trusted advice from qualified professionals available to them by the most convenient means, which doesn’t necessarily mean face to face meetings.

The pandemic certainly poses challenges, but it is also an opportunity to make digital interaction the new normal for private banking. To make that happen, we must use technology as a means to offer personalised tailored advice from qualified wealth management professionals. This will ensure that the quality and trust of traditional private banking services remains, with the additional flexibility and convenience of digital banking.

And with the digitalization of private banking comes a huge range of wider possibilities. A digital platform allows the service to be offered at scale, and this allows private banking services to be opened up to entirely new segments of the population.

For example, those with investible assets between 100,000 – 1,000,000 CHF/EUR that make up the bulk of our home market of Switzerland’s population. The traditional banking landscape has traditionally offered two extremes: retail banking and private banking. The majority of the population is forced to make-do with retail banking services while an exclusive high-net worth few enjoyed the privileges of private banking.

We are therefore using technology to create a banking services for a new generation of wealth makers. They may be lawyers, doctors, and other affluent young professionals who have been long undeserved by traditional providers, and technology has now allowed us to offer them a premium service at a fair and transparent price. Digital platforms are allowing us to offer private banking services at scale and tap into the underserved middle.

Technology similarly offers a new level of speed and adaptability in financial advice, and this has never been more necessary than in the volatility of the current economic landscape. Clients can remain in constant contact with their private banking provider who can provide real-time updates and guidance via technological channels. At times of uncertainty and when it comes to managing wealth, you need to trust that you are getting the best guidance possible to help you both protect your wealth and look towards your future financial goals.

The pandemic has posed a difficult existential question in challenging the intimacy and traditions of private banking. But it is time to modernize. We deal with a digitally adept client base and the industry must now deliver a service that works around their lifestyle, while not losing the trustful and personalized relationships that that make it so desirable. While there are challenges ahead, we now have the opportunity to quickly bring private banking into the digital age.

[1] Savanta’s MillionaireVue Survey