China CITIC Bank International (CNCBI) has recently gone live with a new software system for wealth management that is being positioned to extend to other parts of the institution.
Michael Leung, chief information and operations officer at the Hong Kong bank, says it has just launched a customer-relationship management and processing system built by Avaloq.
Separately, the bank is going live soon with a robo-advisory offering built by Hong Kong fintech Quantifeed, Leung told DigFin. With the advice bolted on to the core private-wealth operating system, the bank will take its high-net-worth offering to its mass retail customer base. (Quantifeed executives declined to comment.)
“We have built a powerful machine,” he told DigFin on the sidelines of an Avaloq conference in Singapore at which Leung presented the bank’s activities.
The rose garden blooms
The Avaloq installation represents the crowning achievement in a broad, multi-year tech revamp by the bank it dubbed “Project Rose Garden”.
Wealth management now represents the biggest source of revenues for the bank, making it the focus of the I.T. rebuild. Avaloq is a technology vendor known for supporting private-banking operations. But Leung says the Avaloq platform can be used to support other business lines, and CNCBI will role it out to corporate banking. It will also deploy the system to support branches and subsidiaries outside of Hong Kong, including those in Singapore and the U.S.
We have built a powerful machine
Michael Leung, CNCBI
Ultimately, Leung hopes to use the Avaloq platform to replace the bank’s mainframe core banking system in the next five years, although such a direction has yet to be decided.
Avaloq’s CRM gives the bank a full view of its customers. Combined with the bank’s proprietary customer data, it should let CNCBI roll out products to mass affluent customers quickly. The customer-relationship aspects turned out to be suitable for corporate banking too, especially as many owners of small businesses are also wealth-management customers.
The bank is a venerable institution in Hong Kong: acquired by mainland conglomerate CITIC in 2010, it is the present incarnation of Ka Wah Bank, which incorporated in 1954. But it seems its tech platform was almost as old. Leung joined the bank five years ago and was astonished to find there was no CRM: no logic to customer accounts, no settlement information for front line staff, no way to calculate a customer’s buying power.
Classic vendor to fintech agility
Project Rose Garden was created to modernize the bank’s tech. And the scale of the transformation was matched by the longevity – and cost – of the project.
The Avaloq build took three years. It took so long in part because CCIB kept finding new uses for the CRM. But its requirements also changed because the tech itself has moved so fast. This began as a classic vendor, core systems contract. It predates tech such as container architecture and microservices that have fuelled demand for agile development. It also predates the recent proliferation of APIs to use data from diverse databases, although Leung says CNCIB has been developing APIs internally for several years.
“Fintech has come a long way since we began this project,” Leung said. “We began with Avaloq’s traditional approach, but ended up tweaking many of the original designs.” Future iterations will include embedding APIs into the core system, he said, as CNCIB must now operate in a world of open banking; Leung’s next challenge is to develop non-bank partnerships to develop a customer-facing ecosystem.
Leung didn’t say exactly how much Rose Garden cost, but it was clearly an expensive project, particularly as CNCIB began using additional Avaloq licenses for other parts of the bank. The bank mitigated some costs by, first, centralizing I.T. budgets under Leung and the bank’s CEO, Bi Mingqiang, to avoid turf battles. The bank also set up a fintech innovation center to identify bank-wide strategic needs, such as customer onboarding.
He says the total tech budget is now 6 percent to 8 percent of annual earnings. “It’s a large number,” he said. “That’s how the world is. If you’re into retail banking, you have no choice.”
What will CNCIB get for that investment? “We’re now the only bank in Hong Kong that lets customers sign up and open an account, even remotely, in just 10 to 15 minutes,” he said. “Within 15 minutes they can be earning interest on deposit or trade stocks.”