Deutsche Wealth Management says it is working with a third-party vendor to screen out “false hits” on prospective clients during due diligence investigations.
It’s part of the private bank’s revamp of its digital processes designed to help it win more business, says Sudhir Nemali, Singapore-based COO for Asia Pacific.
The bank, meanwhile, has an Asia-Pacific innovation lab in Singapore that will let the private bank, and Deutsche Bank, tap into the region's ecosystems and partners such as fintech companies.
Client screening is an example of a technology that can be applied both to the private bank worldwide as well as to other parts of the group.
“In our proof of concept so far, we have reduced false negatives significantly, and the A.I. continues to improve,” Nemali told DigFin. The bank will run it in parallel with its traditional KYC systems until it’s confident the proposition is viable, prior to formal implementation.
Nemali declined to name the client-screening provider but says the bank hopes to be live with it early next year.
It is part of a broader push by the wealth manager to use digital technology to ease client onboarding.
“The account-opening process is our big project,” Nemali said, noting that it is core to a strategic revamp of the bank’s business model to grow clientele and revenues. The goal is to cut the time it takes to bring a new customer on board by 80%.
“We see this as a key differentiator,” Nemali said.
The task is especially difficult for private banks because clients present serious due-diligence challenges. They must be examined in terms of the source of their wealth, their corporate and nominee structures, where their businesses are incorporated, and so on.
Even their use of other licensed institutions as service providers creates due-diligence work: a trustee (provided by another global bank, for example) could involve more than a hundred people at that organization with signing authority for the client.
We see this as our competitive advantage
Third-party fintech services, which connect via APIs to its core system, provided by vendor Avaloq, will let Deutsche conduct such work faster, often in real time, so that it can respond to market or other events in evaluating a client’s risk. The heritage system ran such checks in batches, further slowing the process.
“Revenue is important but so is efficiency and reducing costs, by reducing error rates and regulatory risk,” Nemali said. When it comes to I.T. spend, compliance is the top priority, followed by growth initiatives.
The private bank’s digital reinvention began two years ago when it moved to Avaloq’s back-office system, which provides enough flexibility for fintechs to plug in, Nemali says. It uses fintech Appway for the basic client-onboarding processing.
The meaning of competition
Nemali says starting next year the bank will begin to address other parts of its overall process: e-signatures, providing investment ideas and house views, chat compliance for relationship managers, and trade execution.
But he’s not in a hurry to push all of these things through immediately. He is wary of instant-messaging apps, noting that early compliance solutions in the market are untested; and execution is likely to wait until the bank has a clearer view about how regulators view such matters.
Deutsche is looking to deploy artificial intelligence in a number of areas. It has already done so in operations, and is experimenting with chatbots and other uses. The client-onboarding and e-KYC solutions are now being rolled out.
Third, and most significantly for the long term, will be A.I. for investment advice. This area brings higher regulatory requirements, as the bank needs to prove its algorithms would be selecting suitable products against proper advice.
Nemali says this is the future of competition for private banks – but it will take time to gestate. “Private banks have less data than a credit-card company or a consumer bank,” he said. Deutsche Wealth’s intention is to rely on Avaloq to centralize its client data, so that it can be acted on in various ways to personalize offerings. Deutsche is now doing a PoC with one company Nemali wouldn’t name to explore how customers respond to various prompts.
“But the data is not robust enough,” Nemali said. “The value of this lies in the future,” by gathering data points volunteered by clients: it’s not an intelligence that can be purchased or quickly acquired.
“Account opening, on the other hand – that’s something I can control,” Nemali said