This week DigFin is surveying the digitization of private banking – that most high-touch of financial services. Following Monday’s overview, yesterday we looked at client onboarding, and profiled Amy Lo of UBS. Today we examine the great question in client experience: using WeChat and WhatsApp. Tomorrow we conclude with another CEO profile, while also exploring how private banks are using data and A.I..
In financial services, the usual pattern is that ideas, technology and standards emerge in the U.S. or Europe, and then find their way to Asia.
That’s not the case anymore. In private banking, the new wave of digital engagement with clients is being driven by Asian client demand. And what they demand is to converse with their bankers via WeChat, WhatsApp, Line or another instant messaging service.
Banks initially built online communications around the desktop and email, which fit into their existing compliance and security I.T.
But IMs are external environments. This is raising a host of concerns around safety and probity.
This is the biggest issue that banks are grappling with
Kam Shing Kwang, J.P. Morgan
Some private banks believe they have no choice, especially in Asia. Too many people leapfrogged landlines and desktops in favor of “super apps” like WeChat, and mobile phones.
“Clients want information via social media,” said Kam Shing Kwang, Asia CEO for private banking at J.P. Morgan. “This is the biggest issue that banks are grappling with. But it’s important also because of the sheer penetration of social media.”
But can it scale?
Others are more cautious, and prefer to guide clients to use the bank’s own app. And they think in the case of WeChat, rich people might agree.
“Does a wealthy individual want to operate outside of our system, and be in China’s system, under surveillance?” mused one executive. “Do they fear our bank’s compliance more than they fear China’s tax authorities?”
Several private bank executives told DigFintheir apps can’t compete with the likes of WeChat, so they are looking at ways to work within these “walled gardens”, as one put it. But U.S. and European banks also need scale, and U.S. banks in particular tend to run single platforms run out of New York.
For European banks like Credit Suisse and UBS, Asia represents a relatively bigger portion of their wealth businesses. For American banks, the region is important but not big enough to dictate technology projects.
From this lens, WeChat is only relevant for China and Hong Kong, and requires local-language inputs. “This is a niche market,” one executive at a U.S. private bank said. “It’s not scaled. We need to leverage our global platform.”
Against that caution is the desire by people – rich people as well as the rest of us – to enjoy the convenience of super-apps. And banks fear that if they don’t find a way to work with WeChat and WhatsApp, they’ll lose the millennial generation, and not just in Asia.
Here’s a roundup of how some private banks are tackling the super-apps.
Credit Suisse rolled out CS Chat last year, claiming to be the first bank in Asia to enable communications with WhatsApp. “Our ambition is to be relevant to the way people communicate,” said Francois Monnet, head of private banking for Asia Pacific.
This follows the launch of its Digital Private Bank, an app for disseminating portfolio and investment information. It already allows clients to apply for orders, but not execute themselves.
Although the bank is working on a WeChat version, it began with WhatsApp using Apple Pay, so there is no Android compatibility yet. “We found 90% of our clients are using Apple devices,” Monnet said.
For the bank, this is not just about meeting client demands. It is also a way to address ballooning costs of compliance and operations. As per DigFin’s story yesterday, private banks are trying to automate the onboarding process and the paperwork that goes with routine transactions. Now CS users can upload images of, say, a new proof of address when buying a product.
Last year, DBS became the first bank in Southeast Asia to let RMs converse with clients via WeChat and WhatsApp. DBS worked with a fintech, Singapore-based FinChat, to build the capability.
Clients using WeChat or WhatsApp can plug into DBS’s own app. They first must apply, and then their RM will set up a private chat room. DBS predicts by letting RMs and clients converse this way, it will save 10,000 manhours of RM labor per year. The bank intends to introduce limited transaction capabilities later this year.
The bank last year set up a corporate WeChat account for the public, and for its clients to follow its latest activities and information. "WeChat is one of the key social platforms to communicate with our clients," Kwang said.
More significantly, the bank is planning to deliver further capabilities on WeChat enabling two-way instant messaging with clients. "We're still developing the two-way messaging," Kwang said, noting that providing a compliant messaging channel between RMs and clients via social media is a priority, along with ensuring client information is protected.
Pictet Wealth Management
Claude Haberer, Asia CEO, says the bank is under a lot of pressure from clients to let them communicate via WeChat or WhatsApp.
“We cannot forbid bank staff to communicate with clients this way,” he said.
Pictet’s stance is that its RMs are expected to honor a code of conduct. They can share information and discuss trading ideas. But there can be no instructions for a transaction. Those must be placed the traditional way, via email or a phone call, with callbacks from Pictet as a security measure.
Could this change? “We will continue to monitor how WhatsApp enhances the encryption around its messages,” Haberer said. But for now, the bank’s relying on the training of its RMs and its conventional security methods.
UBS Wealth Management
The bank introduced in October advisor messaging on WeChat for Android and Apple users, allowing communications and messaging on a UBS business account. To allow this outside a bank’s internal tech stack is an innovation.
“It was considered a total no-no in the industry,” said Amy Lo, co-head of private wealth for Asia Pacific. Therefore UBS began this project in the regulatory sandbox at the Hong Kong Monetary Authority. Even so, it took some time to evaluate different fintech vendors and get the project off the ground.
UBS monitors WeChat conversations on its internal systems
The bank set up a marketing page (or “account”) on WeChat in 2016, when it opened a wealth-management branch in Shanghai.
Now it is considering whether to allow clients to execute trades via WeChat. This is a complicated decision, given the additional security and regulatory considerations, but Lo expects it to happen.
“We’re restricted on our social-media compliance,” Lo said. “Trading is the direction this is taking,” she said.