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Tech to the fore as UBS races to win new China wealth

Messaging apps are key to the private bank’s ambitions – but will Tencent help it cross the finish line?

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As UBS Wealth Management seeks to grow its business in Asia, it is increasingly relying on technology to penetrate China. Much of this rides on its desire to partner with Tencent to leverage its WeChat messaging app, but this is just part of a broader emphasis on rejigging private banking to serve rich people that are unusually active in digital media.

“It’s not just age or demographics,” Marina Lui, head of UBS China Wealth Management, said, referring to China’s relatively younger cohort of millionaires and billionaires. “Habits have changed. Even the older generation use WeChat for payments.”

UBS has entered a partnership with Qianhai Financial, announced last month, to help it innovate the onshore wealth business and generate more client coverage.

Lui, who heads both the firm’s onshore and offshore business, says UBS won’t try to compete with domestic banks selling products with guaranteed returns. Rather, it sees more people onshore seeking to preserve their wealth, using financial services at an international standard.

Beyond branches
But attracting and retaining such clients requires a more different approach from other markets, partly because of the high rate of digital engagement in China, and also because of the high costs of operating a branch.

UBS is the only foreign bank in China with both banking and securities licenses to operate domestic wealth-management businesses. It has two bank branches under UBS (China), and five trading outlets under UBS Securities, some for wealth management and others for investment banking.

Cat Rust, head of innovation technologies for wealth management in Greater China, says the firm is constantly evolving its digital positioning. “How to enter the market, how to differentiate ourselves – we’re looking at the entire digital strategy for China,” she told DigFin.

Rust joined the firm last year; she’s a technologist who has worked at a number of startups. She is part of a broader trend looking at wealth management in the region, including the transfer of Winfried Gutmannsbauer to Singapore as the division’s chief operating officer; he moved from Zurich, giving the Asia business a stronger tie to wealth management in Europe.

Marina Lui, who had been running the onshore China business, also formally folded offshore China into her remit in December, still reporting to Amy Lo, head of the private bank for Greater China.

The power of WeChat
Lui says the goal is to leverage the apps that Chinese customers already use, if it can solve the security and regulatory issues around such communications.

For example, the firm’s relationship managers regularly email clients with advice around a portfolio’s activity, such as a suggestion to rebalance or adhere to guidelines. But clients in China often don’t use email.

UBS has developed its own app to provide alerts and notifications, along with recommendations. And by the third quarter of 2018, this app will be augmented to allow transactions. Ideally, UBS would like to offer this service directly through WeChat.

But the bank has not formally propositioned Tencent, noting the complexity of encryption, security, and compliance. UBS has been working with third-party fintechs such as FinChat to develop compliance and other solutions, but the bankers say it has yet to determine which partner can best keep up with WeChat’s sophisticated updates. Nor has the bank worked out how to safely integrate an execution capability into a message app.

Finally, it’s not clear Tencent will open its message app to UBS or any other bank – perhaps it will reserve it for WeBank or other Tencent affiliates. Tencent officials in Hong Kong did not respond to requests for comment.

The big picture
Rust says the firm is working on other digital ideas too. She says the bank is positioning itself as a “superconnector”, connecting its wealth clients to experts, third-party companies and services. For example, UBS is helping clients gain a deeper understanding of innovations in sectors such as property and manufacturing, which may affect their own businesses.

It is also experimenting with face recognition, digital assistants and other means of providing value to clients. Many of these client-facing products are being pioneered in Hong Kong and Taiwan, while the bank runs digital development in Singapore.

There remain challenges to doing business in China, but the opportunity to win a big chunk of the onshore business with an innovative offering looks big. “Who gets the right solution will make a lot of money,” Lui told DigFin.

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Tech to the fore as UBS races to win new China wealth