What is the profile of the Middle Eastern wealth management market?
Middle Eastern demographics have changed in recent years. Firstly, the Middle East now has a younger population than many other regions, and this population growth is set to continue. It is therefore no surprise that there is an unusually high penetration of smartphone users within the region. According to Deloitte, mobile phone penetration is already at 97%, and thus there is a strong requirement for mobile first banking services. These user expectations extend to well established wealth advisory services that are available within an online, end-to-end system.
Secondly, we are seeing the demand for wealth advisory services expand beyond high-net-worth individuals. Increasing education levels within the region, along with a greater number of women entering the workforce, and a growing expatriate community, is creating a new ‘middle class’. These audiences are looking for extended wealth management services for accumulation, and digital allows banks to service them efficiently like never before.
What market trends are shaping the Middle East’s wealth management sector?
The business case for digital is evident in the Middle East, and this is the dominant trend. Even before Covid 19, the need to remain competitive by offering online services was apparent. In January this year, EY reported 50% of Middle East clients had already moved their assets in the past three years.
Now offering digital wealth management services to high net worth clients is taken for granted. Since the onset of Covid 19, we have seen banks triple their revenue through online channels. But to differentiate, banks must offer digital service with greater functionalities, services and product offerings. They are also realising that they can increase client engagement, advisory efficiencies and ultimately profits when implementing these technologies.
Rich functionality such as simulations, personalized news and goalsetting can meaningfully drive higher adoption and cross-selling. For example, when CommBank in Indonesia introduced its SmartWealth mobile banking service, its Premier Banking client numbers jumped by 25%.
What do you see as the main opportunities for wealth management firms in the Middle East?
Digitalization makes it cheaper to serve customers. At present only 25% of wealth management clients in the region currently receive financial advice through mobile apps, but intuitive digital solutions are changing this. Now customers can access discretionary advice, anytime, from anywhere while reducing a banks cost to serve.
But digital offers more than this. It allows wealth managers to launch new ecosystem-based business models. These can be used to extend distribution further, including embedding wealth management services into ecommerce apps, or to extend the range of services provided by opening up their platform to third parties.
Digitalization, in essence, allows wealth managers to reach a larger audience – there are over one million underserved affluent customers in the Middle East – while providing a broader set of services to all customers. Consequently, the middle-income market opportunity is bigger than generally realized.
What role has technology played in the shaping of the wealth management sector in the Middle East and how will its role evolve?
To capture these new markets and maintain competitive with existing customer bases, the right IT infrastructure is imperative. Presenting customers with better user interfaces isn’t sufficient. Customers are looking for better experiences and access to bespoke investment solutions at a reasonable price.
To offer these, banks and wealth managers need orchestration platforms that can provide customers with a joined-up, immersive experience. One that supports multiple asset classes, over any channel. These orchestration systems also allow for rapid change, including launching new services quickly, as well as facilitating business model change.
During the Covid 19 confinement period, one of the largest retail banks in Switzerland, PostFinance, launched an end-to-end digital platform that does just this. It caters to the needs of customers wishing to diversify away from low-yielding savings products. The platform offers a seamless and engaging experience to both advisory and discretionary customers and, unsurprisingly it is seeing massive take-up.
What is additiv’s role in helping wealth management firms within the Middle East?
At additiv, we focus on supporting our customers individual needs, and that includes locally. We recently opened a new office in Dubai. This increased Middle Eastern presence, alongside regional partners such as our cloud providers Microsoft, supports our local customers operationally while enabling us to develop our solutions to meet local needs.
Our Hybrid Wealth Management and Wealth Robo solutions are ideally suited for banks and asset managers to take advantage of the Middle Eastern wealth market. We cover all segments (low retail up to high-net-worth individuals) and support executionary, discretionary and advisory.
These service models are fully integrated into our platform. This means that all the browsing, chatting and communication functionalities are already built into our platform (DFS® system of intelligence). For example, when chatting, a common view within the browser window enables banks to follow onboarding and sales processes directly, understanding process cancellation behaviours.
The value we bring must be realised quickly and we enable this by implementing our solutions alongside our KickStarter™ model. Available in the cloud, KickStarter™ enables instant digital transformation in under three months. There is no need for any capex spend or any implementation costs, including initial data loads and a sufficient level of customization; KickStarter™ customers only pay SaaS fees and can cancel at any time.
Ultimately, at additiv our customers in the Middle East can access the value that digitalization offers to a wider range of clients than ever before; quickly, at low cost with low risk.