Covid-19 has acted as a significant driver for change the world over. This is particularly the case in Asia where it has unleashed a wave of investment in technology by wealth managers looking to capture the maximum share of the market possible, even as customers demand a very different experience than before.
Multi-faceted regional development
AUM have grown significantly across Asia. Singapore has seen significant investment inflows, and in parallel, the Chinese onshore market has seen huge development, says Campbell. “Some of the world’s biggest wealth managers have been very active in attracting customers in Shanghai and the Greater Bay area. Moves to standardise related regulation in the Greater Bay Area, of which Hong Kong is considered an important part, through initiatives such as Wealth Management Connect are helping wealth managers broaden their product shelves to high-networth individuals in China even as many of these look to manage the on and offshore wealth separately.”
Hong Kong has traditionally been an offshore hub for the movement of wealth out of China. It is one of the 11 cities that make up the GBA, and is now an important part of the Chinese Government’s strategy to spur cross-border financial services, transactions and investments between it, Macau and the nine other Guangdong provincial cities and build one of the world’s largest economic regions. During the past two years, there has been an increase in the movement of Chinese outbound wealth to locations such as Singapore and the US. Some of this money would previously have moved to or through Hong Kong, but competition is increasing among key cities in Asia to be the region’s leading financial services centre.
“Singapore is actively going head-to-head with Hong Kong to be seen as the leading global financial services centre,” says Campbell. “The Singapore Government is actively supporting the industry with investment in FinTech and tax incentives. It is also reaching out to other neighbouring countries such as Malaysia, Indonesia, Thailand and Vietnam to position itself as a wealth management hub in Southeast Asia even as wealth increases in these other markets.”
High expectations
In order to attract and retain those inflows though, wealth managers in Singapore and other countries in Asia need to be mindful of client expectations around service and digitalisation.
“Covid-19 has forced change in that people can no longer meet face-to-face and so technology solutions that are easy to set up and integrate are highly sought after,” he says.
He says this plays well into a broader move within Asia for a younger generation of wealthy people requiring a technologically sleek experience with their wealth management. This generation have often created their wealth within the technology sector. They have high expectations around digitalisation and the availability of data to support rapid and smooth access to their advisers. “Their expectations are very different to second-, third- or fourth-generation wealthy in Europe,” he says.
As a consequence, the sector is currently seeing investment into front-end user experience in order to meet these expectations. “Irrespective of how big the wealth manager is or what segment they are playing to, the front end user experience needs to be good. The other big expectation is around having a mobile first proposition and this is now a basic requirement,” he says. In addition, aggregation, where many products and services can be put together on the same platform, is a fast-developing requirement too. For example, a platform needs to have best of breed functionality and thus be able to bring in third-party products and services to sit beside a bank’s own functions. This is rapidly becoming a make-or-break issue.
Going forward, Campbell says that technology that can drive data to enhance the user experience will change things. He cites an artificial-intelligence-driven portfolio analytics and management tool that has been successfully deployed within the wealth management offering of a large global bank chasing HNW clients in Asia. This has differentiated this bank in China, Singapore and Hong Kong, its key target markets.
“The next stage will be to ingest data from other platforms and service provides, introduce AI-driven intelligent chatbots, and even gamify wealth management for younger customers,” he says, pointing to market-leading developments in China by the country’s leading domestic banks and insurance companies. “Some customers want dashboards that allow them to see, if not to manage, the wealth they have across multiple financial services institutions or even in alternatives such as art, fine wines, and so on.”
Regulation
But even if front end technology does act to attract customers, banks still need to work hard to overcome another issue - differences in regulations governing banking and finance across Asia. The lack of common ground is, says Campbell, considerable, and there is much to do to operate smoothly across multiple regulatory jurisdictions. A case in point would be cross-border data transfer and data privacy. “This is a massive issue and there is a huge divergence in regulation and standards,” Campbell says. “This is an area that is going to continue to see dramatic change, even as countries examine, for example, what they can do with cryptocurrency. China is leading when it comes to digital wallets, money and payments, and has also pulled ahead in the central bank digital currency (CBDC) race.”
“To this point a cryptocurrency issued by a central bank would be controlled, monitored and tracked and therefore help allay fears around money laundering, for example,” he adds.
Partnerships
To solve these issues, Campbell believes that a partnership approach between technology vendors and wealth managers could work.
“Particularly important is whether banks can work with large tech firms and harness the vast amounts of untapped data and service insight and further opportunity around that,” he says.
He also points to how ‘super apps’ – such as those from companies such as Grab, Go-Jek and Tencent – can embed themselves into customer’s lives and provide an ecosystem of products and services, including financial services.
The battleground for these super apps is evolving in highly populated countries such as India, Indonesia, Vietnam and Malaysia, where new wealth is being created, and where the previously under- or un-banked can now access information and services through mobile devices. Grab and Go-Jek, for example, are Southeast Asia’s leading super apps and provide access to transportation, deliveries, digital wallets, insurance products, and very likely banking services soon… either directly under their own banners or in partnership with financial service providers willing to let these companies own the customer experience. It will only be a matter of time before increasingly sophisticated wealth management products and services are made available to what is a huge collection of potential customers.
Go-Jek has agreed to merge with Tokopedia to form GoTo Group in readiness for a dual IPO later this year. This brings together Indonesia’s two biggest startups to create the country’s biggest technology group, and one of Asia’s biggest “super apps” when their apps merge. GoTo will have three key delivery pillars: on-demand services, e-commerce, and financial services. The latter already boasts partnerships with more than 20 banks that will provide “banking as a service” via GoTo.
“Wealth managers will need to collaborate and bundle their products and services together with these super apps in order to reach a demographic of digitally charged newly wealthy investors,” says Campbell.
Those that manage to get the right combination of technology and partnerships in place and thus attract more clients will succeed. But, he warns, providers need to be aware of regional and local variations and be able to supply the right products and services within a digitised offering. Right both in terms of regulatory permissibility and sensitivity to the varying degrees of investing sophistication in different markets across the region.
Campbell gives an example: “In China the credit card stage was skipped and instead the market went straight to digital payments. Highly mobile wealthy Chinese travelling within the region helped drive digital payments uptake across the region, with the likes of AliPay and WeChat Pay becoming common in many Asian cities frequented by Chinese tourists. It isn’t hard to offer customers of these payments apps different financial services products, but what can be offered – or will be in demand – will vary from market to market.”
The key will be to know what to make available and where and banks will need to decide which areas of the market they do and don’t want to serve. For instance, there are examples of telecommunications companies that have secured licences to start up digital banks in many countries across Asia, but after doing so in a couple of markets then deciding to go no further due to the complexity of the region’s regulatory environment. Instead, there is an appetite for them to work with banks with long histories and trusted brands and to couple financial services with exciting data-driven technology offerings. Insurance products with dynamically adjusted premiums, be it for specially monitored vehicles or homes are some examples.
Clearly, says Campbell, there is a lot of change afoot and wealth managers will need to make careful assessments as to which technologies to adopt and which partnerships to seek out in order to form a valuable part of the ecosystem with propositions that are relevant and meet the expectations of customer both today and in the immediate future. “Today’s choices need to be made carefully to maximise tomorrow’s success,” Campbell concludes. “The pace of technological change is faster that it has been in human history, and to not embrace change is to head rapidly towards extinction.”
This interview was part of TWM's recent APAC Wealth Technology Landscape Report (2021). Click here to access the full report.
