Peter-Jan Van De Venn, Strategy Director Fintech at Mobiquity shares his views on the benefits of digital transformation for wealth management firms during Covid-19.
In April 2020, Microsoft CEO Satya Nadella famously remarked that society had seen around two years’ worth of digital transformation in the first two months of the Covid pandemic.
Knowledge workers adopted remote working en-masse, retailers scrambled to go online, healthcare and education providers adopted virtual consultations and lessons respectively. It seemed that no sector remained untouched, with the pandemic providing a “burning platform” that innovation experts often believe is required to drive meaningful and enduring change.
While the wealth management sector is not renowned for being at the cutting edge of digital transformation, it too was affected by the winds of change, with companies adopting a range of digital tools to keep their workforce functioning and to serve customers in the best way possible. For many, this transformation was about keeping their heads above water, but for those at the vanguard, it was an opportunity to rethink business models and steal a march on competitors by truly giving customers what they want.
A changing landscape
It’s a period defined by rising customer expectations, with research from Oracle illustrating that half of investors will move their money elsewhere if their needs aren’t being met. It’s no surprise that industry veteran Rodolfo Castilla urged companies to disrupt or be disrupted.
This disruption is taking place across the entire value chain, from the way employees operate to the way customer experience is delivered. For instance, research from the Universität der Bundeswehr München, Germany, shows that augmented reality can boost customer engagement and brand perception by up to 40%. CitiBank has been using the technology to allow traders to access a more immersive trading environment from home.
Virtual reality has also been increasingly popular, with Fidelity Labs creating “StockCity” to present a 3D virtual city for investors to immerse themselves in the data around each and every stock in their portfolio.
AI has also been increasingly deployed, with data from Reports and Data projecting that spending on AI in financial services will reach over $26 billion by 2026 as companies strive to make sense of the huge quantities of financial and alternative data that is available about both markets and individual firms and industries.
Meanwhile, open banking has really come to the fore to provide consumers with seamless transitions between both financial products and indeed the wealth they have with various providers. Companies like Nutmeg and Revolut have led the way in a field that is predicted to be worth $43 billion by 2026.
Appetite for digital
This change in customer appetite for digital services was clear in our recent study of 400 decision-makers across the wealth management sector in the UK, US, Switzerland, and the Netherlands. Across all markets, there was a clear desire to capitalise on digital transformation to strengthen relationships with customers and stand their business in good stead for the post-Covid world.
In both the UK and Switzerland, customer expectations were a key driving force behind the transformations seen in the sector, with over half of respondents saying that the pandemic had sent demand for digital products and services soaring.
Respondents were effusive in their support for the investments they have made in digital technologies during the pandemic, with around 80% of wealth management executives in Switzerland and the UK reporting that they felt the investments had improved their customer engagement strategy.
This perhaps underlines the enthusiasm for further investments in digital technology in the future, with nearly 3 in 4 executives planning to use digital technologies, such as AI, open banking, and virtual reality, more commonly in their practices in the post-Covid era in a bid to provide both more efficient ways of working and personalised service to consumers.
The strong returns seen on these investments mean that the various barriers to progress encountered, which include issues such as compliance and privacy, were insufficient to curdle the general enthusiasm for change seen in the sector.
Making the change
The wealth management sector has been crying out for digital disruption for some time, and the Covid pandemic provided the impetus to make this change happen. With client expectations changed indelibly, the digital genie is now firmly out of the bottle and firms will have to embrace all that digital has to offer if they are to thrive in the post-Covid world.
Our report uncovered various barriers to digitisation that are important to address if transformation is to achieve its potential. Any kind of change requires a degree of learning as you go, and the pandemic has provided a rapid crash course given the speed and breadth of change we have seen. Now is the time to digest that learning and crystalise the changes into a new business as usual that has digital at its core.
Such a transition can deliver the kind of personalised customer experiences that consumers have come to demand, with an expectation that they can manage their finances seamlessly both within a single provider and between multiple providers. This has the potential to empower new business models in the sector where the true possibilities of digital technologies, such as AI and open banking, are embraced and baked into a company’s offerings at source.