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  • @fintechna 6:00 am on October 28, 2016 Permalink | Reply
    Tags: , digital banking, , ,   

    The Bankers’ Plumber on FinTech: The Swiss and UBS have good chances to win the battle of digital wealth management. 


    The Swiss are world leaders in many things: watches, chocolate, Swiss Army knives and wealth management. Although the world of Swiss private banking has had more downs than up lately, wealth management is in the national DNA. There is good reason to see the Swiss coming out on top as private banking reinvents itself as a more digital product. Amongst the Swiss , UBS is well set up to lead the pack; its recent announcement of its intentions in the UK: “UBS to launch digital wealth management platform in Britain” offers much promise, as does history, or rather deja vue.

    In the world, several different terms are used to describe expected changes or influences on the same thing: Digital Wealth Management. -Advisors. Machine Learning are all being applied in relation to what commentators see will be the future in the world of asset or wealth management.

    In essence, this is about applying more advanced processes to the matter of looking after people’s money; making the interaction between bank and clients function faster, better and cheaper via mobile and internet channels, using rules to drive investment decisions and using AI, artificial intelligence, or Machine Learning to learn lessons and fine tune those decisions. For all the new terms and new , the underlying core banking discipline is not changing;

    1. Asset allocation according to investment goals, which are based on risk appetite and risk experience, or awareness.
    2. The two basic approaches to investing: as an investor either I am “self directed”, making my own decisions, with varying degrees of input from my banks or advisor, or I am a passive investor giving a “mandate” to my advisor.

    Swiss banks have been managing money on this basis for a very long time. There is an ingrained culture of formally setting investment strategies based on investing goals; growth, balanced, capital preservation and of dealing with the multi-currency needs of an international clientele.

    The theory is underpinned by solid back-office processes, for example in investment controlling, making sure that the investment guidelines are followed. Having been the product manager for a Shariah complaint cash management fund, I have seen this working first hand at Credit Suisse. Asset servicing is another discipline where the Swiss excel; the international client base means the banks have a very diverse set of asset information and detail to keep on top of. Prices, corporate actions and dividend information are all effectively gathered and processed.

    Historically, the Swiss have not been that efficient; fat, super-normal, profits bloated by lots of offshore, black money have masked high costs and poor processes. The game plan worked as long as the vast majority of those assets were processed on the big, old-iron, mainframes in Switzerland. Neither UBS nor Credit Suisse managed too build really great platforms for offshore processing that would replicate the efficiency of the HQ machinery. In the US, firms such as Vanguard have led the way in offering low cost investment vehicles.

    So, the core already exists as the industry transitions to another generation, both of clients, technical capabilities and regulatory requirements. The challenge is to adapt. According to head of digital at one of the major banks, the key challenges are:

    1. Moving from a push business model to a pull model, including the move from a predominantly offline experience to an online first experience.
    2. Transformation of legacy technology stack into a modular, open-API platform which is more horizontally integrated
    3. Biggest obstacle is culture change, i.e. to find the talented people required to create new world and change existing mindset to a digital one

    In thinking about where the industry is headed, I had a sense of deja vue. In the early nineties, securities lending, or Stock Borrow & Loan as our American cousins like to call it, became possible in Switzerland. The challenge was to to open up all the “internal drawers” where the security positions were filed away and channel the aggregated holdings to the market. The assets were there, they just needed to be connected up and channeled to the borrowers. UBS, or rather the then SBG, led they way. Led by the charismatic Felix Oegerli, a very capable team added a great deal to the industry. Credit Suisse had the same starting position, but could not get out of the starting blocks. From days at Goldman Sachs, where we were active borrowers, I recall a time lag of about two years between the first deals with the leaders at UBS and the laggards at Credit Suisse.

    Another recent announcement UBS’s private banking arm suggests the bank is taking the steps to simplify their infrastructure: “UBS’ European Bank Finds a Home”

    Lessons Learned: Digital private banking is really the world of what the academics call the “adjacent possibles“. What is close to what we are already doing?

    Apple did not invent MP3 music storage, they innovated around it, creating the iPod and the iTunes music store. Apple was not a start up when it made that move. In the mid aughties, Credit Suisse, then under the leadership of the ex McKinsey duo of Lukas Muehlemann and Thomas Wellauer pursued a “mass affluent” strategy. This was based on “bricks” rather than “clicks”. That was an idea ahead of its time. The “mass affluent” will not pay 100 basis points or more for advice. What they will pay will support a “clicks” based approach, but not a “bricks”based one.

    There is wonderful advert for Ricola, a Swiss company which makes lozenges. The main character pops up to challenge others around the world making claims to have invented the sweet, challenging them: “Who invented it? The Swiss!”

    My money, well at least the deeply out of the money options my wife has as a UBS employee, is on the Swiss mastering this evolution and UBS leading the pack.

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    Are available on the 3C Advisory website, click here.


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    is Bankers`Plumber | Intraday Liquidity | Cash Management | BCBS 248 | CLS Programme Manager

  • @fintechna 11:58 am on September 12, 2016 Permalink | Reply
    Tags: , , digital banking, dot-com,   

    Is digital banking another dot-com pipe dream? 


    Remember the late 1990’s when every CEO had to have an internet strategy? Even if they had no idea what the Internet was, they knew they had to have one of those “internet things” and to look at changing the company name to some funky buzzword with no real meaning.

    is starting to feel a bit the same these days. Maybe it is just because I am in banking, but lately there seems to be more conferences and related groups covering digital banking than any other topic in the industry, with perhaps running a close second.

    It seems beyond doubt that most now have a “digital” program – even if this is just a rebadging of their mobile banking program – and have set up innovation labs with lots of 64-inch video screens and sixties-retro styling, but like the late nineties I have the sense that much of this “digitization” is just me-too management.

    I think it is important to differentiate between renaming your internet and mobile channels development as “the digital program” and truly embracing digital transformation. A digital program has to have three key characteristics:

    1. It has to be end-to-end digital – internet channels that back into manual processes, are supported predominantly by call centers, and facilitate check-books are not digital.
    2. It has to be scalable – the infrastructure, architecture and operating model has to be rapidly scalable so that it can grow as your digital customer base grows. As Jack Ma commented, the difference between Alibaba and Walmart is that Walmart has to construct a new warehouse every time it wants to add 10,00 customers; he just has to add another two servers.
    3. It has to be pervasive – digital thinking has to be creeping into every part of your business: from the customer-focused product creation through to the business and financial planning; across the system architecture and operational support into the regulatory engagement and risk management. It should be spreading like ink in a glass of water.

    Like the period, the era of digital banking is upon us. Also like the dot-com period, there is some fundamental strategic substance underlying the me-too push for digital programs. While the dot-com period was marked with “bubbles” of over-inflated equity valuations, the internet did change the way we do business. Many companies that pivoted correctly during the period came out the other side stronger, while others perished.

    I believe the same will happen during the current digital banking era. Some banks will embrace the change fully and thrive, while others will become marooned on bricks-and-mortar businesses with an ever decreasing customer base.

    The imperatives for the transition to digital banking are clear:

    • Costs – When fully realized, digital banking is cheaper to run and grow than “traditional” banking, once you hit a critical mass (in the millions of customers). Of course some less-digital channels such as branches and ATMs are not going to disappear any time soon, but their disbursement and footprint will decrease as fully digital channels and touch-points take the ascendancy. Banks left on traditional business models will progressively become noncompetitive on price.
    • Scale and Aggregation – Digital banking is rapidly scalable. The banks that are early to realize the cost reductions of digitizing will be uniquely positioned to quickly take market share from those banks that are slow to transform. This will inevitably lead to aggregation.
    • Customer expectation – The Millennials are here to stay, and they don’t care about banks, they just want to be able to move their money around in their digital world seamlessly and quickly. For the foreseeable future, the platform of choice is a smartphone, so if banks can’t be there to facilitate the financial needs of Millennials via a smartphone, they will progressively lose market share.

    So yes, digital banking is a bit like the dot-com period, in that it signals the coming of a transformation in banking, but it is not a pipe-dream, it is a call-to-action for banks to either step-up or step-out.

      is Head of Strategy and Planning, Digital Bank at DBS Bank

  • @fintechna 10:00 am on August 4, 2016 Permalink | Reply
    Tags: , , digital banking, , , , ,   

    Digital Banking Transformation: BBVA vs. Banco Santander 


    In the following 5 years may lose 50% of their business.

    I don’t think I’m exaggerating when I say in 5 years banks will lose 50% of their business. I am pretty sure that the major banks handle this scenario. If not, why announce so insistently their strategy to shift to a digital ?

    In a low interest rate scenario, with low margins and high regulation there were only two ways to go: innovation or market expansion where margins were still high (such as Africa which was very risky and non competitive for banks such as or Banco ).

    It seems that digital transformation is the correct approach. But now they have to start. Entrepreneurs who believe that the idea is worth something, I’m sorry to disappoint you:  the idea has a value of 1%, the execution has 99%.

    But how do you transform a traditional bank into a digital bank? There are three ways you can follow or rather a combination of these:

    1. Purchasing and integrating existing companies.
    2. Develop projects internally.
    3. Creating a platform where others offer their products and the bank becomes a middleman of the generated value. A financial iTunes.


    10 variables to be analyzed in the digital transformation

     After studying many cases and opinions by hundred business leaders from business schools around the world[i], I’ll analyze the 10 variables that can determine who will win between BBVA and Banco Santander in the digital transformation.

    1. ENTREPRENEURIAL CULTURE. Having a very disciplined culture is a handicap for any innovation transformation. The employees must challenge the obvious, question and debate everything, innovate. Even ask themselves why you’re my boss? Why am I not your boss?

    Can you imagine a bank manager persuading customers not to buy bank shares because the crash of their values in the last five years (-40% BBVA and -60% Banco Santander)? I mean, can you imagine it without his name being mentioned on the next employment reduction list?

     2. CULTURAL CHANGE. The hardest thing to change in an institution is its culture. Both banks exceed the one hundred thousand employees (BBVA 135,000 and Banco Santander 193,000 approximately); Employees used to traditional banking culture. How many of these will serve to implement the digital strategy? I don’t think more than 5%.

    Banks are making great digital campaigns on their digital tools. For example BBVA Wallet. But if you go to a branch office and ask employees if anyone knows how it works, no one will know exactly. It’s not what you say you are, but is how the rest perceive you!

    3. ATTRACTING TALENT. Is not only that they have more than enough personnel, but is possible they may need 5-6 thousand digital employees who now work for Google and other similar companies that have no intention to change to BBVA or Banco Santander.

    10 years ago the brightest students of business schools ended up working for banks. Today the brightest students want to start their own fintech or work for companies like Google, Apple, etc.

    4. STRUCTURE TRANSFORMATION. They should flatten the organization to boost improvisation. It is true that both institutions have announced in press releases this kind of restructuring. But, “the words do not tell you anything, the facts will.”

    Anyone that has had to negotiate with a bank can see that each time the deal maker is newer and with less rank than the previous one.

    5. IMPLEMENTATION CAPACITY. A project that takes too long to start can only show you what can go wrong, not what it can be transformative and impactful.

    Both in USA and the UK and even in Spain, there has been successful -advisor developed in just 12 months. None of the surveyed had heard of a BBVA or Banco Santander’s robo-advisor, even after 10 years announcing leading digital transformation!

    6. CHAOS  vs ORDER. In the recent entrepreneurial culture of innovation is often put as an example of success the case of Israel. Among other reasons it is often argued that the military training of Israeli society has been one of the pillars of this entrepreneurial culture. This training is characterized by certain “chaos” versus the typical military order of other nations. “Challenging the boss” is one of the commands for all young Israeli soldiers. Any technology that reaches the army of Israel from the USA, is in five minutes modified to find another use of it.

    Both banks are using their platforms for different tasks such as risk management, internal training or products assessment. These platforms were bought many years ago and are not flexible to allow any modification by the employee. However, in the market these systems have been improved substantially in the last 3-4 years and most of them use now open sources. Being “managed” by closed and obsolete systems prevents that the innovation process exists.

    7. EMPLOYEE PROFILE. Following our example of Israel. One of the successes of Israel in terms of innovation is based on the large number of engineers and doctors that came from the Soviet Union. If a bank wants to innovate, it would be logical to think that they should have a high percentage of highly qualified engineers and doctors.

    Silicon Valley companies hire the best engineers and doctors even if they don’t need them. Having them is the best barrier to prevent the competition of qualified personnel. And is not only capturing them but keeping them and create a network-effect that lures those professionals to working with them today.

    8. PROCEDURES. When I see all the procedures that today bank employees must follow, I wonder how the hell they will innovate something? How many times will you know what a competitor or a customer plan? It’s like saying in the trade stocks market you’ll buy shares regardless what happens because it’s in the procedure.

    I recently attended a conference in which three responsible managers of innovation of BBVA, Banco Santander and Bankia participated. Almost the three of them said the same of how they were going to innovate the financial sector, which surprise me. The three mentioned the importance of procedures in their institutions. I wonder, Can they really invent the future of banking following a procedure?

    9. ABILITY TO BUY AND INTEGRATION. Is not only buying innovative companies. It is integrating them into the bank. To succeed in the transformation via purchasing you should be able to buy the best and especially to integrate the projects.

    In recent years I have met four entrepreneurs which BBVA bought their innovative companies and incorporated them. None of the four lasted more than 24 months in the bank. Moreover it strikes me that they all had the same reason to leave the bank, “before I used to innovate, since I entered the bank I can’t make any kind of innovation.” In the case of Banco Santander I haven’t had a chance to meet entrepreneurs who had integrated to the bank. However I’ve met at least three ex-Santander that left the bank and have been quite successful creating digital businesses.

    10. DISRUPTIVE MENTALITY. To create a style of iTunes platform you have to accept disruptive ideas. At MIT they use two very appropriate concepts to innovate. One is “Irreverent Creativity “. The other is the GSD (“Get this shit done”). But above all, any entrepreneur has forbidden to say “this is impossible”. If banks want to innovate they should start by banning from their managers “this is impossible”.

    How can they deal with “Google Bank”?

    At least one of these three things they must do better than “Google Bank”: either buy or develop or be disruptive in the platform. Google bought Android for approximately US 50MM, a ridiculous amount compared to what BBVA or Banco Santander are spending on recent acquisitions. Google has been able to integrate and reach 82% of the smartphone global market creating also a totally disruptive platform.

    Maybe my initial idea of a 50% business loss for traditional banks in 5 years is a bit short.


    [i] This article is based on the opinions of 100 leaders with the following profile:

    • Entrepreneurs, suppliers and customers of BBVA and Banco Santander, colleagues from Harvard Business School and the MIT.
    • Master’s IEB students, from the UNED, Finance Business School and the Tecnológico de Monterrey.
    • Countries: USA, México, Colombia, Chile, Brazil, Peru, UK and Spain.
    • None of them work for the BBVA or Banco Santander.

    is Entrepreneur. Investor. Professor. Transformation Catalyst and this article was originally published on linkedin.

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