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Archive for the ‘Tech trends’ Category

Why Crowdfunding may soon become a threat to the Private Banking industry

Thursday, October 1st, 2015

Although there has been little acknowledgment from the wealth management industry, the rise in crowdfunding in recent years has been remarkable. Goldman Sachs sizes the addressable market for crowdfunding at about $1.2 trillion. This is the total market value for crowdfunding that could be realized in the long-term. For 2014, Goldman Sachs estimates the U.S. crowdfunding market size at $10 billion, up from just $1 billion in 2011. The Worldbank forecast that global crowdfunding could increase to between $500 billion and $1 trillion by the mid-Twenty Twenties. These numbers include marketplace lending (e.g. Lending Club), equity-based crowdfunding (e.g. Circle Up and OurCrowd) and donation-based crowdfundfing (e.g. Kickstarter).

But isn’t crowdfunding something invented by hipsters to collect a few thousand dollars for some crazy art project or an even crazier new invention that will not go anywhere? That was probably true in the very beginning of the crowdfunding trend, 10 or even 5 years ago. But nowadays crowdfunding has flourished into a multi-billion-dollar industry, quickly spreading across the globe. Even institutional money is now flowing into (specifically p2p/p2b) lending-based crowdfunding chasing for better returns than one can get on a typical fixed income security.

So crowdfunding is opening up not only to small retail investors but also to institutional and private wealth. Therefore, crowdfunding brings some threats to the wealth management industry. In a way it is another tool that disintermediates investing as robo-advice does in another context. Affluent individuals, HNWIs or potentially wealthy individuals are using more or less automated platforms to engage with investment targets in a much more direct fashion compared to investing through a typical wealth manager. The functional and emotional benefits of this type of investing may - over the long run - shift assets under management away from the traditional wealth management industry.

But where there are threats there are also opportunities…. We’ll explore the whole field of crowdfunding from the perspective of wealth managers and private banks in a shortly to be published new report. Stay tuned.

 

Is iOS losing its dominance for banking apps?

Thursday, July 23rd, 2015

Having just released the earnings report for Q2 2015 (Q3 2015 in Apple’s fiscal year), Apple pronounced some interesting results. While the company sold 47.53 million iPhones in the last quarter, the revenues derived from the iPad are continuing to decline: only 10.93 million iPads have been sold in Q2. There are still no numbers for the Apple Watch but we know that its launch has caused a serious hype, leading to a real race for Apple Watch apps among retail banks worldwide. However, after skyrocketing at the beginning, sales seemingly went down quickly according to Slice Intelligence.

So what’s the future for banking apps? We can definitely say that iOS and Android devices will continue to dominate the apps market, particularly in the banking sector. Particularly some private banks and wealth managers have in the past published some of their apps only on iOS assuming that wealthy clients will have a clear preference for Apple devices. Today, we can clearly refute this assumption with the exception of only a few local markets (Switzerland has been so far one of the few examples of strong iOS dominance). What will be interesting to see is the development among the respective devices and their screen sizes. Will the trend for bigger screens – enforced by the launch of the iPhone 6 Plus – elbow tablet devices out of the market or will there be a reversal in consumers’ taste such that phablets will definitely leave the stage in favor of a more diverse use of mobile devices? We are convinced that tablets will play a strong but clearly defined role in the world of banking apps. Sales of the iPad may take a dive but this has not necessarily implications for the usage frequency of tablets. It is more likely that this reflects that customers have longer intervals for buying a new tablet as compared to their smart phones; plus there is now ferocious competition in the tablet market, undermining the market share of the iPad.

However for the time being, smartphone apps are clearly in the lead and banks should focus on the development of apps, which work optimally on these devices. Particularly among the wealthier clients, however, tablet devices are just as popular for viewing investment portfolios, interactive graphics, articles, and video material. Hence, banks and wealth managers should closely watch market trends and listen to their customers to be able to react fast and adequately. Only time can tell what role smartwatches will play in the future but considering the Apple Watch has been the hot topic of the first half of 2015, we are currently taking a closer look at banking apps developed for smartwatches as an interesting add-on for our upcoming report on Mobile Apps for Banking 2015 (see last year’s edition here).

 

The self-driving car is here - but what about self-driving wealth management?

Wednesday, June 3rd, 2015

Today I read that Audi will offer the new version of its A8 flagship model in 2016 with „piloted driving features”. Essentially the car will drive itself under certain circumstances, namely in traffic congestions on the highway. Google Cars have driven more than 1 million kilometers on public roads so far (with only a few minor accidents). It will be only a matter of time until auto-piloted cars will be available on the roads for everyday use. The industry is heavily pushing for a change of traffic laws and it seems that legislators will open up the roads in the near future. The benefits of self-driving cars are clear: fewer accidents, freeing up the driver to attend to other things while riding with her car and overall much smoother traffic and fewer traffic jams due to intelligent routing.

It appears to me that the wealth management industry is today at a similar junction and could push for the auto-piloted investor. But the industry leaders are more skeptical and not quite open to change - just the opposite of the car industry. The products are here - just think ETFs and passive, index-based investing. The technology has been developed: robo-advisors stand ready to help consumers get their investments right. The benefits are clear: Computers are much better investors than human beings.  Passive investing beats active investing in more than 80% of the cases. Algorithms have a much better appreciation of risk and return in financial markets than most private investors (and - I have to add - many professional wealth advisors, too).

But yet we see little enthusiasm in the global banking industry for automated, self-driving investments. The overwhelming majority of global banks leaves it to start-ups like WealthFront or Betterment to bring automated investing to the masses. A notable exception is the brokerage firm Schwab with its Intelligent Portfolio offer and a few online brokers.

It may be the case that banks and wealth managers are fearing that robo-advisors will put pressure on the fees for advisory services. But it should be clear to every industry participant that just as sure as self-driving cars will soon become a mass market, automated investing will be a success story in the financial industry. Why leave it to the start-ups and technology companies?

 

Apple Watch launches serious smartwatch banking

Friday, April 17th, 2015

The launch of Apple’s new smartwatch undoubtedly provokes completely new strategic considerations for banks and wealth managers. While the Android Wear admittedly did not cause a disruptive change in the digital device landscape, the omen with regard to the Apple Watch looks completely different.

While Android shipped only 720,000 of its smartwatches in 2014, Apple Watch pre-orders alone add up to 1 million already now in the U.S. It will well be worth keeping an eye on these numbers until launching date at April 24, 2015.

The continuous developments in the fields of wearable devices should start ringing a bell for banking and wealth management app developers. Having started with this year’s evaluation of the mobile apps of the top 30 wealth managers worldwide, we are excited to see who the early adopters are. Given the extremely cautious attitude, the financial sector usually shows towards new technological developments, exceptions like BNP Paribas are particularly noteworthy. Among the early adopters, the French bank offers a smartwatch application to their customers, which allows them to check their accounts when on the go or contact their personal advisors.

We are convinced that this will only be the beginning as the penetration of smartwatches is likely to increase substantially. We expect that wearable devices will be a game changer for mobile banking, adding numerous useful features for clients.

Check out our new Research Briefing, which will be published next week, to learn about how the Apple Watch might actually add value to banking customers and which considerations banks should keep in mind when entering this new digital field.

 

Latest trend in authentication works with a heartbeat

Wednesday, March 18th, 2015

Well publicized, recent security breaches at giant retailers (Home Depot) and financial institutions (JP Morgan Chase and the European Central Bank (ECB)), have caused waves of panic about the security and privacy of sensitive (financial) data. As this threat seems to be ever expanding and detection of security attacks gets more and more problematic, the Canadian startup Bionym has developed a biometric alternative to passwords, PINs, or other time-consuming security details. The Nymi wristband leaves other biometric authentication methods like Apple Pay’s touch ID fingerprint technology for contactless payment behind. It could be used for numerous applications like unlocking devices, remembering passwords, authorizing transactions, or controlling connected devices. The bracelet has an integrated electrocardiogram (ECG) sensor that enables measuring a user’s heartbeats (the electrical activity one’s heart generates), which is unique to every person. Nymi uses the heartbeat signature to authenticate and confirm the user’s identity. There are three levels of security involved: the heart ID, the armband itself and an authorized authentication device like a smartphone (via Bluetooth and a matching app for Windows, Mac, iOS and Android). The user must wear the bracelet on the wrist and touch its top sensor with the opposite hand for it to work.

UK’s Halifax bank’s decision to test Bionym’s technology to allow its clients to make online banking operations in an easy and secure manner is an exemplary initiative. It shows that biometric identification is the future for online banking security. Over the next three years, we expect many innovations in this space – just like Nymi.

 

Will Artificial Intelligence be the key for wealth managers to stay competitive?

Thursday, February 19th, 2015

Exploring the digital world of financial advice for our upcoming report, we had to take a deeper look at cognitive computing, analysing the role of tools like IBM Watson and others. The technology certainly sounds promising: enabling advisors to make better and faster recommendations to serve a higher number of wealthy clients with higher quality recommendations through cognitive computing. This way, IBM Watson is likely to play a substantial role in easing the pressure for wealth managers, which results from shrinking margins as well as from rapid digitization in private banking.

While the use of Watson in financial advice is still in an early phase, the technology shows already promising results in healthcare. Moreover, IBM Watson plans to launch their first intelligent toy for children this year – CogniToys are supposed to develop with the children side by side, learning together with them through continuous interaction.

The need to educate Watson prior to using it effectively is the critical step for wealth managers who consider implementing the technology. Although there are some use cases already, for example at Singapore-based DBS, most banks are not yet rolling out AI platforms – such as Watson – as they are waiting for a clear proof their economic viability and ability to deliver RoI.

It is out of question that intelligent, learning software platforms with cognitive abilities will find their way into the wealth management industry. Early adopters may face some uncertainties but will certainly gain a competitive advantage being a step ahead of the pack.

 

Wealth Management Solutions at FinovateEurope 2015

Tuesday, February 17th, 2015

/by Francis Groves , Senior Analyst/

I saw numerous presentations at FinovateEurope that have implications for wealth management, especially in the wide variety of security features and applications designed to help people with their financial goals were demonstrated. However, there were just three presentations that looked at supporting the work of wealth managers/client relationship managers specifically.

The first of these presentations was from Crealogix, the digital banking software providers based in Zurich, whose CLX.AdviceManager financial advisory mobile app we covered in MyPrivateBanking’s ‘Mobile Apps for Financial Advisors 2014′report. Now Crealogix are adding a new product to their overall offering for financial advisors called ‘BankClip’. This an easy to use video clip assembly module that enables the advisor to create a customized video including components such as an update on the client’s portfolio, excerpts from the latest market commentary by the private bank’s analysts together with, for example, the advisor themselves making the argument in favour of a change to the client’s portfolio. It’s a good way to make service more personalized and more immediate and it really was straightforward to implement.

The next item that was specifically relevant to wealth management was by newcomer Mydesq, also based in Zurich. The company’s CEO, Milan Vora, demonstrated their just launched advisor application. The most impressive aspect of Mydesq is how much the application assists advisors with its continuously updated compliance content. This not only enables advisors to keep up-to-date with regulations in multiple jurisdictions but it seamlessly introduces all necessary compliance-related changes to the advisor’s work processes. As an advisor application, Mydesq includes features to support account and portfolio analysis and portfolio recommendations to the client. A client app is planned for Q2, 2015.

Lastly, Vienna-based CPB Software introduce some of the features of its PROFOS software, launched in September 2014. The three aspects of PROFOS that particularly stand out are presentation in relation to risk, the financial crises feature and the client profiling. PROFOS has introduced an extra degree of flexibility in portraying investment risk so that in addition to text explanations or charts projecting risk, the advisor can employ other graphical tools to explain risk in relation to the client’s portfolio. The financial crises feature of PROFOS allows the advisor to demonstrate how the client’s portfolio would have performed during specific crisis events such as the Russian default in 1998, the dotcom bust or the collapse of Lehman Brothers. Lastly, PROFOS allows the advisor to create a (confidential ) profile of each client on the basis of client meetings that will enable them to prepare for future meetings in the most effective way. The client profile focuses on the client’s negotiating style and communication style in particular and gives the advisor extra resources for achieving mutually satisfactory outcomes from client meetings.

 

FinovateEurope 2015: trends & implications for wealth managers

Thursday, February 12th, 2015

/by Francis Groves, Senior Analyst/

MyPrivateBanking were kindly invited to FinovateEurope 2015 and I attended on Wednesday this week. So how was it? There were a lot of presentations by providers of payments technology, so, occasionally they seemed to be crowding one another. Nevertheless, payments is really technology security going by another name and there were plenty of other security features presented as well. It seems a safe prediction that some of these will have implications for private banking and wealth management. We hope to post here about these in more detail before long and we’ll also look at some of interesting private banking relationship manager applications that were featured at Finovate.

One of the presentations that stood out for me in the field of security was Israeli firm NICE Systems’ voice authentication solution, demonstrated on a bright green analog phone (circa 1965) complete with curly flex. I especially liked the way that the voice database can store the voice ‘print’ of crooks and scammers. The genuine you can be authenticated in less than six seconds; the criminal impersonator lasted just eight seconds before they were identified.

Solutions aiming to educate and support clients included the gamification applications from AdviceGames of the Netherlands. This looks fun to use but I’m not sure that the pirates theme of the games demonstrated would really appeal to the older customer. Also impressive was the Spendific app from the Norwegian firm Evry. This is a savings goal app for 18-24 year olds. You set your goals and allow the app to have a say in how you spend your money; it’ll tell you things like whether a particular purchase will wreck your saving plan and how much money you’ll have for the rest of the week if you go ahead. It’s not particularly sophisticated – or diplomatic – but it is a great way for people to be sure that their financial good intentions bear fruit. Moreover, it’s easy to see that Spendific could be integrated with financial planning and investment applications as users become older and wealthier. Also, it’s another example of the imperative to be financially prudent being promoted in retail finance that we’ve noticed is a feature of several robo-advisory services. I love the name ‘Spendific’; it’s just a pity that this is a white-labelled product so users won’t get to use it.

Finally, who received the most applause? This was the Polish Internet bank, mbank, and their collaboration with i3D to create a hybrid interactive digital/physical banking experience for shopping malls. As well as standard functions, the shopping mall bank enables very rapid enrollment in banking products such as payment cards complete with special offers for the retailers nearby. A key feature are the very large multi-touch, motions sensing screens that provide identification through face recognition. All the time the mall is open for business, the mbank branch stays open and though rentals are high, the bank’s staffing costs are considerably lower than for a normal bank branch.

 
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