Sunday, December 14, 2014

Finance 2.0: God help, Swiss Private Bankers say, Social Media and Cloud completely nonrelevant!



Ernst & Young report on  Digital Disruption and the Game-Changing Role of Technology in Wealth Management
From Ernst & Young report on  Digital Disruption and the Game-Changing Role of Technology in Wealth Management

What puzzles me when I read the Ernst & Young’s survey on Digital Disruption and the Game-Changing Role of Technology in Wealth Management is not that Social Media and Cloud have no relevance and Finance 2.0 as a whole has little relevance. That is not a surprise. I figured that out all by myself without a survey on Swiss Private Bankers. What scares me is that the top priority areas are exactly the ones, which could benefit significantly from Finance 2.0, Social Media included. This shows that many decision makers at Swiss Private Banks have not yet understood what Finance 2.0 or Fintech is all about



20 - 30% of "old" Swiss Banks will disappear
20 - 30% of "old" Swiss Banks will disappear


First of all it is not really a helpful approach to split up into various tools and channels such as mobile devices, social media, cloud etc. What is the difference in-between an app. such as WhatsApp and e.g. Facebook anyway? Almost 50% of users access Facebook via app as well. The key purpose and benefit of all these technical elements is interaction with clients, employees and with other stakeholders. So if a selection is needed, classification should be conducted by purpose such as, who do we reach, type of interaction etc. and not by tools. So dear Swiss Banks, instead of tools let’s talk about Finance 2.0, which is also including Social Media.When defining a digital strategy, deciding on activities with specific focus on channels is likputting the cart before the horse.The base always should be a bank processes as for example the advisory process.Then for every step of the process it should be evaluated and decided whether this part of the process can be supported an improved the best way with offline and/or online activities and which specific actions should be taken.



The Finance 2.0 Advisory Process for Swiss Private Banks
The Finance 2.0 Advisory Process for Swiss Private Banks











Compliance is Swiss Bankers biggest Concern...


One part of compliance is to protect clients. Compliance wants to ensure that banks manage that clients understand investment products well and that they understand above all their risks and what it means for themselves. It was certainly well intentioned by the regulator and by compliance officer. The result though is that clients are now bored to death with piles of paper they have to read and sign, which is extremely time consuming for banks. Unfortunately not much is solved with that. It is rather a vicious circle. Client advisors need their time to go through all that paper work and are lacking of time to respond on clients real needs and help them to understand markets better. Financial literacy is an important area. Here a number of aspects of Finance 2.0 help to deliver to Swiss Bank Clients the exactly needed information, when they needs it and in a user-friendly and well understandable way. A good example how in the new Finance 2.0 world financial literacy can be improved is fintool , till now only in German. More about Finance 2.0 in compliance can be found in my blog "And if compliance were Finance 2.0’s best friend…and the other way around? " 


On the other hand there is the part of compliance which ensures that the big number of legal and tax regulations will not be violated. Also this is extremely time consuming and with the number of heterogeneous clients hard to do. A Finance 2.0 company who has good solutions to approach all kind of compliance challenges is swissQuant Group 




New Swiss Digital, Finance 2.0 Institutions will arise
New Swiss Digital, Finance 2.0 Institutions will arise

Other important areas for Swiss Private Banks are Front Office Processes and Improvements ....


Exactly here client interaction or interaction with potential clients is essential. As mentioned in the beginning Finance 2.0 tools can be a strong leverage, when combined with offline activities and its far beyond than just furnishing the front people with some fancy apps. 


It is a fact that there are not enough clients in Switzerland to replace all the assets under management from offshore clients which decreased significantly. The new markets are the onshore markets in the emerging countries. That is no problem for UBS and Credit Suisse. It is though for the majority of Swiss Private Banks, because effort and costs are to high. Here new models are needed. It can not only be done with Finance 2.0 but Finance 2.0 can, it must be an important part. In order to build relations one must be onsite, but being onsite online via Social Media is a valid possibility too. You doubt it? When I decided to focus business wise on Brazil back in 2009 I did not know anybody in São Paulo. Before I went there I built up a network on Social Media. Like this I could accelerate my strategy significantly when I finally went to São Paulo in 2010 . Due to my social media activities I met my current Brazilian partners which grants me a very strong foothold into the Brazilian financial sector. As of today I run their European operations. All this was initiated by social media of course coupled with extensive offline activities thereafter.


Social media is also extremely helpful when a bank wants to get in touch with potential clients or just want to strengthen their brand. No I am not talking of advertising on online channels. Again and again its about interaction. Interaction can be boosted when banks involve their employees. A good example is Credit Suisse to show what the could have done if.... The other day Credit Suisse did a google hangout with some external experts. I find it an excellent idea, unfortunately they head only 40 viewers. Of cours because nobody new about the hangout. Just imagine with what power Credit Suisse could have spread the information about the hangout by there employees through twitter... if they had built a culture where employees tweet and post actively on Social Media about their employer. Unfortunately Credit Suisse's strategy seems to be the opposite. 


Lets talk about defining risk profiles and investment strategies for clients the Financ 2.0 way. That a questionnaire is only of limited use has been figured out by most. Also an online simulation "What happened if you had invested in these asset classes" is by far not the perfect solution. A powerful way to get clients more in a situation which is closer to reality and would allow to analyse clients behavior in a better way are online games --> Gamification. Read more on this topic on my blog Companies should use gamification, banks must use gamification!

Cloud has been an other area which is of no importance to Swiss Private Banks. Cloud is an essential area of Finance 2.0. An example here for a tool which is using the cloud and provides an important value for the investment decision process of a Swiss Private bank is PHYNARY SYSTEMS . That system provides highly sophisticated quantitative portfolio analysis and construction, comparable with industry leaders just for a sharply lower price...because they use the power of Cloud.



These are just a few examples. Finance 2.0 has a large number of options to support Swiss Private banks. It can be apps, proprietary social media or public social media, cloud, gamification, blogs and so on. Of course a number of other areas and processes other than the front can be boosted by Finance 2.0. On the back-office side the Bitcoin technology will change the world for instance.  Don't forget we see currently only the peek of the iceberg, there is much more to come!



Dear Swiss Private banks now it is on you to decide. Do you want to be one of the 20 to 30% of the banks which will disappear as Sergio Ermotti predicted this week or do you want to arise like the phoenix from the ashes?  

Please through the right switch at the right time! By the way the right time is now...more than right!



The Way forward for the Swiss Finance 2.0 Banks
The Way forward for the Swiss Finance 2.0 Banks


Personally I believe, that Sergio Ermotti is right. 20 to 30% of Swiss Banks will disappear, but I also believe that new Swiss Finance 2.0 institutions will arise and that in 10 years the Swiss Financial Sector will be bigger than today. 


A German Summery of Ernst & Young’s survey on Digital Disruption and the Game-Changing Role of Technology in Wealth Management you can find on inside-it

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