Private Banker International - Fintech Supplement

1. PRIVATE BANKER Digital priorities; Cyber Security; Data Management; Customer Experience; Best practices & use cases; Innovation Europe; UK; North America; Asia-Pacific FinTech Special Supplement The ‘IT’ Factor How are private banks harnessing and monetising technology? PBI supplement.indd 1 02/06/2016 11:15:24

2. www.privatebankerinternational.comB y FinTech 2016 FINTECH SUPPLEMENT Private Banker InternationalPrivate Banker International FINTECH 2016 Editor: Meghna Mukerjee Email: meghna.mukerjee@uk.timetric.com Correspondent: John Schaffer Tel: +44 (0)20 7406 6703 Email: john.schaffer@uk.timetric.com Asia Editor: Xiou Ann Lim Tel: +65 6411 2189 Email: ann.lim@sg.timetric.com Sub-editor: Nick Midgley Group Publisher: Ameet Phadnis Tel: +44 (0)20 7406 6561 Email: ameet.phadnis@timetric.com Regional Director, APAC: Ruben Kempeneer Tel: +65 6383 4688 Email: ruben.kempeneer@sg.timetric.com Business Development Manager: Alex Aubrey Tel: +44 (0)20 3096 2603 Email: alex.aubrey@uk.timetric.com Customer Service Tel: 020 3096 2636 or 020 3096 2622 Email: customer.services@uk.timetric.com London Office 71-73 Carter Lane London, EC4V 5EQ Tel: +44 (0) 207 936 6650 Asia Office 1 Finlayson Green #09-01 Singapore, 049246 Tel: +65 6383 4688 Fax: +65 6383 5433 Email: asiapacific@sg.timetric.com PRIVATE BANKER www.privatebankerinternational.com Don’t have online account details? You and your associates may be entitled to online login credentials. The benefits of full online access are as follows: • Timely daily news updates • Access the latest analysis • Monthly editions sent directly to your inbox • News alerts direct to your inbox • Comments from key industry influencers and leaders • Search for specific, relevant content • Access the archive To create or activate your account please contact: customer.services@timetric.com www. Digital touch briefings ad - PBI 18042016.indd 1 18/04/2016 10:54:05 How are private banks harnessing and monetising technology? This FinTech Supplement is an addition to the Private Banker International Briefing Service: the premier source of analysis, proprietary data, expert insights, news and country surveys for the global wealth management community. To find out more about Private Banker International and upcoming supplements please contact: Alex Aubrey - Email alex.aubrey@uk.timetric.com or Call +44 (0)20 3096 2603. PBI supplement.indd 2 02/06/2016 11:15:29

3. FinTech 2016 y 1 FINTECH SUPPLEMENTPrivate Banker InternationalPrivate Banker International FINTECH 2016 s? s 10:54:05 Let’s talk FinTechCONTENTS 2,3: DIGITALLY FIT: UK PRIVATE BANKS As the wealthy increase their demands for sophisticated digital channels, private banks must evaluate their technology priorities to successfully keep up. John Schaffer speaks to leading UK private banks to understand their digital journeys 4: EXPERT COMMENT: SEI WEALTH PLATFORM Brett Williams, MD at SEI Wealth Platform, UK Private Banking, outlines the key considerations for wealth management firms to successfully navigate a complex and demanding ecosystem 5,6: TECHNOLOGY PRIORITIES: PRIVATE BANKS IN EUROPE Meghna Mukerjee highlights the areas where Europe’s private banks are maximising technology offerings to transform internal strategies and service propositions 7,8,9: PRIVATE BANKS IN NORTH AMERICA: WHO IS DOING WHAT North America is ahead of the FinTech adoption and innovation curve. PBI asks leading private banks what they are doing to win the technology race 10: EXPERT COMMENT: EWISE David Hamilton, president and CEO of eWise Group, comments on the impact of data- driven economies on private banks and their data aggregator service providers 11: DYNAMICS OF CYBER SECURITY Creating a secure environment, mitigating cyber-risks and investing in appropriate security measures are crucial for private banks, and vital to ensuring client trust and data protection. PBI speaks with industry experts to assess how vulnerable private banks currently are, and what is being done about cyber threats 12: EXPERT COMMENT: WEALTHINITIATIVE Swiss FinTech startup WealthInitiative is helping private banks and family offices to unlock synergies among their HNWI clients. We find out more from founder, Douglas Azar 13,14,15: TECHNOLOGY SPOTLIGHT ON PRIVATE BANKS IN ASIA-PACIFIC Several of Asia-Pacific’s private banks are ahead of Europe and the US in terms of delivering innovative client experiences through technology-savvy branches, mature mobile banking apps and advanced security. Xiou Ann Lim talks to the leading players 16: THE INNOVATION EQUATION At a time when private banks can choose to disrupt or be disrupted, ‘business as usual’ is not an option. PBI asked private banks and analysts what innovation in private banking truly means Follow Private Banker International Search for @BankerNews I t was only a matter of time before we at PBI put together a FinTech focused supplement. Every month, we get varied queries from our subscribers about how technology can help the private banking sector become increasingly client and advisor centric, as well as efficient and profitable. We get questions around how different banks in different countries are using technology beneficially. Thus we decided to find out from the industry players how they are leveraging technology and what more needs to be done. The stakes of not adopting technology in a timely fashion are enormous. Wealthy clients, currently, are better informed, more technologically curious, independent and demanding. They move swiftly between the analog and virtual worlds and are used to real-time, personalised services thanks to the likes of Uber, Apple, and Amazon redefining customer experiences. Investing in technology frameworks to ensure robust online and mobile platforms for private banks of any size is not optional anymore. It is imperative. These offerings also need to be intuitive and multi-dimensional. Maturity in private banking apps is increasingly being taken for granted by clients. The private banking industry is largely traditional and relatively slow to adopt changes. However, there is no doubt that to remain competitive and sustain growth, firms must invest in a transformation that has technology at its heart. Nifty new automated advisory services are mushrooming, providing agile alternatives to an already restless and hungry clientele. There is no room to be technologically complacent. Even the oldest private banks must imbibe the culture of innovation and a start-up mentality to remain relevant to its existing clients and attractive to new ones. It is essential for private banks to lower all-round costs, generate more revenue and reduce operational complexities. Technology can enable all of this if implemented smartly. Several players also need to effectively deal with outdated legacy systems before they can develop novel tools to empower their staff and re-imagine customer experiences. This needs to be done urgently to improve security provisions, as creaking IT infrastructure can be an open invitation for fraud. Identifying specialist firms that can fill in imminent gaps with their fintech expertise is also a need of the hour for private banks. Regulation is a top driver for technology adoption and we have increasingly been hearing about ‘RegTech’ (technology used to address regulatory challenges). With regulators becoming more stringent, private banks have to guarantee compliance while also ensuring that the cost of compliance don’t skyrocket. Taking advantage of technology for these purposes is vital, as it also is to opti- mise data – another critical piece of the success jigsaw puzzle. Many private banks have gone a long way in maximising the benefits of technology across their value chains. Some have developed in- house systems, others have found strategic fintech partners, and many are experimenting with new solutions to find the right balance. In this supplement, we have taken a birds- eye view and examined how forward thinking private banks are using technology to their advantage in different parts of world. We have spoken to over 22 of the leading global private banking executives and domain experts to understand what their key technology priorities are, how they define best practices, what their plans and forecasts are, and what issues still need resolving. Enjoy the read. Meghna Mukerjee meghna.mukerjee@uk.timetric.com PBI supplement.indd 1 02/06/2016 11:15:30

4. www.privatebankerinternational.com2 y FinTech 2016 Digitally fit: Private banks in the UK T he private banking industry has been slower than its consumer banking counterpart when it comes to getting ahead in the digital adoption race. It has been significantly behind other industries such as travel and tourism and retail, where the likes of Airbnb and Amazon have accustomed clients to technology innovation and personalised services. The wealth management sector is associat- ed with traditional face to face contact where the role of a relationship manager (RM) is central to managing large-value assets and advising clients on their portfolios. Clients also engage in personal contact due to the complex nature of certain regulatory pre- requisites, where the expertise of an RM holds weight. However, technology is increasingly being hailed as a crucial revenue generator, and innovation a key customer loyalty driver for private banks. In contrast to the functional retail banking digital channels, private banking offerings must demonstrate greater depth and breadth in order to add real value for a high net worth (HNW) or ultra-HNW client. Private banking clients want detailed insights, access to granular data, alongside refined engagement capabilities such as financial advice, as opposed to merely checking balances and performing bank transfers. Private banks are also facing competition from nifty, automated, online-only wealth managers such as Nutmeg and Wealth Hori- zon that are luring wealthy clients with agile, easy and efficient alternatives. The majority of private banks in the UK are not being complacent and continuing to invest in, and fine tune, their digital capabilities. PBI talks to select private banks about their digital game-plans. As the wealthy increase their demands for sophisticated digital channels and easily accessible information on their portfolios, private banks must evaluate their technology priorities to successfully keep up with client expectations. John Schaffer speaks to leading UK private banks to understand their digital journeys Coutts & Co. At Coutts & Co., a full suite of services is offered to its wealthy client base, ranging from detailedanalysisofportfoliosto a digital concierge service. Rob- ertHemphill,executivedirector, digital solutions at Coutts, tells PBI about the private bank’s top technology priorities. Couttsaspirestobethedigital leaderoftheprivatebankingandwealthmanage- ment sector, and its main priority is to ensure an exceptional experience across the breadth of its digital offering. “Our primary focus is accessibility, enabling clients to quickly and easily access portfolios through innovative online banking and wealth management services, maximising transparency and providing empowerment. “Banking is the foundation of our service, and we continue to build on three centuries of experience, with continuous innovation in order to enhance the service; from secure messaging, emailandtextalertsthroughtooursecureonline ‘vault’ from which clients can access an archive of digital statements and other documents that have been sent to them,” says Hemphill. The second priority for Coutts is fraud protection, authentication and security, and the lender has a multi-layered approach to protect- ing clients and their identities. The third priority is connectivity – connecting clients through multiple touch points to the Coutts team. Hemphill says: “The success of this approach is clear; in 2015 we saw a 29% uplift in client usage of Coutts’ digital channels, yet add in the fact that 2015 was our telephony team, Coutts 24’s, busiest ever year, and client interaction is firmly increasing on all levels.” The fourth priority for Coutts is empowerment. In 2015, Coutts launched a fully interactive website that reflects both the Coutts brand and its services, with a dedicated insights sec- tion to inform and engage clients on matters relating to all aspects of their wealth. “We also empower our own people. We have revolutionised the way in which our employees communicate with one another and their understanding of the breadth of Coutts solutions through our interactive intranet,” he adds. The final priority for Coutts is maximising choicewhileensuringanexceptionaluserexpe- rience, at all levels. “We aim for the Coutts Crown Standard, our internal benchmark for exceptional standards, to be inherent across all channels, while giving clients the ability to choose how they interact with both the business and their wealth portfolio,” explains Hemphill. However, the key to successful digital channels is not merely based on front-end developments. Coutts made changes to its core banking systems four years ago, which has made digital innovation easier. The core banking system update has also allowed the bank’s data to be more consolidated, where it is no longer spread across a number of different legacy systems.< PBI supplement.indd 2 02/06/2016 11:15:35

5. www.privatebankerinternational.com FinTech 2016 y 3 Private Banker International FINTECH 2016 Citi Private Bank Citi Private Bank currently offers a mobile app for Apple devices called InView. The service, launched in February 2014, allows clients to view portfolios in detail and analyse key metrics, alongside performing basic transactions through the app. The mobile app also gives Citi Pri- vate Banking clients access to various research articles related to their portfolios. A significant feature of Citi’s digital offerings is its ‘onboarding toolkit’. The bank plans to release a wet- signature functionality, enabling clients to use their finger or a stylus to sign documents. Citi was an early adopter of mobile provisions for private banking clients. The release of the app comes as an update to the bank’s private banking app, released in 2010. < Arbuthnot Latham & Co. Boutique private bank Arbuthnot Latham & Co., the private and commercial banking and wealth management arm of the Arbuthnot Banking Group, launched its online banking service in 2004. It added mobile banking functionalities in 2014. Arbuthnot Latham’s chief executive, Ian Hender- son, tells PBI that over 60% of its substantial client base is using online banking channels, and they have over 25% of active clients using the bank’s mobile app. Since launching its commercial banking proposition in 2015, Arbuthnot Latham’s commercial clients are also making use of the online banking service. Its digital offerings allow clients to view transactions and statements, and carry out other basic e-banking functions. The bank also offers an invest- mentportal,allowingclientstoviewtheirinvestment portfolios. Ian Henderson tells PBI: “Our social media presence has continued to grow strongly, with around 1,700 followers on LinkedIn and nearly 900 on Twit- ter, as we engage with clients and potential clients. “We will be looking at other forms of social media engagement with our clients over the coming months.”< SGPB Hambros France-headquartered Société Générale Private Bank (SGPB) launched an overall IT transformation plan in 2013, and the renovation of its digital or customer interface is oneofthekeypillarsoftheall-roundproject. As part of this rejuvenation, SGPB Ham- bros, SGPB’s UK division, launched a new e-banking platform in April 2015, available across mobile, tablet and desktop. Security improvements and better navigation facilities have been added to the new platform. SG Hambros has invested in an improved client relationship management (CRM) tool and portfolio management system to improve face-to-face interactions, with more flexibility in accessing information such as portfolio valuations, positions and performances. At the time of the new e-banking platform’s launch, SGPB Hambros CEO, Eric Bar- nett, said: “Since 2013, we have launched a series of client-centric initiatives in order to ensure that we are effectively able to meet clients’ needs. The launch of our new eBank- ing platform is the next natural step in this direction and we are excited about the pros- pect of offering clients more secure and easier online banking access anywhere, anytime and on any device.”< Lloyds Bank Private Banking Lloyds Bank Private Banking’s clients, in the UK and across its international business, are able to use all of Lloyds Banking Group’s digital services, giving customers access to banking on mobile, tablet and desktop. Cli- ents are able to view their accounts, make UK and international payments and transfers, as well as stay informed about the bank’s reward programmes. Lloyds Bank Private Banking has continued to roll out screen-sharing and video conference technology, giving private banking clients more choice about how they would like to interact with the bank and communicate with their banking team. In March 2016, Lloyds reported that £4bn payments and transfers were made on a monthly basis from private banking clients using digital channels, and increasingly by mobile. Phil Allen, digital director for financial planning and retirement at Lloyds Banking Group, tells PBI: “Approximately 52% of our private banking clients in the UK are digitally active, a 12% increase year-on-year. We migrated our international clients on to the platform in the fourth quarter of 2015 and we can already see 20% of these customers are digitally active, which is a great achieve- ment. “Wenowseeatotalof42,000loginstoour digital services every day from mobile, tablet and desktop, giving customers the choice and convenience they want.”< Barclays Wealth & Investment Management Barclays launched a mobile banking application for its UK HNW clients in July 2014. The app is part of a web portal for private banking clients: Barclays One. With Barclays One, clients can have a full view of their Barclays Wealth banking and investment accounts, holdings and transactions, Wealth Card balances and transactions. Additionally, it includes historic valuations and performance for investments, interactive charts showing how wealth is distributed across nine Investment Philosophy asset classes, eDocuments (valuation statements and contract notes from UK accounts online), tax packs and market research andinsights.BarclaysOneisusedbyover75%of the bank’s client relationships. The Barclays Mobile Banking app for wealth enables clients to carry out a range of banking activities, including moving money between accounts,makingsterlingpaymentstoUK-based recipientsorcompanies,canceldirectdebitsand more. Additional functionality is available on iOS devices for clients with UK Wealth current accounts, enabling them to see their overall net valuation with Barclays, historic valuations and performance data of investments. Barclays also uses biometric technology for authenticationofHNWclients,andvoicebiomet- ricsisnowBarclays’primarysourceofidentifying BarclaysWealthandInvestmentManagementcli- ents in the UK. Dena Brumpton, CEO, UK Private Banking at Barclays, says: “More than 11,000 wealth and investmentmanagementclientsarenowenrolled and can be identified by their voice. “Our customers have seen the time taken to verify their identity fall from one and a half minutes to less than 10 seconds.” Barclays has leveraged voice biometrics tech- nologytoremovetheneedtocallbackitsclients, which was part of a fraud check, for certain payments. This has been received well, particularly by clients who were used to the callback process. “Our clients expect banking to be completely ontheirownterms,withtheabilitytoaccessser- vices and transact in the way that suits them. As part of the Barclays group, we can benefit from Barclays wider digital expertise while delivering functionality tailored to the unique needs of Wealth clients,” adds Brumpton. < PBI supplement.indd 3 02/06/2016 11:15:38

6. www.privatebankerinternational.com4 y FinTech 2016 Private Banker International FINTECH 2016 Private Banker International Five factors determining future success for wealth management firms W ith a raft of changes impacting investors and savers in recent years, the need – and consequently the opportunity – for wealth management firms to provide advice has never been greater. However, given the complexity of delivering a quality service, a number of factors will deter- mine success for organisations. What then are the most important things for wealth management firms to consider? Costs Increasing compliance and operational costs are forcing some wealth management firms to replatform, or at least make significant investments in new technology across front, middle and back-office processes. As a consequence of this disruption, there is growing recognition among wealth managers and financial advisers that by engaging with technology providers with institutional capabilities, they can de-risk and downsize their business, and still deliver quality service and growth with the benefits that straight-through processing and outsourcing bring. Others sitting on expensive, unprofitable platforms have yet to see the light, and face the risk that these solutions do not pass the due diligence suitability test! The Financial Conduct Authority (FCA) is looking on with interest, and this alone is reason enough for platforms to re-evaluate their commitments to due diligence. The regulator’s thematic review on this subject underlines how it is no longer possible for wealth managers to trust existing processes, and by ignoring this fact some firms will run the risk of exposing themselves to possible enforcement action. Value Given the intensive consolidation that has occurred across the value chain of late, firms that have pursued vertical integration are facing challenges in streamlining the component parts. Many are reliant on overengineered software applications and processes that, when combined with ageing and expensive systems, restrict innovation and progress. There is a need for new models that are simpler and more efficient. Some financial advisers who are served by the retail platforms are now of a size where they recognise the opportunity to take a greater share of the margin on offer across the value chain, and are promoting their own brand on services and products rather than that of others. Service Consumer expectations are growing, and clients are demanding more for less. Without continuous enrichment of the range and quality of services offered, advisers face strong down- ward pressure on margins. Making the time to focus on what offers real value in true financial planning – i.e. establish- ing a clear understanding of life goals, cash flow needs and other objectives – is now more than ever dependent on the use of the better planning tools available in the market. These investments in tools which allow consistent and controlled delivery of strong service propositions will be key to the future success of many wealth management firms. The chance of success will be further enhanced if these tools are embedded in a good practice management system, and integrated with platform services to deliver a seamless solution. Few can deliver an end-to-end solution that offers this potential without the need to continuously rekey client data. Advisers should make it a key part of their next due diligence exercise. Innovation The push or pull towards D2C, mobile, internet and social media, and the increasing demands from users for simpler, more appealing, more efficient tools and applications are changing the future landscape for advisers. Technology is now available which allows firms to engage with and educate customers digitally, improving access to information and services and reducing costs. Clients who have historically seen the adviser as their finance teacher can now rely on technology; importantly, research shows they prefer this approach. Integrating digital solutions effectively with the personal touch where this is needed will be an important factor in the future success of wealth managers and financial advisers; it is not just the millennials who expect to be ser- viced digitally. Regulationoverload With RDR, pension freedoms, CASS, FATCA, GATCA and Mifid II and other directives, many firms are facing regulation overload. The financial commitment required to continuously improve systems, processes and controls is significant. Consequently, regulation is constrain- ing proposition development, innovation and, some would argue, the quality of client service. A more proactive approach to regulation is needed across the market, with some technology partners configuring their solutions to comply, thereby reducing the ongoing burden on the adviser. The annual process of platform and technology due diligence should be used by wealth managers and financial advisers to test their suppliers to ensure they remain suitable and fit for purpose. < The SEI Wealth Platform is an outsourcing solution for wealth managers, encompassing wealth processing services and wealth management programs, combined with business process expertise. SEI provides wealth management organisations with the infrastructure, operations, and administrative support necessary to capitalize on their strategic objectives in a constantly shifting market. The Platform supports trading and transactions on 131 stock exchanges in 50 countries and 35 currencies, through the use of straight-through processing and a single operating infrastructure environment. For more information, visit: http://www. seic.com/enUK/banks/288.htm?cmpid=pb- gpa-813 or contact Andrew Booker on 0203 8107718 or abooker@seic.com Consistent growth is difficult while profit margins are being squeezed and traditional revenue models are being challenged. Brett Williams, MD, SEI Wealth Platform, UK Private Banking, outlines the key considerations for wealth management firms to successfully navigate a complex and demanding ecosystem PBI supplement.indd 4 02/06/2016 11:15:38

7. www.privatebankerinternational.com FinTech 2016 y 5 Private Banker International FINTECH 2016 Technology – a key enabler for Europe’s private banks T echnology is no ‘magic bullet’ to solve problems currently faced by private banks. However, if implemented cor- rectly, technology can go a long way to eliminate complexities, enhance operational efficiency and aid revenue generation. Private banks in Europe are increasingly rec- ognising the importance of technology and, in the last five years, many forward-thinking players have embraced it as a catalyst for growth and competitive positioning. PBI outlines the areas in which European private banks are significantly prioritising and leveraging technology. Enhancingtheclientexperience Technology has been, and continues to be, a big mover in ensuring client-centricity. Private banks are rethinking aspects of their business and operating models, and leveraging improved IT capabilities across the organisation to maintain personalised services and receptiveness to clients’ needs, as well as ensure smooth client experience (CX) and satisfaction. France-headquartered Société Générale Pri- vate Bank (SGPB) has transformed its digital interface. The transformation is one of three pillars of an all-round IT rejuvenation plan that the bank embarked upon in 2013. SGPB’s digital ambition is part of the private bank’s overall strategy to expand its activities across Europe, Middle East and Africa (EMEA), and capture the growth potential of its client base, in line with Société Générale group’s strategic priority for digital transformation and innovation. SGPB will link all its products and services to customers through a series of apps, and the digital transformation journey entails the deployment of a sophisticated e-banking platform for wealthy clients so they will have the spectrum of options to transact “bonds, shares, forex, money market, whatever the asset class”, head of SGPB, Jean-Francois Mazaud, told PBI recently. SGPB is looking to launch further e-banking platforms internationally through 2016 and 2017, with an aim to complete the digital transformation project in 2018 for all of SGPB’s locations. Client relationship management (CRM) is finally coming of age in the private banking sector, and SGPB’s digital service includes a CRM tool and an enhanced portfolio management system that will allow flexibility in accessing information such as portfolio valuations, positions and performances. “Technology is one of the key factors gov- erning the way we are shaping our private bank for the future, as we continue to anchor client centricity as part of our DNA,” says Mazaud. The technology developments that most interest Mazaud are also those that boost CX. “As a connected bank, these include trends in how to improve the user experience, and the design of the user interface, as well as the internet of things,” he says. Netherlands-headquartered ABN Amro Private Banking offers a wide range of innovative online, mobile and social media solutions, including its mobile banking app, an iPad mobile office app, iPad Research, Web care team and WebEx advice, amongst others. “In the Netherlands, our mobile banking app is being used more than 60m times per month,” says Brigitte Seegers, spokesperson for ABN Amro Private Banking. Outside the Netherlands, ABN Amro is developing a private banking digital offering that consists a blend of omni-channel services combined with personal interactions. ABN Amro, on the whole, is investing €700m ($780m) up to 2017 in its IT systems. “We have been a frontrunner in the field of internet and mobile solutions, and will continuously adapt to the clients’ changing needs. Through multi-channel services and interactions, we support our clients as they would like us to,” adds Seegers. Being client-centric and delivering seamless experiences is also top-of-mind for France- headquartered BNP Paribas Wealth Manage- ment. Thierry Derungs, chief digital officer at BNP Paribas Wealth Management, tells PBI: “CX is our core driver. All our digital choices are driven by the added value they could provide to our clients. Our clients are modern, entrepreneurial and open to new technology. “One of our priorities is to ease and improve client interactions to deliver a delightful and seamless experience. To fulfil this objective, we work with several technologies such as electronic signature, biometric authentication, real-time video streaming and others.” Derungs adds: “A bit more than three years ago, Vincent Lecomte and Sofia Merlo, co- heads of BNP Paribas Wealth Management, decided to hire me as chief digital officer. Since then, they have always been strongly committed to our digital strategy – not only budget- wise but also, much more importantly, by positioning the digital strategy inside the core priorities for the wealth management unit. CX is larger than a solely digital strategy but digital is one of its strong components.” One of the latest deployments at BNP Pari- bas Wealth Management is a new content management platform. The lender has also developed its Voice of Wealth app to educate and inform clients about investments and market trends as soon as they happen. “The Voice of Wealth app has already received excellent results, not only in terms of downloads but in terms of return frequency and time spent per visit. Almost 40% of the vis- its last more than 10 minutes, with a bit more than 75% of clients coming back in less than three days,” explains Derungs. Enhancing advisor productivity through technology is equally important to private banks. Empowering advisors with a range of granular tools and training is an area in which private banks are investing. SGPB’s Mazaud says: “It is equally important that our private bankers have the same level of digital accessibility as their clients, and become skilled at digital-product innovation. “To nurture this shifting environment, we have implemented new methods which aim to integrate client and banker feedback (co-crea- tion), provide quick delivery (test and learn) In the last few years, private banks in Europe have increasingly focused on leveraging technology across the whole organisation. Meghna Mukerjee highlights the areas where private banks are maximising technology offerings to transform internal strategies and service propositions PBI supplement.indd 5 02/06/2016 11:15:38

8. www.privatebankerinternational.com6 y FinTech 2016 Private Banker International FINTECH 2016 and develop a ‘culture of possibility’ through open innovation.” Improvingdatamanagementandagility Data management is crucial to the efficiency jigsaw puzzle at private banks. To ensure best practices and best-of-breed service in an ecosystem where client demands and regulatory burdens are growing fast, private banks need to get data management game-plans right. Private banks are, currently, viewing data – structured and unstructured – as a core asset. There are different drivers behind gathering data – for the regulators, to manage risks internally and better make strategic decisions, and to understand and serve clients better across different generations, which is important for client segmentation. “Following trends in artificial intelligence, machine learning, natural language generation and data visualisation corresponds to the need to be an intelligent bank,” says Mazaud. Derungs says: “Our interest in new technologies is in offering some clever combinations that allows us to deliver new services with strong added-value for our clients. “As an example we, on the wealth management side, do not look towards blockchain for its money-transferring capacity. Our interest is in the combination of blockchain (secured data exchange), big data (advanced data analysis) and artificial intelligence (automated data quality improvement) to improve our know- your-customer (KYC) and client onboarding processes. They help us provide the seamless experience our clients expect.” Understanding client behaviour via the cor- rect analysis of data can provide private banks with crucial insights on how different demo- graphics of clients – especially comparing the older-generational wealthy to Generation Y investors – like to handle wealth. “Our clients are more knowledgeable now, and there are more next-generation clients. Our business model is, therefore, focused on delivering real added value. We manage the trust that is invested in us by being in touch with our clients and giving them the right advice in complex situations,” says Seegers, ABN Amro Private Banking. The private banking industry has, in gen- eral, suffered from underinvestment in data- management capabilities. The challenge within many organisations is that the data is still fragmented across many databases and spreadsheets. However, a shift is underway – from legacy to good practice in data management – at private banks, keeping the volume, velocity and variety of data in perspective. Most private banks have not historically had an end-to-end data management project in place, but they are realising the importance of such a project – streamlined and complete with a clear roadmap and success metrics. Two important pillars of SGPB’s all-round IT renovation project are based on storage of customer information and data analytics. “We have to be an agile bank through continuous delivery,” says Mazaud. “Our vision for the future is to be vigilant about where all the data we have is stored, and to try to have a common language that enables us to treat this information efficiently. We will also focus on data analytics, whereby we take data from the warehouse, treat it through algorithms, and send it back to the end customer through the bank’s front-end interface, or to the banker, who can present this information to our customers in an intelligent fashion.” There is substantial scope for private banks to use analytics to their advantage, and its importance will continue to increase. Ensuringsecurityandefficiency Ensuring robust and up-to-date security provisions is at the heart of all technology and strategy developments at private banks. BNP Paribas Wealth Management’s Derungs says: “Secured sites are, of course, very important, and we continuously improve them with a strong focus on mobile to fulfil our clients’ expectations. With a penetration rate of over 40% in many countries, our secured solutions evolutions are driven, again, by our CX program to provide the services our clients expect from us.” SGPB’s Mazaud adds: “We keep focusing on being a secured bank, and so are interested in developments such as electronic signatures, authentication and biometrics, security and data protection.” Alongside making platforms secure, private banks are also prioritising being more social, and using technology to do so. “As a social bank, we are looking, for example, at crowd- funding, social philanthropy, lifestyle management and social networks,” says Mazaud. Derungs adds: “Social media is also a recent progress we made, with excellent engagement results. We now have an efficient presence on several social media platforms, and we continue to expand them.” Private banks are also keen to use technology to simplify operational complexities and speed up long-drawn processes that are pain-points for banks and customers. As regulators demand robust KYC and anti- money laundering architectures within private banks, many lenders are upgrading their IT systems to handle these extensive requirements. Lengthy KYC due diligence processes have become a well-acknowledged, industry-wide issue. Detailed regulatory requirements have increased the volume of paperwork that clients have to run through. Its cumbersome nature is an enormous cause for concern for private banks, with some lenders taking up to three months to fully onboard a single client. However, getting the client onboarding process right is vital. While manual processes still dominate, digitisation in client onboarding has become a priority for private banks. The challenge of easing this process is imminent. < n PRIMARY CHANNEL FOR DOING BUSINESS IN 2-3 YEARS, EMEA (CLIENT) 0 10 20 30 40 50 60 70 80 Education Service Advice % Digital Face-to-face Contact centre Source: EY report, 2016, Could your client needs be your competitive advantage? n PRIMARY CHANNEL FOR DOING BUSINESS IN 2-3 YEARS, EMEA (FIRM) 0 10 20 30 40 50 60 70 80 Education Service Advice % Digital Contact centre Source: EY report, 2016, Could your client needs be your competitive advantage? PBI supplement.indd 6 02/06/2016 11:15:40

9. www.privatebankerinternational.com FinTech 2016 y 7 Private Banker International FINTECH 2016 North America: Concrete jungles where FinTech dreams are made N orth America has all the ingredients to lead the FinTech evolution taking place across the banking sector - particularly in wealth management. The US is the birthplace of the robo-advice disrupters – with companies such as Wealth- front and Betterment leading the way. Across the US and Canada, private banks can be divided into three groups – leaders, learners and laggards – when it comes to technological adoption. A small number of leaders are embracing all forms of innovation and are looking for new ways to generate revenue. There is a fast- growing segment of learners, which are open to new opportunities. There are, no doubt, laggards – institutions that are traditionally set in their ways and unwilling to change. PBI spoke to some of the leading private banks in the US and Canada that are significantly investing in their technology road- maps. We asked them about current technology priorities, digital offerings, future focus and FinTech trends of interest. North America is ahead of the FinTech adoption and innovation curve. Agile and flexible back-end IT systems, and sophisticated customer-facing digital channels are crucial in engaging current and future clients. PBI asks leading North American private banks what they are doing to win the technology race Dennis Hall, head, data and client digital services, Northern Trust Whatareyourtoptechnologypriorities? Over the past few years, Northern Trust has made a significant investment to bolster our technology platform to deliver new, innovative and contemporary solutions. One of our top technology priorities has been the development of an advisor workstation. Northern Trust is redefining relationship management with the launch of our advisor workstation, powered by Salesforce. Developed through an extensive analysis of the customer experience (CX), the workstation will streamline the way we approach both businessdevelopmentandclientservicing,with a seamless advisor interface between desktop, mobile and tablet. Key features include an integrated 360-degree view of each relationship, servicing automation of high-volume requests, cross-team client support and mobile access. WhatisNortherntrustcurrentlydoinginthe digitalspace? We continue to focus on our business-driven, technology-enabled strategy, aligned with our clients’evolvingpreferences,whichareincreas- ingly becoming more digital. We work with our clients to evolve and maintain our industry-leading position with client-facing websites and mobile apps. As mentioned, we also recently began rolling out our new advisor workstation. What are the main objectives of your technologyprovisions? The main objectives are to create a differentiating Northern Trust digital experience, which aligns with our personalised approach to interacting with current and prospective clients. Technology is a critical enabler for our business model. We remain focused on providing tools to our advisors that allow them to efficiently serve current and prospective clients in contemporary ways and enhance their ability to deliver on the advisory relationship across multiple channels. We also provide intuitive digital capabilities directly to clients, which enable them to remain constantly connected with Northern Trust whenever or wherever they prefer. What is unique about Northern Trust’s approach? We believe our advisor and client technology platforms are unique in the volume of com- plexfinancialdatatheyprovidetoouradvisors and clients in an intuitive, easy-to-use way. We design applications from the outside in, tap- ping into client and advisor perspectives that leverage human-centered design. This has allowed us to stay closely connected with our workforce and client base to deliver experiences that are well aligned with how our advisors do their jobs and how our clients want to interact. What are the most interesting technology trendsyouhaveseeninprivatewealth? I am excited about some of the recent advancements related to digital security, such as biometrics. We are consistently focused on providing a secure digital experience to our clients and historically some of the standard security protocols(eg:strongpasswords,dualauthenti- cation,physicaltokens)didnotalwaysprovide a well-received user experience. Some new biometric security advancements provide the opportunity to increase security and usability at the same time. That will be well received by many clients. Are there any plans to implement a robo- advisor-styleservice? We continue to advance the digital capabilities we make available directly to our clients in a way that is well aligned with our client service model. We have a differentiating combination of hands-on, advisor-led client interactions, which are augmented by unique self-directed client digital experiences. We believe the mix of face-to-face versus digital experiences will continually evolve based on technology advancements and individual client preferences. We will continue to innovate in this space, and be prepared to support our clients’ unique needs and preferences. Anyfuturetechnologyplansyoucanshare? We are continuing to evolve our advisor and client platforms, with multiple releases planned in 2016 and subsequent years. Cur- rent focus areas include Advanced Advisor- Client Digital Collaboration, Mobile Enabled Holistic Advice Delivery, and Mobile Enabled Goals Driven Wealth Management. We view our platform as continually evolving, and are continuing to work with advisors and clients to define the next generation of digital capability for Northern Trust. < PBI supplement.indd 7 02/06/2016 11:15:40

10. www.privatebankerinternational.com8 y FinTech 2016 Private Banker International FINTECH 2016 JR Lowry, EMEA head of Global Exchange, State Street What are your top technology priorities? While State Street doesn’t have a wealth management business per se, we do provide a range of services to wealth managers, including fund administration and custody, portfolio management software, data management, risk, liquidity, and performance analytics; trading services such as for forex and cash management; and investment vehicles like ETFs and 40-Act funds. In this context, we are actively focused on several technology areas including: • DataGX data management tools and services to support wealth managers’ investment management and customer acquisition/ retention activities. • Enhanced risk and liquidity analytics via our truView service, reflecting recent regulatory provisions and changes in market dynamics. • Continued investment in managed account support via our Infrahedge platform and our Allocare AMS portfolio management tools. • Trading tools in multiple asset classes that offer ‘one-stop shop’ access on an agency basis to a variety of counterparties. • Renewal of our core wealth management servicing systems as part of our corporate digitisation program the we call Beacon. What is State Street currently doing in the digital space? We have a five-year corporate digitisation program called Beacon, which aims to drive renewal of our core technology engines and an extension of our digital capabilities. The name Beacon has become an acronym that describes our aspirations: best-in-class service and solutions, end-to-end delivery, agile methodologies and teams, client-centric design and innovation, one view of the client, and next-generation technology. We are aiming to deliver greater value to clients through: • Digital integration, that spans device types and reduces the paper, faxes, and emails that are still too prevalent in our operations. • More rapid processing, that is a move away from batch systems to near real-time processing and data. • One source of truth, in how we, our clients, and the market sees it. • Insight, through enhanced analytics and turnkey services that allow our clients to focus on investment management, rather than operations and data management. Our data and analytics business, State Street Global Exchange, is heavily focused on providing technology-centric tools and services to our client base, including data management, analytics, software, indices and indicators, and advisory support. What are the main objectives of your technology provisions? Our overall objective is to continue to provide leading tools and services that help our clients who themselves are in the wealth management space. These tools span portfolio management, risk and compliance, data management, investment operations, and fund administration. What are the most interesting technology trends you have seen in private wealth? While the core of the technology focus in wealth management is on better applying existing technologies, there are a few areas that represent innovation and experimentation by the industry. They include social technologies and gamification as a means to better engage millennial savers; behavioral analytics that are designed to identify investment bias; and machine learning algorithms and natural language processing to accelerate research, better target offers, and personalise the customer experience. Less exciting but equally important are the efforts focused on enhanced KYC and AML technology, some of which draw on the experience of the global intelligence community. Any future technology plans you can share? Some of our newer products are focused on helping our clients aggregate and distil aca- demic and investment research in a way that is tailored to their individual needs and interests. Thistoolusesamixofmachinelearning,natural language processing, and human curation. Another service will provide sentiment analytics, based on the daily scanning of 25,000 news sources. Across our technology efforts, we see the importance of gearing our tools to mobile devices and providing an integrated cross-device experience. Our approach in Glob- al Exchange is open architecture, and we are actively plugged in to the FinTech world to stay abreast of new technologies and ideas, and to collaborate where appropriate. Finally, our corporate Emerging Technolo- gies Center was formed last year to look into the future and identify technologies that could have a meaningful impact on our clients and on us. Not surprisingly, blockchain technology is a key focus for this group, but they are also researching areas such as unstructured data management. < John Bai, MD, client experience transformation, Scotia Wealth Management What do you believe are your top technology priorities? Across Scotia Wealth Management – which includes private banking, investment management, and estate and trust services – we are looking for ways to leverage technology to enhance the client experience (CX). Scotia Wealth Management has a comprehensive three-year digital roadmap that addresses key client expectations around the onboarding process, client self-serve options, and enhanced client access to information. We will be exploring, introducing and/ or deepening digital enablers such as biometrics, data analysis and gamification to enhance client engagement and experience. What is Scotia Wealth Management currently doing in the digital space? Scotia Wealth Management is well aligned with the bank’s digital transformation to leverage technology to enable our customer- focused strategy. Our digital strategy will be focused on: • Simplifying the client experience by focusing on the client and making it easier to do business with us through effective and efficient processes. • Making the client end-to-end journey as seamless as possible by creating a technology solution that aligns with our integrated wealth management business model. • Leveraging big data analytics and capabilities to proactively develop more relevant products and services that can be delivered to clients in a timely fashion as their lives evolve and their needs potentially become increasingly complex. • Increasing client convenience by estab- lishing self-serve options so they can securely access and self-serve their accounts when and where they want to. • Increasing client security by integrating KYC/compliance/AML activities into the process. What are the main objectives of your technology provisions? The world is increasingly complex, and client needs and expectations are evolving accord- ingly. A number of trends are having a profound impact on the lives of our clients, including the transfer of personal wealth, consolidation of high net worth households, the aging population, and business succession. Our digital strategy helps to ensure that we can proactively help our clients plan for, and develop solutions across all stages of their lives. Digital strategy is integral to the bank’s overall strategy of becoming more customer- centric, meeting changing customer expectations; improving our speed to market, and achieving greater cost efficiencies. What is unique about Scotia Wealth Man- agement’s approach? Our investments in our technology platform are designed to take a customer-centric approach to technology development that PBI supplement.indd 8 02/06/2016 11:15:41

11. www.privatebankerinternational.com FinTech 2016 y 9 Private Banker International FINTECH 2016 Amit Sahasrabudhe, head, wealth management strategy and digital solutions, RBC What are your top technology priorities? Our technology priorities at Royal Bank of Can- ada (RBC) Wealth Management are focused on meeting the evolving needs of our clients and client-facing professionals, and can be grouped into five key areas: • Client experience: We are focused on enhancing our service offerings through digitally enabled experiences. This includes improving the mobile and online experience, and creating a seamless end-to-end client journey with a focus on onboarding and account opening. • Data and agility: In order to adapt to a rapidly changing environment, we have prioritised platforms and tools that continuously support our speed, agility, data insight, and transaction-capability needs. • Platform simplification: We are continuously simplifying and automating our key business processes where relevant. • Operational excellence: Client data privacy and cyber security are critical considerations. We are committed to offering our clients technology platforms that are reli- able and secure. • Empowering advisors: We are dedicated to providing our advisors with the technology tools, capabilities and resources necessary to be more productive and meet the evolving needs of our clients. What is RBC doing currently in the digital space? Our focus on digital advancement is under- pinned by our ability to listen to client and advisor needs, and deliver premium products. In 2016 we focused on advancing the digital experiencesweoffertoourclientsandadvisors. We recently launched a new and modernised global wealth management website with a responsivedesign,engagingcontentandacon- sistent experience for our clients. We are also making significant investments to empower our wealth advisors, enhance client service, strengthen relationships and drive productivity. We are enhancing our online and mobile platforms to provide greater mobility to our wealth advisors and allow clients to have more choice and flexibility in how they interact with us. We recently launched RBC Wealth Manage- ment myGPS, a web-based, integrated applica- tionthathelpsRBCNorthAmericanwealthadvi- sors facilitate interactive, goals-based advice with their clients. We worked closely with our advisors in the development process, which provided a unique opportunity to address key challenges with existing tools – providing one holistic view of the client’s goals, needs and priorities; reducing data re-keying of information by integrating with existing the CRM tool and account level data; and providing digital and interactive outputs to support deeper wealth management discussions with clients. What are the main objectives of your technology provisions? Our clients have told us they want technology solutions that enrich their wealth management experience. We view advances in new technol- ogyanddigitisationasanopportunitytodeliver richerinsights,providechoiceandconvenience, enhance productivity, and be increasingly relevant to the future generation of clients. What is unique about RBC’s approach? As part of one of the largest financial institutions in the world, RBC Wealth Management has several competitive advantages. First, we have scale, so we have the resources to invest for growth, including in our technology. Second, we are able to actively collaborate with diverse partners across the organisation – focused on a similar goal of advancing technology solutions through sharing insights and leveraging common capabilities. Finally, we are embracing a new way of work- ingthatisfocusedonagiledeliveryandacceler- ateddecision-making–anintegralwayofdoing business at RBC. We are not losing sight of what has driven our success to date. Are there any plans to implement a robo-advisor-style service? Wesupportinvestorchoice,andbelievethatcli- ents should be able to select the advice and service model that suits them. Our HNW and UHNW clients tell us they value their wealth manager as the cornerstone of their relationship and that our advice is critical to meeting their complex needs. We are also investing in digitally enabling advisors and exploring our options to offer clients additional ways to invest with us. Earlier this year, our US Wealth business announced a collaboration with digital wealth management provide FutureAdvisor on a pilot program for select clients, called RBC Investor Gateway. This will provide our US financial advisors with the opportunity to reach a broader range of clients. < n PROPORTION OF US HNWIS EXPECTING MOST OR ALL FUTURE WEALTH MANAGEMENT RELATIONSHIPS TO BE DIGITAL IN 5 YEARS 0 20 40 60 80 100 % Aged under 40 Aged 40 and above Source: Capgemini and RBC Global HNW Insights survey 2014 enables and enhances the client-advisor relationship, not replaces it. The clients we are targeting have bespoke needs. Technology plays an important role in the delivery of advice and the overall CX. Take for instance our account-opening process. Most digital account-opening processes focus on speed. However, when talk- ing to our clients, we heard that when they are transferring large sums of money, opening up an account in three minutes or less was not a key priority. Clients are coming to us for advice and to establish a relationship with an advisor. So instead of focusing solely on how fast we can open the account, which may result in taking the advisor out of the onboarding experience, we are developing a solution to improve the onboarding experience that will allow for deeper conversations around what the client wants to achieve. What are the most interesting technology trends you have seen in private wealth? The use of biometrics, gamification, social media, data analytics, and the Internet of Things are all interesting ways technology is being used in our industry. The experimentation with the Internet of Things and how it can be used to better understand clients is currently an interesting trend. Are there any plans to implement a robo- advisor-style service? Scotiabank offers a continuum of wealth management services that range from a completely self-directed experience all the way through to customised advice from teams of professionals who provide a wide range of expertise. Any future technology plans you can share? We will start releasing a new digital onboarding process in 2016. We will start with a few full-service investment accounts and then enhance the offering to eventually encompass the majority of investment accounts, as well as broaden the offering across the wealth management platform to all the businesses. < John Bai, Scotia Wealth Management (cont.) PBI supplement.indd 9 02/06/2016 11:15:41

12. www.privatebankerinternational.com10 y FinTech 2016 Private Banker International FINTECH 2016 The importance of aggregating, managing and using data for private banks T he modern economy, labelled as the Personal Data economy, is portrayed as data-driven and can only be realised if data can flow and drive new innovation in all sectors. The private banking industry is highly impacted by this trend, as gathering personal financial information from clients is key. Hav- ing a consolidated view of customers’ financial data allows private bankers to target and customise their advice in order to achieve their clients’ personal goals. Private bankers are using consolidation services to collect financial data from all the banks and financial institutions where a client holds online accounts, displaying the data into a single interface. The data aggregated is then shown as an online summary of the client’s assets, funds, stocks and other holdings, which could be completed by other services from the private bank such as personalised analysis. The personal data aggregated by these services has to be protected to guarantee the highest security and privacy. Data-driven economies can only be achieved when there is consistency with user preferences and expectations; it is key to earn trust by avoiding breaches of data security. Personal data is now seen as more valuable than gold. Breaches in personal data security are an alarming issue, specifically for the private banking industry accessing highly private information such as clients’ accounts across all their financial institution relationships. Last year, we witnessed a mini data security war between several retail banks and third- party account aggregation providers in the US. JPMorgan Chase, Wells Fargo and Bank of America cut off access to account aggregation services for the fear of a security breach. The Wall Street Journal reported that the banks “have raised concerns that the aggregator sites may threaten consumers’ account security and the performance of bank websites.” A JPMorgan spokeswoman said: “In the meantime, we want our customers to realise that they may be trading account security for convenience when handing over their pass- word” to third-party sites. The known downsides to account aggregation are highlighted in the server-side aggregation approach. Privacy is a concern because users must disclose their usernames and passwords to the banks or third parties providing the aggregation. The end result: the ‘domino effect’ of data security. Customers are opting for simplicity and easy access. Financial institutions are in a bind because the perceived implication of convenience is the loss of privacy and access by third parties to their clients’ sensitive financial data without their explicit consent. In a world where personal data security is increasingly under threat, how do private banks offer their customers comprehensive account aggregation tools without becoming the custodian of customer data, particularly the customers usernames and passwords, and therefore a larger target for hackers and increasing the risk of data loss? Private banks comprehend customer demand for simplicity, aggregating all their financial accounts in one place. The answer to their concerns is to opt for a client-side aggregation model, where all the data is aggregated and saved on the user’s device and not shared with third parties. The aggregators blocked by the US banks last year are aggregating the user’s financial data and store that data on the service provider’s server in the cloud, the so- called server-side aggregation model. It means the data aggregation service provider saves the login details and passwords of the user on their server in order to access the data whenever they need. This common architecture is not the only way to perform account aggregation. As a secure and private alternative, the client-side aggregation model, invented and patented by eWise in 2000, never requires the customer to disclose their online credentials to the aggregator provider or the private bank, and all aggregation is per- formed on the customer’s chosen device. All data and information is encrypted and stored on the customer’s device in a Personal Data Vault, where the customer can choose to share their data with his trusted private banker through permission management. In line with security best practice, encryption keys are not stored on the device but rather on ‘zero-knowledge’ servers. Separating the place where the personal data is stored – on the user device – and where the key to open the Personal Data Vault is stored – on eWise servers – guarantees from compromising the user’s Personal Data Vault. In the eWise client-side model, the private bank offering the data aggregation service never becomes the custodian of the customer’s online credentials. Through permissions granted by the customer, information they hold with external financial services providers may be shared with the private bank from the Personal Data Vault. This approach not only offers customers greater control and choice over the personal data, it eliminates the compliance, legal and security risks of online credential custody for the bank. An effect of implicit credential sharing through the server-side aggregation model means that the service provider has access to users’ financial data and can then anonymise and sell that data. In a quest for companies to invest in customer insight and explore better opportunities for cross-selling and increase in revenue, personal data is the key to access those insights. There is a very high demand from companies to acquire this data. But taking care of users’ privacy also takes care of the company’s objective. The goal of getting more insights in order to achieve better cross-selling opportunities could be achieved in a private and secure way that is mutually beneficial. With eWise patented client-side aggregation, customers take control back over their personal data and benefit from choosing who they want to share data with. Learn more at www.ewise.com David Hamilton, president and CEO of eWise Group, comments on the impact of data-driven economies on private banks and their data aggregator service providers PBI supplement.indd 10 02/06/2016 11:15:42

13. www.privatebankerinternational.com FinTech 2016 y 11 Private Banker International FINTECH 2016 Cyber Security at private banks – no taking chances A key concern for private banks in all regions is cyber security threats. Cyber security is crucial to maintaining client trust and ensuring data protection. Cyber security threats and breaches are certainly not exclusive to the private banking and wealth management industry. IT security threats have been problematic since the exist- ence of the internet, and have surged in recent years as technology use has grown. Cyber-attacks are the new big enemy in private banking. For any industry, an attack can have damaging effects; for the private banking industry, which is reliant on client trust, it can be catastrophic. As private banks and wealth managers continue to prioritise cyber security, much remains to be done. High net worth individuals (HNWIs) and ultra-HNWIs are attractive targets for cyber fraudsters. In the digital age, it has become progressively easier for fraudsters to gain information on individuals, especially on high-profile figures whose wealth information is in the public domain. It is not only about money fraud with HNWIs, but also personal data. “HNWIs, their families and businesses, are an obvious target for cyber-crime, arguably more attractive to criminals than the larger numbersofretailbankingcustomers.Thewider use of digital channels in private banking also increases the risk of exposure to cyber criminal activity for this group,” says Jamie Woodhouse, MD, finance and risk services at Accenture. Richard Horne, cyber security partner at PwC, adds: “The amount that criminals are able to find out about individuals online is staggering.” One of the most significant cyber risks is phishing, an attempt to gain sensitive information such as PINs, usernames, passwords and card details, usually via bogus emails. Although social engineering methods such as phishing are not the most sophisticated forms of cyber-attack, they can often be convincing with the potential to fool clients if they are not vigilant. According to the US Department of Homeland Security, around 100m malicious emails enter inboxes each day. Fraudsters’ tac- tics for targeting private banking clients can differ from mass attacks on retail banking clients, and tend to focus on individuals, requiring the fraudstertoamassagreateramountofresearch. There is a risk that private banking clients could be more vulnerable to phishing, as they are more likely to correspond with relationship managers by email. “Therehavebeenseriouscasesofcybercrime that have affected private banks – both on and off the public record. These include instances of phishing, insider and cyber-theft of customer details, and also loss of customer data via third parties, including printers and legal firms,” says Accenture’s Woodhouse. Shiftingfrompreventiontoresilience According to Woodhouse, private banks are implementing strong provisions to safeguard themselves after realising the scale and serious- ness of the threats – from trust, reputational, regulatory and remediation angles. “We see more action across the organisation; CEOs are shifting from pure prevention to strengthening overall business resilience. “CIOs are building more robust technology strategies, prioritised by threat and the assets they want to protect. CROs are working to quantify the risks and build cyber-risk into their enterprise risk frameworks and controls. “Relationship managers are working to help clients cut back on human errors that give openings to criminals. It is inevitable that some cyber-attacks will succeed – so resilience thinking includes planning and testing responses for when criminals do break through or insiders take out client data or cause damage.” A number of private banks, including Coutts, Barclays and Standard Bank, have adopted biometric technology to verify client authenticity. Coutts has implemented messaging services via its tablet and smartphone apps, allowing for greater degree of security over emails that have not been encrypted. Authentication can be granted via fingerprint rather than pass-code. “Innovations such as TouchID, voice and behavioural biometrics not only serve as private banking industry firsts, but have also dra- matically reduced fraud and enhanced the client experience,” says Robert Hemphill, executive director, digital solutions at Coutts. A risk-savvy corporate culture, adds Wood- house, needs to be embedded across the entire organisation. “Firewalls will not protect employees from falling prey to social engineering, for example. Data losses have happened when disguised criminals accessed physical data servers in banks, or send well-crafted emails to top executives. So it is important for all employees – the board, relationship managers, facilities managers, CROs, COOs and CIOs – to have the right tools and culture to manage these risks,” he says. Creating a secure environment, mitigating cyber-risks and investing in appropriate security measures are vital for private banks to cope with the ongoing regulatory changes. It is a question of time before private banks will need to become even more connected than they are now, with the introduction of additional distribution channels for clients and third-party partnerships, and potentially new cyber threats will arise; financial institutions need to be ready for the new reality. Banks with legacy IT infrastructure will find this process of enhancing security systems much harder, and will be exposing themselves to increased vulnerability. Woodhouse says: “Digitisation, when done right, also enables banks to build in automated defences and advanced surveillance that can help fight cyber crime and accelerate recovery.” He also points out that technology is moving fast, both within banks and through collaboration with FinTech providers. “Data protection practices and technologies like DLP, information rights management, encryption and restricted use of removable storage devices are also being adopted along with penetration testing and war-gaming,” he explains. < Creating a secure environment, mitigating cyber-risks and investing in appropriate security measures are crucial for private banks. PBI speaks with industry experts to assess how vulnerable private banks currently are, and what is being done about cyber threats PBI supplement.indd 11 02/06/2016 11:15:42

14. www.privatebankerinternational.com12 y FinTech 2016 APAC TOP 20 AUM BENCHMARK Private Banker InternationalPrivate Banker International FINTECH 2016 WealthInitiative: Identifying synergies and opportunities R eal estate, art and passion investments – such as classic cars, yachts, private jets or rare watches – and direct equity investments represent a dynamic multi-trillion-dollar market. Yet traditional wealth management institutions and family offices are remarkably ill equipped to cater to the growing demand from their high net worth individual (HNWI) clients. While technology makes it a breeze to trade shares and other securities, wealth managers often lack the right tools to find their clients a new holiday home, sell their rare watch collections or find the right private healthcare company to acquire. FinTech startup WealthInitiative, founded in 2015 in Zurich, Switzerland, has launched a platform geared towards the needs of wealth management institutions and family offices to facilitate transactions in this fast expanding universe. The new WealthInitiative platform is used internally to help wealth management institutions explore synergies among their own clients in the various departments and locations. It provides institutions with a new internal tool and creates a secure market where clients’ assets can easily be traded. The platform is available as a cloud-based solution, or can be hosted on banks’ IT infrastructure. WealthInitiative is offered as a white-labelled platform, and is primarily used by wealth managers on behalf of their HNWI clients. Unlike startups that seek to disrupt the traditional wealth management model, Zurich- based WealthInitiative offers a solution that aims to bolster private banks’ and family offices’ competitive edge. By facilitating secure and efficient transactions in real estate, art and passion investments and direct equity investments, Wealth- Initiative enhances wealth managers’ value proposition in relation to asset classes that are often most dear to their clients’ hearts. By matching supply and demand through a trusted platform, private banks and family offices avoid the steep fees normally charged by intermediaries, allowing them to generate additional revenues. Moreover, the platform speeds up transactions, enhances confiden- tiality, and significantly lowers costs for clients, leading to a superior client experience. In the near future, WealthInitiative will allow various wealth management institutions and family offices to securely reach out and connect with each other, multiply- ing transaction flow, and creating additional opportunities for clients and institutions. WealthInitiative will thus develop into a matchmaking platform for private banks, family offices and key institutions around the world to enable them direct contact from seller to buyer, eliminating steep fees pertain- ing to the trade of tangible assets and the transactions related to direct private equity investments. The competitive advantage of WealthIniti- ative beyond its niche concept is the state-of- the art digital features inbuilt in the platform. Easy to use and equipped with the latest technologies available, the platform enables fast and intuitive interaction. WealthInitiative is also planning to work on the integration of blockchain technology to allow tracing provenance and ownership of assets traded on its platform, which will further add to the security of transactions. Founder of WealthInitiative, investment advisor and art investment expert Douglas Azar, says: “I strongly believe that creating synergies among clients is the next growth driver for wealth management institutions and family offices. “Throughout my experience in private banking and art investment research, I kept on wondering about the lack of tools that would allow wealth management institutions to better exploit this untapped potential. WealthInitiative was born out of a desire to fill this gap.” < WealthInitiative was founded in 2015 in Zurich, Switzerland by investment advisor and art investment expert Douglas Azar. The company launched its online platform in early 2016 to foster synergies among wealth management institutions related to transactions in real estate, art and passion investments and direct company investments. WealthInitiative’s offering is geared towards wealth management institutions, asset management firms and family offices globally, and allows efficient, confidential and secure trading of assets on behalf of their high net worth clients. The company is backed by an international group of private investors based in major financial hubs. Swiss FinTech startup WealthInitiative is helping private banks and family offices to unlock synergies among their HNWI clients. To do so, WealthInitiative has launched a platform to cut out the middlemen in real estate, art and passion investments, and direct equity investments PBI supplement.indd 12 02/06/2016 11:15:46

15. www.privatebankerinternational.com FinTech 2016 y 13 APAC TOP 20 AUM BENCHMARKPrivate Banker International Lighting the way in FinTech: Private banks in Asia-Pacific G lobally, retail and corporate banks – as well as payment firms – have taken digital engagement with clients to the next level, by using technology innovation as a cornerstone of their business models. For private banks, this shift continues to be gradual. In Asia, though, private banks have evolved and adopted new technologies at a rapid rate. Wealthy clients in Asia prefer to meet relationship managers (RMs) face-to- face regularly, which is a cultural nuance, but at the same time they also view sophisticated technology provisions as must-have services, instead of a nice-to-haves. Nifty new players such as China-headquartered Alibaba have shaken up the traditional banking market in Asia, and made customers accustomed to easy, real-time services and personalised offerings. Private banks in markets such as Singa- pore, Hong Kong and Taiwan are particularly forward-thinking. Many are actively working with startups to identify new opportunities. Some regulators are promoting this culture of collaboration as well. Singaporean private banks, such as DBS, Bank continue to digitise themselves and introduce niche offerings such as personal RM ‘avatars’ and investment dashboards. At the Private Banker International Global Wealth Conference in October 2015, Tan Su Shan, group head, consumer banking and wealth management, DBS Bank, emphasised the importance of being aware of new technologies and maximising their potential: “If artificial intelligence is indeed able to combine cognitive computing for structured and unstructured data, as well as create an emotional linkage with the client, I want to know about it,” she said. PBI puts the spotlight on four private banks that are leading the way in fintech adoption in Asia-Pacific, to find out what they are doing and examine their approaches. Asia-Pacific is undoubtedly the region to watch for FinTech developments. Several private banks are ahead of Europe and the US in terms of delivering innovative client experiences. Xiou Ann Lim talks to the leading players and examines the most interesting offerings in the region A people-first approach to fintech at Credit Suisse A year ago, Credit Suisse rolled out its Digital Private Banking platform in Singapore. The number of clients using it has increased more than tenfold over the last year, and the user base has almost doubled since access was extended to iPhones three months ago. François Monnet, Credit Suisse’s head of private banking Greater China, and sponsor of the Digital Private Banking project in Asia -Pacific, says clients have responded very positively to the platform. “A fast-growing number of clients are using the digital channel, logging in more often and spending more time on the platform,” he adds. Monnet reveals clients spend an average of around 15 minutes per login session on the digital platform, and they log in an average of six times a month. “Our most active user logs in more than five times a day,” he discloses. Monnet says that the platform has given Credit Suisse more channels anddatatobetterunderstandclients’investmentpreferencesandbehav- iour. “We found that while clients tend to conduct their digital banking activities on weekdays, they are also using it on weekends,” he shares. The platform also provides insights on client usage preferences. Across all devices, Monnet says that the top three most popular functionalities are Portfolio Overview, Trade and Research. “In terms of devices, clients prefer using the iPad to view their portfolios, trade and get investment ideas, while they use the iPhone mainly for quick viewing of their portfolios as well as acquiring news and insights on markets,” he adds. “We observe our clients using the platform to source for investment opportunities and ideas. Through the trading tools available, they are empowered to act on market opportunities at their own convenience, while also maintaining a close dialogue with their RMs,” Monnet shares, PBI supplement.indd 13 02/06/2016 11:15:50

16. www.privatebankerinternational.com14 y FinTech 2016 Private Banker International FINTECH 2016 adding that this has resulted in positive feedback from clients. Despite its importance, digitisation in wealth management is complex. Not all players can undertake the challenges and commit significant investments and resources to fintech, as several pieces need to come together. According to Monnet, the first and most time-consuming part of the journey is to prepare the platform and banking infrastructure that will provide the services to the front-end applications. This includes the core banking and other systems to support the required security, automation and data standards. “Once you have the platform ready, only then can you start building the client-facing applications. That is the sexy part, because it is new, fresh and reinvents the banking value proposition for the client,” Monnet says. Additionally, Monnet cautions that the bank itself has to be ready to enable the service. “It is a new target operating model and way of working together to be a 24/7, almost real-time business. This requires us to rethink the way we work, our processes and tools. “It is complex to engage everyone in the organisation to embrace this changeandunderstandwhatgoingdigitalreallymeans,”Monnetexplains. To help convey the substantial advantages of the digital private banking platform to both clients and front-office teams, Credit Suisse put in place an ongoing change programme. “This change process to adopt the digital private banking platform has been extremely successful with Credit Suisse employees and clients,” he says. Having all these pieces working together – an engaging front-end application fully integrated into the IT infrastructure of the bank and propelled by internal adoption – is a multi-year commitment. “From the beginning, we designed and shaped our digital solution based on in-depth client discussions to get their valuable input,” Monnet reveals. The features of the first product release were designed, developed and prioritised based on what these clients expect from the bank. “So, we are continuing to have regular conversations with our clients and RMs to get their feedback and we continuously enhance our digital private banking platform to increase the breadth and depth of what we offer digitally,” he adds. Monnet views technology as an enabler and not a replacement: “Our RMs will remain at the centre of the client relationship and private banking continues to be a people-based business.” He believes that new digital capabilities are giving the RMs a new platform to better serve their clients, focus on higher-value-added advisory activities, and manage higher volumes. “We see the digital platform as being complementary to the expertise of our RMs. We are simplifying access to the knowledge and insights of the bank, so our clients can identify and act on the information that is most relevant to them – whenever they choose,” Monnet says. The emergence of fintech may seem to be highly advantageous to the private banking industry, but it does bring its fair share of threats, and Monnet believes that cyber security is one such element at risk. “I believe our peers in banking and finance, as well as other sectors, face the same threat. As a leading private bank, our first priority is client security and privacy – we take it extremely seriously.” Monnet discloses that the digital private banking platform will be rolled out to the Hong Kong booking centre in mid-2016. New features, functionalities and language capabilities will be added.< Credit Suisse (cont.) Fintech at Citi Private Bank: Getting it right first time Citi Private Bank’s Investment Lab developed Idea in 2014 with the aim of helping clients with cash and liquidity solutions, deposits, lending, estate planning and investments. According to the global head of Citi Private Bank Investment Lab, Philip Watson: “Idea helps us better understand our clients and what they are exposed to, as well as what types of investments they have.” It also makes recommendations and helps to identify risks in their portfolios. Idea consolidates all these pieces of information and cuts through the noise to get the most relevant information and channel to the client as quicklyaspossible.“Thisenablestheadvisorstoinstantlyunderstandwho is impacted by what,” says Watson. As efficient as the platform is, Watson doesn’t think robo-advisory will completely replace relationship managers anytime soon. “In Asia, we look after approximately 5,000 individuals and families – the needs differ from client to client,” he explains. While he believes that use of data and technology is empowering, private banking delivers very unique solutions to the needs of individuals. “I do not see competition between the two,” he says. “Itdoesnotsubstitutethedialoguethatissupposedtohappenwiththe client about things outside of the insights that data can provide,” Watson reiterates. These could be transition or changes in the family or transfer of wealth between generations. Instead, he believes that there is a natural fusion that enables a productive dialogue to happen with the client. Apart from the ‘softer’ issues in wealth management, Watson also believes that fintech will not be able to fulfil clients’ need for education. “One thing we have observed is that our clients have a great appetite for education,” he shares. The Investment Lab produces around 1,500 case studies for Citi Private Bank clients every year. So – while education can be facilitated through technology – he believes that there are some rudiments that are human- to-human, which cannot be replaced. The Investment Lab – which operates out of London, Singapore, Hong Kong and New York – is working with a number of fintech firms on several plans. “What I find so exciting about the fintech community is that there are seeminglynoboundariesastowhatcanbeachievedwiththetechnology,” Watson says. But what he finds lacking is the awareness of the internal workings of a private bank and the ways in which clients engage with them. “There are some regulatory and compliance features that need to be embedded within fintech solutions,” he explains. “While the technology can provide solutions, there are a few hurdles that the fintech community need to get through – but they’re not insur- mountable, it just takes experience,” he adds. Watson’s philosophy when it comes to innovation is simple: “We want it to work as originally planned.” He says that the speed at which they can bring innovation into the ‘business-as-usual’ is dependent on a number of factors. “When we introduce disruption, we want to have anticipated the broad- est range of challenges that may arise in that first period – because that first period is an extremely important one,” he adds. “If you introduce disruption in a bid to be the first to market, and for all of the positive reasons you may have had for accelerating it, the investment of time that you have to make in order to repurpose and win back the user base is significantly larger,” Watson cautions. “You can lose a significant amount of time – more than what you gained from being the first to the market.” To Watson, the nuances of private banking tend to be more client-specific. “There’s no question that there are some differences between regions in terms of investment behaviours, but our clients do employ us – among other reasons – to access opportunities outside of their own region; they tend to have a global outlook,” he explains. The Investment Lab is trying to embrace changes happening within the market – both in clients’ buying behaviour and within the product landscape. Watson reveals: “Our clients are increasingly aware of the opportunities available to them in the global sense, but they frequently lack the time and tools to evaluate all of them and do a peer-group analysis across those opportunities. These are things that we’re investing our time in at the moment.” < PBI supplement.indd 14 02/06/2016 11:15:50

17. www.privatebankerinternational.com FinTech 2016 y 15 Private Banker International FINTECH 2016 Singapore’s OCBC broadens its wealth management reach through fintech While most private banks are concentrating their efforts on improving theirdigitalpropositionforhighnetworth(HNW)privatebankingclients, OCBC in Singapore is using fintech to make wealth management services available to more people. To further this agenda, the bank launched its OneWealth app in March 2016. Callingitthe“democratisationofwealthmanagement”,headofe-business Singapore Aditya Gupta explains that advisory has traditionally been restricted to the HNW segment of private and priority banking clients. “But if we marry digital technology to wealth management, we have an opportunity to make quality advisory more accessible and personalised for a much larger group, and to segments that have not had access to this – mass affluent, youth, first-time investors, etc. That was the concept behind this app,” he explains. The OneWealth app – which took around 10 months to develop, proto- typeandtest–providesup-to-datemarketinformationandrecommenda- tions from OCBC wealth experts directly to clients’ mobile devices. “We have consciously curated the content into simple bite-sized pieces of information,” says Gupta. Users can also view their portfolio in real- time. “We give users contextual alerts. It is relevant to their investment holdings, and not a generic text message,” he adds. Although the app was only launched recently, it has already been down- loaded around 15,000 times. “The initial engagement levels are also high – clients come back to the app every day because of the daily updates. “They are also interacting with it by saving articles, giving feedback on social media and logging into their portfolios,” Gupta reveals. While some functions are similar to those offered on the online banking site, the OneWealth app was developed with a mobile-first perspective. “We have redone the way content is presented and also increased engagement as compared to the website,” explains Gupta. There is a newsfeed that is designed based on user feedback, which allowsthemtocustomisewhattheywanttosee.Theappalsohasageneric newsfeed and one that is based on personal holdings. Gupta shares that customers who are using the app for the first time are happy to manage their portfolio holdings on their own. “There are also customers who are already tied to a RM or prefer to have a hybrid model where they want to see content but still meet an advisor to transact or get additional advice,” he adds. Gupta says there are plans to add a buy-and-sell function to the app. “The reason why we did not do that in the first phase was because we wanted people to familiarise themselves with the app,” he explains. OCBC will also be introducing a fingerprint biometric-based access to clients’ portfolios so that they do not have to go through a complex login and two-factor authentication process. This comes from feedback that users want easier access to their portfolios. “We want to continue to simplify the wealth execution,” Gupta says. Speaking about the bank’s innovation lab – The Open Vault – he shares that rather than taking the standard approach of banks where they start fromthefintechcompaniesandthenlookforsolutions,OCBCstartedwith their problem and opportunity statements before identifying partners. Currently, the bank is running an accelerator programme with venture capitalfirmNest.Guptarevealsthattwoorthreeofthefintechcompanies participating are in the wealth management space. “We will be providing them with sandboxes to build prototypes for us,” he adds. “We have taken a step in the right direction, so that is encouraging.” < Fintech at the centre – not an extension – of UBS UBS’s Evolve innovation centre has been testing, learning and applying several different proof of concepts to understand how they best fit into the UBS ecosystem. According to its Chief Digital Office (CDO), clients want more digital touch points and efficiency – so, a lot of the digital projects will kick off from the innovation centre. “Our management is committed to ensuring that digital is not just an extension of UBS, but central to our transformative efforts to be future- ready and remain the world’s number one wealth manager by AuM.” Revealing that there are several plans in the pipeline, the CDO adds that “there will always be pockets of resistance – like any other form of disrup- tive influence”. However, the private bank’s management has embraced digital and understands the need to stay ahead through it. “Externally, we ensure that all digital changes begin with what clients want and end with them as well,” says the CDO – adding that they are involved from the testing phase and that many have stepped forward to volunteer their time and feedback to help UBS improve. “UBS does not believe in designing or building without putting clients’ needs first.” Internally, the CDO has been working with UBS staff on human-centred design. By the end of 2016, several dozen UBS staff members will have gone through workshops to flesh out principles, help participants better understand digital transformation and how to apply it within their units, PBI is told. Has UBS identified any potential technological threats to its private bank? “Everything can be viewed as an opportunity. Even robo-advisory is not considered a threat. We know what our clients want and we believe that pure robo-advisory services are not going to make a huge dent in the private banking space in Asia,” says the CDO, adding, however, that perhaps the biggest fintech disruption may come from China – where companies such as Baidu, Tencent and Alibaba are reshaping the digital financial services model rapidly. “We are always looking at ways to get better. To say that we have got enough is a mistake. We believe we have the best mix possible of high- tech and high-touch to serve our clients – but that does not mean we will rest there.” < n FINANCIAL ADVICE INTERACTION - CHANNEL PREFERENCES Top 2 Channel Preferences in 2-3 Years Change from Current Preferences Mainland China Mobile 27% Online 21% 8% 5% Hong Kong In person 29% Online 29% 1% -1% Singapore In person 44% Mobile 17% -6% 6% Japan Online 38% In person 35% 5% -7% Australia Online 35% In person 35% 9% -9% Source: EY 2016, Could your client needs be your competitive advantage? PBI supplement.indd 15 02/06/2016 11:15:51

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