Author: Andreas von Hirschhausen

How PSD2 and Open Banking will change our view and ease of wealth aggregation and how banks can use it to their advantage.

Open Banking and PSD2 are associated with several problems for banks: costs, loss of data, increased competition, and increasing regulatory burden. The implementation deadline is near and very little banks have a clear proposition on how to use it instead of just complying with PSD2. What if I told you, that you can use Open Banking to win new clients to start new business models? And that you can increase client satisfaction and your share of wallet?

How to make your clients love you

Here is a common view on Open banking: Financial institutions have to create an API, which they might not be very familiar with. They have to share data about their clients, which competitors could use to take business away. And last but not least the costs of complying with PSD2 are increasing. But here is a not-so-obvious view:  By offering the more compelling proposition you can leverage your existing client base, your brand and the trust clients have in you to understand your clients better. Moreover, you can offer them more value and increase your share of wallet with the client.

Open Banking does not have to stop at current accounts as PSD2 does. Imagine the possibilities: You not only can connect current accounts, yes, (yawn!), but also: portfolios, real estate, private equity, cryptocurrencies, cars (yes, all of those data points can be delivered to your clients at their fingertips). Aggregate wealth and analyze transactions to give the next best actions that fit perfectly to your clients’ needs.

Answer important questions for your clients:

•How much am I worth?

•How much can I save and how much do I need to save to reach my goals

•Does my asset allocation fit my needs?

As a bank you can get valuable information about your clients:

•Did I advise them correctly?

•How much is my client worth? Does that change the way I treat him/her

•What other offerings would this client profit from?

“If you connect valuables of your clients, you’ll be the financial center for all their needs”

 

How to be the center point of your client’s financials

Now, how can a bank achieve digital excellence and connect to new clients? The answer is easy. It should deliver apps and solutions that offer real value for their clients.

Here is a roadmap to excelling in your business:

1. Think of a clear business case and what you want to achieve, e.g.

•Find out more about your clients

•Increase client bonding

•Increase your net promoter score

•Get new assets

2. Think about how you want to achieve this

•Focus on current accounts and use them as an example of retirement planning

•Use holistic wealth aggregation to give better portfolio advice in the context of financial planning

•Use aggregation to better target promising clients in your sales funnel

•Increase your assets under advice by comparing your expertise with existing client portfolios

3. It helps to know where your proposition is better than the rest

• Do you have a strong investment office?

•Can you offer a wide range of products?

•Do you have an extra trust factor?

•Are your services cheaper, more diversified, better performing than others?

Such digital tools based on Open Banking can help you to show clients digitally and easily how they will profit from working with you. And all that in an automated and scalable manner.

 

 

The digitization of the financial industry often progresses only cumbersome. Great successes or changes usually come from the emerging challengers or “online-only” banks. The established players are trapped in legacy systems that are not up to the pressure of digitization and regulation. 

This applies especially to investment processes. From consultation to portfolio design, steadily falling margins meet with high manual effort in all areas. In the field of tension between compliance, process costs and the desire for differentiation, existing technology often blocks the future. 

The following five points describe which tasks your current investment software is unlikely to perform and what added value you can expect from modern software.

 

1. Your investment software has too little data about your customers and their value(s)!

Open Banking offers new ways to gain a holistic view of your customers. The linking of accounts, deposits and other assets makes it possible to capture the financial situation of your customers faster, more detailed and more comprehensively than most existing investment software can.

With Fincite.CIOS, financial service providers can capture all their clients’ accounts, deposits and other assets (real estate, private equity, etc.) in a 360° view. Based on this hollistic view, CIOS provides recommendations for individual actions either directly to the customer or as a sales impulse for the consultant. With our Software the consultant gains an understanding of the client and the customer lifetime value.

 

2.You can´t automate your investment process with your existing software!

From collection of the financial situation and the risk profile up to the investment compliance and documentation there are many – often manually carried out – steps which cause high process costs and compliance risks. Most consulting or portfolio management systems often lack an end-to-end view for effective automation. But the processes of investment consulting or asset management can be automated to a large extent.

Fincite.CIOS digitally maps the processes from recording the financial situation to portfolio construction and order generation. This end-to-end process saves more than 25% of time per customer per year. In addition, automated processes can almost completely prevent violations of investment restrictions.

 

3. Your investment software is not a front-office system and can´t be customized!

Portfolio management or advisory systems are not built for customer contact. They rarely view their customers holistically in terms of their financial situation, current portfolios and individual opportunities.
Existing systems are often far away from the vision of financial service providers of a fully digitized and highly customizable process. Rather, they deal with questions such as:

– How many individual customer portfolios can the software manage?
– What happens if more than 100 customers access the software at the same time?
– How can we deliver an outdated user interface to the customer to meet reporting requirements?
– How can data fields for the MIFID2 reporting requirements still be integrated into the existing system?

Fincite.CIOS is designed for highly customized client portfolios and digital interaction. Our software includes the ability to provide your clients with real-time insights into their assets with a visually sophisticated and modern dashboard. Digital interaction and excellent communication processes will increase your customer satisfaction and loyalty and empowers your advisors.

 

4. Your investment software does not enable a fast roll-out

The world of a financial service provider is complex. Through several channels (e.g. consultants, online, mobile, distribution partner) different service models such as self-execution, investment advisory, and asset management models are sometimes rolled out across different customer segments (retail, mass affluent, private banking) in several countries.
Existing investment software is often not designed for this diversity and different purposes. 

Fincite.CIOS enables financial institutions to implement different service models on one software using a process mapping layer. Modern REST or GraphQL API layers allow access to the logic across different channels. To date, international financial service providers are already using CIOS’s multi-tenant environment to extend their consulting and portfolio management processes to multiple countries. All for a fast rollout.

 

5. Your investment software does not maintain a relationship with your customers!

The Markets are changing. And with them often the financial institution’s evaluation of asset allocation and individual products. But customers also change. Their financial situation and thus their risk profile can develop. It is just important to check these changes regularly (a requirement according to MIFID2 by the way) and to implement the recommendations of the Investment Office in the client’s portfolios as good communication – especially in times of crisis. In many cases, existing investment software does not meet these requirements.

By continuously linking the financial situation and providing market data, research results and signals, CIOS offers the basis to keep the client portfolio in shape and to provide clients and/or their advisors with specific knowledge for every market situation.