More than half of banks and wealth managers intend to embark on full-spectrum digitisation projects within the next two years, according to Objectway’s recent report, ‘Unlocking opportunity in challenging times: Innovation in European financial services’.
More than 40 per cent are already working on innovative concepts for customer experience, research found, with close to 70 per cent stating that increasing regulatory pressure requires continual questioning and adaptation of business models. Further pressures on industry participants include investor protection and environmental concerns, the recent financial crisis and geopolitical events.
The report states that earnings forecasts for the private wealth sector again suggest no change over 2023. Clients are reducing the number of wealth managers they employ, with a private client’s average dropping from 4.6 to 4.2 over the past year. Luigi Marciano, founder and CEO of Objectway, suggests that this is a result of portfolio stagnation and a requirement being left unmet. The majority of financial companies surveyed (84 per cent) reported that increased competition in this area is ‘clearly noticeable’.
In order to improve customer satisfaction rates, the report advises digitalisation. According to the research, banks and wealth managers increased their technology investments by 8.5 per cent over the last 12 months, and are projected to increase them by a further 9.2 per cent by the end of 2023. For the most part, these investments are allocated to improving customer experience, optimising processes and expanding the range of products and services on offer.
Almost half of those surveyed stated that artificial intelligence and machine learning will be the biggest change in customer experience strategies over the next two years, with 35.6 per cent citing the expansion of their customer-facing channels as a priority.
When expanding the variety of products that they offer, ESG investments are the overwhelming priority for those polled. 84.5 per cent expect to add or expand the ESG investment options they provide over the next three years, with this figure rising to 97.2 per cent in the private wealth industry.
In order to improve their ESG profile, creating new investment strategies was prioritised by 73 per cent of respondents. 64.7 per cent suggested asking clients about their views on ESG, and 48.5 per cent cited providing further financial education support and resources as a way to improve ESG brand image.
The use of strategic partners is highlighted as an important way to succeed in strategic innovation, the report says. 47.6 per cent of large companies do not want to use their internal resources around what could be a critical innovation, preferring to benefit from the flexibility of outsourcing. For smaller companies, the benefits of outsourcing are more cost-oriented.
Commenting on the findings, Marciano says: “Increased competition between players, the challenge of digitalisation and the ability to then guarantee the results of investments are the biggest challenges. Sustainable investing is on the rise among high-net-worth individuals in Europe and globally, as awareness of positive social and environmental impact combined with improved financial returns grows.
“More companies are recognising the benefits of having an ecosystem of fintech and wealthtech experts and are outsourcing aspects of their business. In doing so, they are creating new opportunities for growth while reducing the cost and complexity of administration.”
