24 Jan Tech-savvy private banks could benefit from regulatory scrutiny
24 January 2019
The private banking industries of Hong Kong and Singapore are gearing up for major regulatory reforms in a few months’ time, and how private banks leverage technology to facilitate the transition will separate the wheat from the chaff, according to fintech professionals.
From April, Hong Kong’s private banks will be required to conduct suitability checks for every complex product transaction according to the Securities and Futures Commission’s (SFC) amended suitability requirements, while banks in Singapore also have until April to implement the revised accredited investor regime. In both cases, technology could prove essential to integrating and executing the reforms.
“We see the regulatory development as a game-changing opportunity for tech-savvy private banks or other financial institutions to win more end-clients by providing a smoother user experience while meeting the more rigorous compliance requirements,” David Lee, partner at Privé Technologies, told Asian Private Banker.
As an example, Lee highlighted one financial institution which has created a text-to-speech function accompanied by quizzes to conduct suitability checks, rather than having a banker and/or recording read product information and disclaimers and ask questions.
“The financial institution relayed that its end-clients were more engaged in the process after this was introduced. It also allowed the financial institution to reduce costs, as the institution was using disclosure recordings that had been recorded manually,” he said, adding that products no longer have to be removed from the shelf until recordings are updated, thereby cutting costs further.
In addition to streamlining compliance processes, technology upgrades can create future business opportunities, according to Lee.
“It goes a step further from not only making sure that a private bank is merely compliant with the regulations to also digitally transforming the end-user journey so that the bank can also leverage the process to better utilise relevant data and improve its future sales process,” he said.
Abraham Teo, head of product management, APAC at AxiomSL, shares Lee’s sentiments that tech capabilities are becoming increasingly important for banks who wish to gain a competitive edge, and also believes financial institutions should welcome the opportunities technology affords them.
“Banks should be viewing technology investment not just as a cost, but as a strategic investment. For example, investing in data lineage capabilities throughout the bank would allow for the bank to better understand their data and manage their data risk, which is why you see the role of a chief data officer becoming more prevalent and important in banks today,” Teo told Asian Private Banker.
He added that increasingly stringent regulations pose unique challenges as well as opportunities for banks of different sizes.
“Larger banks have more capabilities to integrate new technology while the smaller banks typically don’t have such a level of support. They often have to ask the head office for technology support while we as tech vendors also assist smaller banks in their learning process,” he said. “But smaller banks have the advantage of less complex structures and product mix, therefore they can be more agile when facing regulatory changes.”
In recent years, the attitude of the region’s private banks towards third-party fintech vendors has changed significantly, particularly regarding the outsourcing of regulatory-related processes.
In 2018, banks in Asia announced partnerships with fintech vendors in areas of risk, compliance, as well as client onboarding — a far cry from 2012 when private banks in Asia were generally reluctant to outsource due to privacy concerns.
This article is originally published on Asian Private Banker.