IBS Journal October 2016
bank to be first choice for managing personal finances, less than 40% have a positive experience to report about their provider. The name of the game, therefore, is in shifting negative or neutral experiences to positive ones. And FinTech disruption is already creating a dent in conventional wealth management portfolios with a digital approach to setting budgets, monitoring spend, reviewing saving goals, managing investments or notifications and reminders.
is someone with investible assets over $1 million, although this varies between geographies and banks. There are an estimated 17 million global HNI with $65 trillion in wealth. 1% of that constitutes the Ultra HNI population, typically defined to be with investible assets over $30 million, and this segment holds over 35% of the global wealth. North America and Asia Pacific geographies make up more than half of the HNI population.
The HNI segment is sought after by banks as it tends to provide a much higher stability and a framework to drive the liability strategy. The focus is on building the deposit book, the investment portfolio that drives both a cost-effective liability book, and a healthy fee income structure. An effective HNI strategy could well be the secret sauce for driving profitable growth, especially when cost of capital and access to liquidity get harder to tap into.
The question then moves to what makes the segmentation meaningful. Or, put differently, what matters more to the typical HNI customer? While managing the wealth for a HNI customer is always seen as the primary value proposition, the positioning of a bank to this customer extends beyond just deposits, investments and insurance products. The maturity of the market, the awareness of the customer and also sophistication of the bank all matter when it comes to the evolution of service offerings: from an execution only model to that of an advisory model and to a full- fledged wealth management offering with holistic services. However, all things being equal, it is the service differentiation that makes a difference.
Customer engagement is all about shifting experiences. While 75% of customers reportedly prefer their primary
Innovations in channels, both with the conventional branch as well as with the digital channels, holds a very important place in service level and experience differentiation. Driving an omnichannel integrated view and access, PFM offerings over the mobile, an intuitive IVR and a personalised contact centre experience – all of these are seen more as hygiene factors. Their absence is felt more than their presence.
The challenge of personalisation is even more pronounced when dealing with the HNI segment. An estimated $41 trillion of wealth is to be transferred from Baby Boomers to Millennials by 2025, and that makes customised experiences even more critical. A strategic approach to leveraging social media and providing corporate updates, expert advice and analysis is an interesting strategy adopted by leading players such as Credit Suisse, BNP Paribas and Deutsche Bank, while mobility and anywhere access available on tap is a core value proposition at CitiGold. Free evaluation of customer financials online by USAA and the superior online banking experience of BankAm, are pertinent examples of global FIs driving differentiation through digital.
Needless to say, banks quickly embracing new rules have a head-start, not only with new entrants to the HNI club, but also existing ones who see the merits of convenience. Defining the right segment is key, as is knowing the customer’s preferences. However, predicting changing needs and aligning offerings accordingly are hugely important elements in the new age of banking. After all, it’s the most responsive to change that survive, not necessarily the strongest or, for that matter, the largest.
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