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Unlocking Opportunities by Serving the Underserved Affluent Segment

Unlocking Opportunities by Serving the Underserved Affluent Segment

A look at how private banks can utilize platform initiatives to unlock new opportunities in the affluent segment.

A major contributor of Asset Under Management (AUM) growth
in Asia (countries such as Singapore, Hong Kong & China) has
been the systematic creation of new High Net Worth (HNW)
and Ultra High Net Worth (UHNW) individuals.1 Through the
years, the growing mass affluent segment in Asia presents a
significant opportunity for capture. By 2020, Asia is stipulated
to account for 54%2 of the global middle-class population
and wealth is expected to reach USD 43 trillion3. To put figures
into perspective, much of this sum is untapped given that the
combined AUM of the top 20 Asia wealth managers in 2017
amounts to USD 2 trillion4. Moreover, within this segment, there
exists a shifting inclination towards portfolio-based proposition
from the traditional product pushing. This means that serving
the increasingly sophisticated mass affluent clients through the
retail banking service model may not be sufficient. However,
from an internal survey, more than 60% of banks in Asia are
still servicing the retail and private segments separately using
different platforms and service models. The resulting client
journeys and service levels are diametrically different for each
segment. This in turn poses a challenge to client retention
across segments. This article aims to highlight the benefits
and challenges in redesigning the service model for the mass
affluent and share some industry best practice implementation
guidelines.

How to establish a consistent client journey
across segments?


Establishing a consistent client journey across segments
involves the expansion of front-end client offerings and the
simultaneous consolidation of back-end systems and processes
across the traditionally separated retail and private client
segments. Retail clients are increasingly looking for a quality
advisory proposition with a portfolio concept and a wider
variety of product offerings. A platform extension programme
provides banks with the opportunity to bridge the gap in the
service and product offering across the segments with a less
fragmented architecture setup (Figure 1).

Identified benefits of a platform extension:


The key objectives of initiating a platform extension programme
are essentially:

  • To improve and ensure consistent client experience:


    Extending platforms between retail and private segments
    allows banks to deliver consistent client experience across
    segments. A prime example is the transition of a retail client
    to a private banking stature. A unified platform can minimise
    impact to client account handling, performance calculation
    methodology and client statements, thereby delivering a
    consistent client journey.
  • To uplift topline through additional sales proposition:


    From the front office perspective, expanding the product and
    service matrix traditionally intended for a single segment
    to both segments can expand the bank’s client pools and
    therefore its revenues. This is especially the case as retail
    clients continually become more sophisticated investors.
  • To attain cost efficiency through economies of scale:


    From the Operations perspective, the increased size of
    the combined platform allows for economies of scale
    and reduction in costs. This cost benefit is derived from a
    decreased per unit transactional cost as well as from cost
    efficiencies enabled via the consolidation of teams and the
    streamlining of processes across support teams.

    Some banks have recognized the opportunity and have already
    begun pursuing high-commitment investments into such programmes. Some of the challenges of a platform extension
    are highlighted in the next section, however this alignment is
    inevitable in the industry.

Identified challenges of a platform extension:


A platform extension can be complex in the short term due to
the isolated setup of the two segments within a bank. In the
most extreme cases it can bring complexities similar to a merger
whereas in the simpler cases it can be a basic extension of the
existing services. Some of the key challenges from a business
and technical aspects are (Figure 2):

The key is to be aware of these complexities and to tackle it
upfront in the Target Operating Model (TOM) and Analysis &
Design (A&D) phase of a platform extension.

How does a well-defined TOM solve the
challenges?


A clear Target Operating Model (TOM) definition should form the
baseline of a platform extension programme. A TOM approach
will help a bank get a comprehensive understanding of the
business strategy and vision, define project scope priority
and plan the extension together with relevant stakeholders
from business and technology departments across segments.
The Synpulse TOM approach (Figure 3) provides a framework which
has been used across multiple projects for baselining and
launching a platform extension programme.


A TOM assessment will be run across the 4 pillars of:

1. Organization & Processes


Analyse and define the target organizational structure and
business process landscape

2. Products & Services


Define future products & services, new market requirements
and functionality gaps of the programme

3. Technology & Architecture


Define the target application landscape and IT architecture
design

4. Partnership & Sourcing


Explore sourcing or vendor potential and define target
partnering model

The definition of target front to back processes using a set of
best practice processes is at the core of such an assessment.
The Synpulse BANKINABOX® covers all the processes within
a core banking setup and contains know-how from various
platform extension programmes.


While defining the target, a bank should also consider the
prioritization of the TOM pillar and the preferred rollout
approach (Phased vs Big Bang). A holistic analysis considering
cost, benefits and implementation risk will provide a clear
roadmap (Figure 4) in terms of the implementation of the platform
extension.

Key implementation guidelines:


Platform extensions are challenging and the complexities are
further increased given the typical program mandate for maximum
alignment. Therefore, a clear framework is required to
define, plan and implement such a transformational project.
Some key insights for pragmatically launching such a programme
are highlighted below:

  • Planning and scoping:
    Planning and scoping such a platform extension requires
    a deep understanding of the IT and business complexities
    along with the platform capabilities. There needs to be a
    holistic TOM exercise for scoping and a clear definition of
    the target architecture for such a programme. A realistic
    bottom up project plan needs to be developed based on
    this exercise.
  • Project governance is a long-term investment:
    Banks often begin investing in strong project governance
    after the initial delays and as part of the project turnaround
    initiative. A strong project governance from the onset can
    help kick start a project in the correct direction and prevent
    unnecessary delays.
  • Functional and technical know how is a must:
    It is important to ensure that the project team has a strong
    functional and technical expertise about the platform coupled
    with in-depth knowledge of the requirements of the
    different segments. This helps in early identification of system
    gaps which reduces the cost per change. This needs
    to be further supplemented by dedicated support from the
    platform provider.
  • Sequential implementation plan:
    It is recommended to launch such an implementation
    project sequentially across the permutations of divisions
    and locations. A strong private banking booking centre
    should form the baseline following which it is easier to
    launch the platform to additional divisions in the region.
    From an APAC perspective, the simultaneous go-live of
    HK and SG with a Big Bang approach has been proven
    successful, however requires strong governance in the form
    of aligned business requirements.



Conclusion


All in all, with the rising wealth in the Asian middle class and
increased sophistication of retail clients, there is a need to
enhance the retail offering and service model. A platform
extension will not only cater better to the mass affluent but
also ensure consistent client journey, increase topline and
cost efficiency. However, given the business and technical challenges,
a systematic approach with strong project governance
and know-how is vital for the success of such a large scale
programme.

Author Acknowledgement


This article is authored by Rahul Bansal (Senior Consultant), Evan
Chang
(Consultant), and Dalston Leong (Associate Consultant).

References & Footnotes

  1. Led by China, a new billionaire is created in Asia every other day — 2017
  2. The Unprecedented Expansion of the Global Middle Class: An Update — 2017
  3. The Growing Asian Wealth Management Market Capturing the Mass Affluent Opportunity — 2018
  4. Asia 2017 AUM League Table — 2017



Rahul Bansal
Senior Consultant
rahul.bansal@synpulse.com
 Rahul Bansal
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