The Swiss Private Banking Sector
Forward with strength and confidence
Jürg Frick, Senior Partner at Deloitte AG, continues in his personal assessment of the future of the Swiss banking sector and its transformation.
Jürg provides an overview on how far Swiss banks, regulators and politicians could revitalise Swiss banking and the progress that has been made during the last three years. He analyses three core elements of banking: business models, customers and relationship managers.
His assessment deals with a number of issues relating to banking sector as a whole, and some issues relating to private banking only.
What can we expect over the next three to four years?
The near future will see full confidence restored, and bankers will be able to focus on:
- prioritising their customers,
- enhancing the banking experience for customers,
- communicating with customers more quickly and in greater detail,
- using social media to develop the perception of the bank as a platform for bringing together business partners with common interests and using fintech solutions,
- optimising internal banking processes and lastly doubling the number of customers contact points using technological solutions provided by internal or external suppliers.
In the future, technology will replace the human element. However, new technology also creates new opportunities. It enables banks to bundle offers, approach more customers, use social media to build and benefit from networks, work more efficiently, implement updates faster and more cheaply, and use different platforms to increase expertise amongst employees.
There are five business models which will establish themselves in the future of the banking sector. They need to be adapted to the individual needs of each bank. Business models were presented in more detail in our study “Future Business Models for Swiss Banks” (2016).
- The Trusted Advisor (TA) business model
- The Product Leader (PL) business model
- The Transaction Champion (TC) business model
- The Managed Solutions Provider (MS) business model
- The Universal Bank (UB) business model
Requirements from a customer perspective
It can be debated whether the efforts of banks to employ digital, robo-advice, robotics and, in general, fintech solutions are actually in the best interest of the customer, and more importantly for which customer. Is it still timely to segment customers into retail, affluent, high net worth individuals, ultra-high net worth individuals and family offices and to have them split into regions and countries in the name of globalisation and technological possibilities?
The main point is to bundle the same needs, the same interests, the same risk capacities and the same risk appetite, to define and develop products and services thereon. Due to this differentiation, there will be demand for other types of advice, products and services, which in turn need to be represented by other personalities.
In addition customers will still value ‘traditional’ banking services, in particular quick and uncomplicated access to their relationship managers.
The end of the traditional relationship manager
In the past, individual relationship managers were primarily focused on a two-way arrangement with customers. In the future, the emphasis will be on bringing together individual customers and their interests, with the bank taking on the role of mediator, organiser, director and initiator. The relationship manager of the future will have a new profile, as “Network manager”. In other words: “Which arrangements do I need to get my network to work together?”. The banker of the future will act more as a source of advice and ideas, and less as an agent for processing orders.
The Swiss Private Banking Sector - Back to the fast track
The developments allow for a reliable assessment of the future of the Swiss banking sector particularly for private banks. The number of banks in the banking sector will drop significantly and foreign banks will exit the private banking business. Smaller banks will increasingly return their license or drop out of the market due to the burden of the anticipated withholdings. The banks’ profitability and the employees’ salaries are expected to decline. However, private banks will continue to be able to make a significant contribution to a healthy banking sector despite the myriad of challenges – if the increase their efficiency and have the courage to change.
Embracing the Business Model Change
Global market, global clients but local specificities