Digitalization View from the front

It was a pleasant Wednesday morning when we met with Claudia Colic, Dirk Klee and Andreas Kubli in the UBS offices on the Bärengasse in Zurich. As Chief Operating Officer of UBS Wealth Management, Klee has been leading the digitalization of the bank’s business with wealthy individuals. Colic, head of Transaction Banking at UBS Switzerland AG, manages technological change for corporate clients in Switzerland. And Kubli, head of Multichannel Management and Digitization at UBS Switzerland, oversees the Swiss bank’s all-important digital client interfaces.

Curious about what it was like on what we might call the front lines of UBS’s digital transformation efforts, we had invited them to share their thoughts with us in a roundtable interview. We asked them to talk about the changes they were seeing, the challenges they faced, and where they thought the journey was headed. Below we present a summary of our discussion.

Of client demand and broadening ecosystems

All three roundtable participants told us that digitalization is changing client expectations. On the corporate side, Colic said clients “want a lot more than before in terms of convenience, transparency and flexibility,” for instance performance and risk analytics via mobile tools or increased efficiency through such digitized processes as electronic invoicing.

Although the wealth management business remains centered on human interactions, Klee said wealthy clients increasingly want to interact digitally with their banks as well: “The client experience is being increasingly driven by what clients see in companies like Apple, Amazon or Google. They expect a similarly seamless interaction with their bank.” So too, Kubli added, do the bank’s less well-heeled customers. “Retail clients increasingly expect personalized communication as well. They notice, for example, when our communications are not consistent with what they have told us about their particular preferences.”

All three also said they were collaborating more with outside vendors, expanding UBS’s tech ecosystem. Kubli routinely works with a wide variety of firms, including Fintech startups, to add functionality – for example, the new personal financial assistant in UBS e-banking. Colic said she had no inhibitions doing the same on the corporate side: “We do work with external providers because often they are more nimble than we are. Clients actually appreciate it when we vet leading providers and, where it makes sense, add their services to our offering.”

Klee said the internal ecosystem is changing as well, with the bank’s client advisors profiting from such things as machine learning and big data. “We have already automated a lot, and can easily bring together everything we know about our clients. We are now introducing systems that learn as our advisors use them. That helps advisors tailor their service more effectively.”

And what of the Fintech threat? All agreed it was real enough, although Klee said startups attacking banks still face massive hurdles: “There are some interesting pieces of technology out there, but Fintechs miss the content and expertise wealth managers have built up over the years. We have yet to see clients hand over their wealth to a Fintech startup.”

Kubli likened the Fintech onslaught to a gold rush. “There are those who prospect for gold, and those who make money selling shovels. Out of the 12,000 or so Fintech startups today many will make money providing shovels, becoming part of our ecosystem. A few prospectors will be successful too, but the majority will fall to the wayside.”

Colic agreed, but also sounded a warning. Banks have to be careful “not to lose the important part between the client and the execution of transactions, because it is here where a lot of commercially leverageable information is obtained. If banks give up this space, they will become just settlement agents. But to stay in this space, we as banks need to add value. If we get it right and maintain those customer touch points, I think banks have a bright future.”

We also asked about innovation, an important topic at UBS at the moment. “In my area we don’t look to other banks but to the big tech companies for inspiration in fostering innovation,” Klee said. This has led among other things to a new innovation core process. Klee also has teams looking at how the industry may develop over the long term, up to 30 years out. Colic said she is working hard on instilling a corporate culture in her business which encourages innovative thinking. This also requires a permission-to-fail culture. “To innovate you have to let people make mistakes. If no one makes a mistake, no one is taking any risks.” Kubli agreed but added that the need for innovation is business-specific. “In some businesses you will find it is imperative to be on the cutting edge. In others, it can make sense to be a fast follower.”

We were curious if regulators posed a hurdle to innovation – and surprised to hear that the opposite is often the case. “Many regulators are extremely interested in supporting digital innovation,” Klee said. “In the UK, for instance, regulators have been talking to us about robo advisory and automation. They see it as a potential way to support product suitability.” A consequence of which, Kubli added, is that some regulators are also actively supporting Fintech startups, increasing competition.

We wound the conversation down by asking about future priorities. “We have a huge pipeline of innovative new services, and a process to prioritize them,” said Klee. “We are aligning these around a defined set of technology themes”. Colic’s main priority is providing a less fragmented systems landscape: “Corporate clients want a single point of entry into our bank, and ideally one entry to all of their banks. We are working on a complete revamp of our systems to provide that. Looking farther ahead, we are also looking seriously at real-time payments, meaning blockchain.”

And what of the future of banks in general in the face of all this change? “I honestly think banks are in a very good position and will win out despite the tougher competition,” said Kubli. “The key will be providing more service for less cost. However it plays out, the true winners will be clients.”