Thomas Achhorner: «Banks Are Surviving on Lazy Money»

Thomas Achhorner: «Banks Are Surviving on Lazy Money»

Consumer tech firms and fintechs are increasingly grabbing customers and deposits from the banking industry. Additiv's Thomas Achhorner tells finews.asia whether banks can survive the challenges posed.

Thomas Achhorner,managing director of Asia Pacific at Additiv sees competition for consumer deposits and traditional financial services increasing over the coming years, with consumer technology companies and fintechs soon to be granted virtual banking licenses.

«Banks today are surviving on lazy money,» Achhorner told finews.asia in an interview. «If they don't step up, they will lose to the Alibabas, the Amazons, or the fintechs.» Achhorner works at the Asia Pacific office of Additiv, a firm established in Switzerland three decades ago offering digitalisation solutions in wealth management.  

In a similar tone, Gartner, a global research and consultancy firm, recently predicted that 80 percent of financial firms will either disappear or be rendered irrelevant by new competition, evolving customer behaviour, and advancements in technology.

Customer Data Analysis

Banks have had the luxury of collecting customer deposits without doing too much because regulations and high capital requirements had previously created high barriers for potential new competitors. However, falling costs of technology and changing consumer preferences are eroding these barriers and moving the battle lines to customer data analysis.

Compared with consumer tech giants, banks have little to no visibility of the lifestyles and spending habits of their clients. This is because people increasingly transfer assets into their e-wallets or online stores, said Achhorner,  previously a consultant with BCG.

«I know of one chief information officer of one of the largest state-owned banks in Asia. He said: we have hundreds of millions of current accounts, we have done the KYC, we have the infrastructure. We have tried to gain some intelligence from our customer database but we drew a blank,» said Achhorner.

Trend 1: Battle on the Front End

Apart from large consumer tech companies, banks also need to worry about fintech firms that are winning over thousands of customers with user-friendly interfaces and zero to low charges. One example is Revolut, a London-based fintech that aims to disrupt banking in Europe by offering most financial services at no charge, said Achhorner.

«Today, electronic KYC and risk profiling can be done via mobile. Based on spending habits on your e-wallet, the number of children you have, a risk-appetite questionnaire, an app can suggest wealth management solutions based on a dynamic goal-based environment,» he added.

Wrong Classification

Another reason why fintechs will take a slice of the wealth management pie is the way that banks segment their customers by the amount of money deposited. By classifying clients into «premium bank» or «high net worth» they automatically disqualify clients who may be in that segment as well but choose to keep assets in other places too.

When banks decide not to serve them, they will naturally turn to the fintechs who are agnostic to such classifications. The view is echoed by David Furlonger, vice president at Gartner.

«Banks face an alarming risk of failure if they continue to maintain 20th century business and operating models,» Furlonger said at a Gartner symposium.