Although transactional banking robustness enables day-to-day banking avenues, this has proven to be a limiting endeavour as clients in the affluent segment yearn and demand more than that in terms of the banking experience.
There is overwhelming evidence that transactional banking products and services are almost identical for most banks and can be easily copied and therefore present low switching barriers for clients. More than before, customer churn is at the peak and clients can move from one bank to the next with ease and no inconvenience whatsoever. To demonstrate how value propositions are not very compelling in most private clients, even within the same bank customers don’t see the benefit of switching to the so-called higher segment as product differentiation is not strong enough and yet clients pay a premium for the services they receive or for having ‘that’ card.
As I pointed out in my previous articles, the main undoing could be due to the fact that most private banking sub-segments exist within retail banking and by default they follow the retail strategy where the main emphasis is customer base growth. The ripple effect, customers are acquired but there is no concerted effort to retain through robust relationship management. Running private banks at the back of the retail banking strategy can be cost effective as a one-size fit-all approach” is adopted. However, this can have far-reaching disadvantages for clients and other stakeholders such relationship managers and transactional bankers in this segment. Besides a mirage of challenges due to this strategic direction, this is extremely limiting and renders a complete dilution of the private model and experience.
Globally, our peers have over the years achieved tremendous strides in ensuring that private banks are not exposed to unnecessary limitations operationally and strategically but exist as pure private banks. For starters, the majority of these brands exist as standalone or boutique private banks. Indeed, we have also witnessed an avalanche of these standalone brands being acquired by well-known banking giants either to quell them as competitors or augment their competitive vantage points. Also, some boutique private banks were dealt a bad hand of the global recession and had no choice but to scale down, close shop or get taken over.
The greatest lesson for our local brands is that although this may be the case, even after being acquired the acquiring banks still made sure that a private bank was allowed to exist as a standalone. It is given support operationally but can determine its strategy and operate in total autonomy to ensure quality of product and service and recruits a highly knowledgeable team to support the customer journey.
The existence of a private banking or affluent banking segment should rest on two dimensions of Wealth Creation or Wealth Preservation that must co-exist in perfect harmony. For this to be fully effective, wealth management practices through risk management, retirement planning, debt structuring and estate planning have to be cornerstones of the offering and drive the value proposition. Let’s kindly note that this does not make transactional banking or the Relationship Manager any less important as these always hold everything together and RMs must also gatekeep and determine which expert must be deployed in response to customer needs upon a thorough assessment of their cash flow and the strength of the customer balance sheet.
Our local affluent banking may not be at par with most of our peers internationally. However, in my view wealth management should be one aspect that drives Customer Value Proposition in affluent banking. International private banks are moving away from transactional banking as they key driver but are becoming more focused on Wealth Management to create real value for clients and address their needs. Nonetheless, these private banking brands need to continually reflect and ask the following questions if they are in existence and operating.
- Is our future looking bright in private banking?
- Do we want to stay the way we are?
- Can we afford to stay the way we are?
- Alternatively, if changes are necessary, what do we change and why?
- Will the transformation bring renewal and growth, and if so, how much?
- How are our client servicing and relationship model compared to our peers?
- Does our Customer Value Proposition stand out?
- Do we have highly knowledgeable and technical private bankers who can respond to customers’ changing needs and life cycles?
Here is some of the best private banking brands in Africa and globally that one can use them as case studies to learn a thing or two.
2021 Best Global Private Banking Brands
|Category||Name of Bank|
|Best Private Bank in the World||J.P Morgan Private Bank|
|Excellence in Crisis: Client Services||Emirates NDB|
|Best Private Bank for Social Responsibility||BBVA|
|Best Boutique Private Bank in the World||LGT Bank|
|Most Innovative Private Bank||Hanna Bank|
2021 Best Private Banks in Africa
|Category||Name of The Bank|
|Best Private Bank||Standard Bank|
|Best Private Bank for Entrepreneurs||Guaranty Trust Bank|
|Best Private Bank for Business Owners||ABSA Bank|
|Excellence in Crisis: Client Services||SBM Bank|
Source: Global Finance
LinkedIn: Gomolemo Kololo Manake