Julius Baer Video Podcast: Digital Transformation Trends In Banking & Wealth Management For 2024

By Sreekanth Anasa | Dec 19, 2023

During a discussion with Enrich’s cofounder Poorna Nayak, Aditya Yedida, responsible for overseeing Channels & Digital Services in the Eurohub region, delves into the primary trends shaping the landscape of private banking and wealth management in 2024. Amid discussions about the imminent impact of generative AI and machine learning in private banking and wealth management, Aditya emphasizes the pivotal role of compliance within the BFSI sector when adopting such transformative technologies. As highlighted by Aditya, at the core of these changes lies Julius Baer's unwavering commitment to putting clients at the forefront of their services.

Video Transcript

Poorna: Hi, I'm Poorna, one of the co-founders of Enrich, a platform specializing in client engagement solutions for banks, wealth management firms and insurance companies. Today, I have the pleasure of introducing Aditya Yedida from Julius Baer, a bank honored as the world's best private bank for high net worth individuals in 2023 by Euromoney. I've had the privilege of knowing Aditya while he was heading digital client interaction and innovation in Singapore. He's now moved to Luxembourg and heads the channel engagements for Luxembourg and Monaco booked clients. He will today be discussing digital transformation trends in 2024 for banking and wealth management. Thank you for taking the time to do this, Aditya. It's great to have you on this podcast today.

Aditya: Thanks, Poorna. Thanks for having me. As you mentioned, I have recently moved to Luxembourg, and my experience so far in the last decade or so is the basis for my interaction with you, and purely in a personal capacity. I'm more than happy to have this discussion with you on the various topics that you bring to this discussion today.

Poorna: Thanks, Aditya.

Poorna: So to begin with, would love to know what's going to keep you busy going into 2024.

Aditya: Well, as you introduced, I recently moved to Luxembourg, which means that it's a new geography, new set of clients. But at the same time, we are one bank with a global vision and, global path. So in 2024, my primary work is going to be to work with the local clients and work in the bank's bigger agenda, but primarily driving, the European agenda forward.

Poorna: So what do you see are the key technological advancements, that will drive significant changes in banking and wealth management.

Aditya: Well, that's, actually a deep question, it has three parts. As always, one is from a client's perspective. The other is from a bank's perspective. And of course, the third one is the most important player in our industry, the regulations perspective. So maybe we start with the first one, the client's perspective. As always our industry is primarily a service industry and we are dependent on clients needs. Instead of following technologies, we focus on how those technologies impact human emotions, human behaviors, and in turn, our client behaviors. Which means that for us to be able to satisfy our client's needs, it is imperative for us, to track those, aspirations, those emotions, and make sure that our clients stay happy, which also means, take an example of the social networks, the internet connectivity growth, and other recent trends, which changed the way our clients perceive how they can create impact, how they can create their own legacy, which also means that our offerings, our services, have to also be tailored to those, different interests of theirs. Hence, fundamentally, we track our client's needs and we try to manage their expectations, their opportunities, their behaviors. We try to support, we try to enable them. Hence, I would look at that slightly differently, as a second tier. One, the first one, obviously, is the technology which drives these human changes and human behaviors, and from then those human behaviors and changes which drive us, for the bank. So if we look at it that way, then, yes, the recent, decade has obviously made people much more closer, much more aware. They understand what it is that is going on in the world when it comes to social integrity, when it comes to the impact on climate, when it comes to what it means to form future legacy and what it means to have their families sustain the kind of wealth or the kind of impact they have on the world over time. So there we work with our clients. In general the industry also works with their clients, to make sure that this kind of thing works well. So this means, as having a way to create that social impact for them, whether it is ESG topic that is coming up recently, well into the market, whether it is having a planning for their family which is the new gen clients that we have to onboard and take with us and provide services for them, whether it is investment into green markets, growing emerging markets, how that has an impact on their portfolios, how do we maintain the engagements, with the communities that impact these things, all of these become part of a new emerging trend of how you're going to service your clients. So this in general is going to be a dynamic area where we look at these emotions and continue to track. But primarily all of these last decade and a half changes in the social strata are also going to be the key players. So that is primarily from a clients perspective.

The same if we do look at it from a bank's perspective. Our industry doesn't have too much wriggle room in terms of margin. You cannot suddenly, overnight come and say, we are going to hike the interest rates or we are going to have this much commission. It's going to be a hard job, at the same time you would have to find ways by which you can become more efficient and you can have your bottom line increase better. And this has been a long standing thing in the industry, and everyone tries to achieve more and more efficiency. So over there, from a bank's perspective, giving back time to our employees and making sure that the employees and the people who service our clients, do better in their daily job in the time that they have, at the same time manage their work and life is going to be a key aspect, which means the tools that are coming out, like AI or the digital technologies that are coming in terms of servicing the clients better remotely, all of these things are going to give back time to our employees and also help service the clients better. Now that including some of these, non fancy back end work, which is also going to stabilize the foundation, improve the efficiency for scaling in future, these are also going to be imperative for the banks to continue to work, even though they are not so visible as much as the digital channels outside. So these two aspects, which give back more time to the employees and also improve the foundations to make it scale further, are going to be the key aspects from a bank's investments perspective in my perspective.

And the third one, from a regulations point of view. For our regulators always it's a tough job in my view, no matter which part of the world you go. Now, given the connectivity and impact that one emerging technology in one corner of the world is going to have at the other, we will always need to have a catch up game when I put myself in a regulator's shoe. There are technology that is coming up first, and then slowly you have regulations catching up, police catching up. It's always the police chasing a vehicle, a robber or a thief. You never have police already premeditating what's going to happen, that's a pure fantasy. So in this game as well, it is going to be exactly the same which also means that it is probably wise and pragmatic to see how fast the industry can react to these changes than ever try to see that there is going to be no new challenge that comes up. So in that context, whether it is blockchain or any of these crypto challenges, or the AI related challenges in terms of identity privacy or in terms of the cloud technologies, how that they are enforcing the need for more cyber security. All of these things also present challenges for the compliance regulations and the bank departments working with them closely. And here exactly, again we would need to have a way which provides us that dynamic behavior which can conform to these new regulations and compliance and new social structures.

So that's those are the three key areas, in my view, from a clients perspective and, banks perspective, and of course, from regulators perspective that are going to come in the near future.

Poorna: Okay. Got it. I liked how you put it into like three broad buckets. And in the client part, I especially liked how you said technology is to support client aspirations and you got that emotional angle to it. Finally, technology is meant for that only, finally letting them achieve what they want. Great.

Poorna: So this year has been the year of AI, artificial intelligence, and so much so that Collins dictionary has made it the word of the year. So how are financial institutions leveraging AI and machine learning to enhance customer experience.

Aditya: Yeah. I mean, again, as I mentioned this, this follows the trail from the previous question that you asked. If a bank in my perspective, or a financial firm or any fintech or anyone is pursuing a trend that is coming without understanding the impact it has on our clients or anyone's clients, that is going to be a quick path down a rabbit hole. So I don't want to, I hope that none of my fellow peers in the industry go down that route. I'm very happy to say that I don't think any of our industry players are quick to jump on any of the trend without understanding the impact on their clients, as I said. So in this case as well, to be honest, as probably, you know, AI, the core AI and the idea behind that has been there for ages. The computational power, the recent changes and the hardware infrastructure, and of course, the availability of data, all of these things have changed the way that comes into fore today, but it's too early to jump on to a particular solution or a particular trend to offer to our clients.

The way I see it, we are in the hype phase of this AI, where for the right reasons again, it has triggered the imaginations of people and everybody thinks, what if I can use it for this? What if I can use this for that? Which is, again, very good for the industry in general or for the people in general. But we would have to reach a phase where this initial hype and interest, turns into pragmatic opportunities, turns into realistic outcomes that we can derive for our clients and things. Again, as I said, cause that cause impact and that cause those opportunities to facilitate their goals or their life aspirations, that is where the key is going to be. So I would, and, and the way I see as well is, the industry is rightfully waiting for that moment to pass. But of course, having said that, I understand that there are some right, foundational fundamentals, that are being put in place to leverage those opportunities when they arise, be it having the right people, be it having an open mind to see what are the technology developments that are happening, be it having the infrastructure to keep things ready or being design considerations that we would have to take in place so that these challenges in future could be made part of the ecosystem of our offering.

All of these kind of things are happening at the moment. But, concretely and I also see a few firms, who are testing out a few things cautiously. But, to actually pinpoint and say these are the 4 or 5 key things that are going to be the AI trends that influence our banking, is going to be too early. Maybe one final point on that as well, because artificial intelligence, of course, we tend to look at it from a client perspective. We tend to look at it from the value perspective that it brings, but it also brings a very new set of challenges from a compliance perspective or a regulations perspective and a cybersecurity perspective. So this is also going to be key, to see how fast now the catching up game happens. How fast, how far would the cop be away from the smart guy who's going to do all of these nasty things? So this is also going to be the key. So that is also a place where we are observing closely. Probably many people in the industry are also doing, so very closely. Also have to see how that shapes our future, very soon. But this is an area that we cannot ignore. It's an area that will continue to grow.

Poorna: Yes. Okay. To summarize, it's an upcoming area, but what will create value is yet to be figured out.

Aditya: Yes. Yeah.

Poorna: Okay. So you did mention blockchain and cryptocurrency mostly in the compliance part of it, but what do you see as the role of blockchain and cryptocurrencies in reshaping traditional banking and wealth management in 2024?

Aditya: Yeah, that's a good question. Personally, from my side. I always see the cryptocurrency as the marketing for blockchain because when you see money on the table, many people tend to get attracted. When you saw the initial almost close to $1,000, BTC going to 100 K, there was a lot of interest in the market. Many people got to know it. There was a lot of enthusiasm in investing in those currencies. It kind of exploded the understanding or at least, the knowledge or awareness of people of that technology called blockchain, much more than what it was by itself, by blockchain being blockchain itself. Why I say that is, I see blockchain as a very powerful technology and so do many of my industry players. If you see some of the banks in the market they have rolled out solutions that allow faster settlements, that allow for, maybe fractional investments. There are so many other solutions that do come out of blockchain, which again, to do what I said, which impact our clients in many more aspects of their life. So those key important solutions and areas would only come to the fore if there is that right interest. So the cryptocurrency, in my view, could generate that initial interest that brought the right focus onto the technology.

And again, I believe that the hype phase of blockchain, which we were talking about on the AI because of the recent ChatGPT, is now on the downhill. So the moment the hype phase goes down, I think people would see blockchain for the right solution. It is essentially enabling efficiencies, creating more value to the customers, enabling faster payments, more transparency on the happenings. That itself is a huge, huge, advantage and win for the industry by itself. Again, having said that, the catch up game which also comes there, how do we transfer? How do you make sure that transparency is also transferred into a compliance area as to how you can have a regulator or the risk department of the bank understand where the funds are coming from for a particular client. Can I really do the due diligence? I see there are solutions emerging in the market, which also play in that area, where they try to provide a bit of transparency on the source of funds, KYC and others. But again, there is a point that is yet to come, which also tells us that clearly this is the set of tools or solutions or areas that could be the most effective in a fight against all these dark practices within blockchain. So I think that maturity is yet to come, but the hype phase has gone down. And where I am seeing primarily the move of blockchain is, as I said, in the efficiency game, in the customer value game. And of course, more investments into the compliance area, as I can see a more effective policing technology, if I may come out of this whole exercise.

Poorna: So on one side, you have these new technologies like AI, blockchain, and on the other side, most of these large banks deal with legacy systems. What is your approach to transitioning these legacy systems so that they align with modern technology and customer expectations and at the same time ensuring a seamless continuity and robust security measures.

Aditya: Yeah. Again that again is a long standing challenge. For the banks, even though technologies change from A to B to C, it's always a question of how can you have this parallel pillar of legacy technology, standing there besides these new technologies and at the same time continue to, as you said, offer the same, kind of, customer satisfaction, etc. But, I think that there is also a different angle to look at it, the reason for why, banks that are a bit slow in general, banks or wealth management industries, or any financial firm itself is a bit slow in moving towards that is also for a right reason. And the reason is if you have a new technology, the first thing that you would do is to test it out, play it out in a low risk situation, and then, obviously gradually use it. You wouldn't directly put your most valuable topics or more valuable things into that, or you wouldn't throw that into the fire right away.

Financial industry as I said, it has moved away from being a mere financial instrument in people's life. It has got to do with much more than that, with human emotions, aspirations and stuff. So directly adopting that new technology without adequate caution would be wrong of any industry player to do. In that context, the legacy system sometimes should be viewed as time tested, and enough security is put in place and something that provides a sense of security and guarantee saying that, yes, I can reliably provide this to my clients with this security infrastructure in place. Again, having said that, it's not a complete 0 or 1. The new technology may be much better in that it could be much better in providing the client satisfaction, but, we would have to take steps towards that. So, first thing to understand is that there is needs to be a certain bit of respect, for the challenges that legacy systems or time tested systems, in my view, present. At the same time, there also needs to be a respect for the complexity in moving away from there to here. If we take one example, it is very easy. I've been working on, the instant messaging area and how we can make that compliant for our banks. It's been there for the last decade and of course, the adoption of social instant messaging, has picked up in the middle of the or to the latter part of the last decade. Immediately, our clients expect us to provide services on that. Our regulators expect us to have a compliant way in which we compete, in which we interact with our clients. But at the same time, for banks to immediately adopt that is going to be a challenge, because in addition to what the normal day to day interaction happens, or how the day to day interaction happens, we would need to put in those additional controls, security frameworks, have the right infrastructure in the backend to be able to facilitate a financial transaction on the same solution. So it's almost to the scale of creating a parallel solution in the background for us to be able to offer a financial service on that.

So in the catch up game of making sure that we manage the security and compliance aspects, we would have to have a new solution brought to the fore for this, and we would have to innovate quite a bit. So that's why it takes a bit of time. So the most important thing, coming back to how you manage the transition from the legacy to this while managing, is to understand that there's definitely going to be this transitionary phase where we would have to have the legacy, and the new age, working in parallel. And then we would have to see again, when it is the right time to move away or to do away with the legacy and then move towards an entirely new phase. It also obviously has to do with our clients. Some of the client facing solutions could be, very emotionally, linked to how the clients, daily businesses. So there are some people who probably prefer certain older channels, time tested channels. There are some people who probably prefer the newer channels. So it's not entirely a A or B game. That's why the transitionary phase sometimes is going to be much, much longer.

Therefore, if you have to summarize, having first the respect for the challenges that the place and also the value that the legacy technology brings is the key that will help us plan. Second is to have this kind of a transitionary phase plan and have realistic expectations of by, when and what we can do away with, because that has a lot to do with investments, client expectations, management and servicing. And finally, when do you pull the plug on A or B so that you do not have your clients get affected by this transition and take them with you in the journey is also going to be the key.

Poorna: And typically how long do these transitions take.

Aditya: Depends. Because if you take something like a core banking system, which is fundamental to the bank and rooted, in the middle of everything, it's going to be long, really long. Not impossible, but really long. It's not that every other day you can find another bank do that for banking replacement. if you're talking about probably a channel that is in the edge and probably linked to a few isolated here and there, maybe that's much easier. But again, that's why on a spectrum of where it stands, it's important to see the impacts and the effects it has, on security, on customers, on, on the bank, on investments, etc. and then to design an approach of how long it would take and how you need to do the transition. So that's where the time factor also comes. and it could be quite, quite broad.

Poorna: So in the last decade, I would say a lot of digital transformation has been underway. How are banks and wealth management firms adapting to changing customer behaviors and preferences due to these transformations?

Aditya: Yeah. I think one important thing that I would say is, I think there was a time when I met around I think 13 CXOs in a week, where we have different presentations on different emerging trends and how it can satisfy the client's needs. When I never had a problem in getting the audience of somebody or getting the right attention of somebody, because more or less every CXO out there in the industry is looking for how they can serve their clients better. Now, to me, that is a very, very, very important thing because, having visionary leadership, with the right intent, to move in the right direction, is, first and foremost, the key. So in the industry, I see that, a lot of people are open to it, but that everybody takes action on A or B or C is, of course a subjective evaluation of how they perceive the particular opportunity to be and where and when they think is the right time to do so. So, that is something that I wouldn't comment on that is obviously subjective and, and for the right reasons in their contexts. It could be a different point in time for different players. But, the fact that everybody shows that intent to listen, intent to, understand and, and find the right time to put in is a very, very good sign for the industry, in my view.

And secondly, if I look at what is happening, not every bank is doing the same thing. We have pockets of innovation that are coming from different banks in different areas, which also tells me that the diversity in the client needs or the people that some of the banks target or see as their main audience is also different. Understandably so, because the kind of value proposition that different banks have, is different. Of course, there is a fundamental common element to everything, but looking at what a certain bank is good for and famous for is, is also, a very important thing to understand. So if you see some players are investing in community, some players are investing in blockchain technologies on efficiency and transformation, some are investing in payments and stuff. So it's going to be very important for us to understand which value proposition is key for which bank and where they see the innovation or where they are seeing their energies invested to give the right outcome. So in that sense, if you collect the overall investments and outcomes and strategies of different banks, you see that there are certain players leading certain areas for their clients and certain other players leading in certain other areas.

So, in general, the industry has been pushing boundaries. Which player pushes which boundary and which area is the only difference that I'm seeing? Which again, is good because we also look at the other players in the market, the other peers look at us in the market, and then, they see all these guys have done well in this one. Let's try to mimic. Of course, that is the biggest form of flattery for each other. But again, we are not trying to compete against one another, but we are trying to compete for the best satisfaction of our clients and which eventually, obviously would mean that we do better than A or B or C. So, yeah. For example, Julius Baer to think, we, we play against a retail bank doesn't make any sense. We are a pure play private. We play to our audience, we satisfy our clients. Similarly, different banks have different strategies in that section.

So, yeah, in 2024, if you look at the key technology trends, and how the banks have been investing and what the visionary leadership that people are continuing to show and the investments into various diverse technologies, that tell me that we're going to have a really, really diverse set of, different tools that are going to come out to the market, different diverse set of services that are going to come out to the market, which is, again, better for the industry altogether.

Poorna: So in private banking and in the wealth space, financial advisors and wealth managers play a very big role. What innovative digital tools or platforms are expected to revolutionize the way they interact with their clients in the near future?

Aditya: Yeah. Again, this goes back to again, the first question that we discussed. Our banking industry, especially the private banking industry, has got a lot to do with human relationships, understanding human emotions, understanding what they need, to have their aspirations fulfilled. So these kind of things would require a dynamic collaboration between our advisors and our clients. Our advisors are constantly trying to understand what it is that makes their life a bit better. And that is where all the investments do come in. When we look at digital tools, enabling the financial advisors, for our financial advisors to be able to do all of those aspects that I mentioned, it is much more important to give back time to them. So whether it is the operational aspects or the administrative aspects, these things are very important. But, are they really the best use of our time, financial advisors time? Maybe. Maybe not. So that is where I think the key comes in, when it comes to unlocking the efficiencies for the bank and also improving our clients satisfaction. Tools that help in documentation, that help in onboarding, that help in background checks, that help in doing the due diligence, that help in doing the day to day work, that help in pushing through some of these operational aspects which do not require detailed attention. These kinds of things are very, very critical. So primarily I would look at the fintechs or the emerging technologies to be able to service here.

No matter how much we say artificial intelligence, till we see, again as I said when the hype phase goes down and the real value comes, we'll need to see how much of human intelligence or emotional intelligence they bring to the table as well. But till that happens, so far I've not seen. But till that happens, the financial advisors or the client servicing teams, time, which they can dedicate towards understanding our clients emotions, aspirations and any technology that unlocks more time for them is going to be of key interest.

Poorna: So you have been mentioning understanding clients emotions. The human element is coming out in a lot of the things that you are telling. How can the modern approach to wealth management combine the human element with digital advancements to provide enhanced services to private wealth clients?

Aditya: Yes. Again, this follows the previous question again, as you rightly said. So on one hand, fine, you remove the operational and administrative or at least lessen the operational administrative burden on our financial advisors. Then it is more about enabling the financial advisors to really be able to understand the human emotions. What do I mean by human emotions and aspirations? If we take a simple example of what it means to be a person managing wealth in a different era versus today is what people have to understand right. Now this does not come out of data crunching. This comes out of understanding the daily routines or understanding what the people are interested in. That is going to be the key.

So if we look at some of our next gen clients who come in, and I have seen in one of the recent experiments, people were more interested in, in seeing how a project could impact the environment, how a project could impact their social perception in out there in the world, which tells me, that if the same person probably is an entrepreneur back in probably 3 or 4 decades ago, maybe they would probably still have had this view, but not to the extent that these guys have now. So firstly, designing a solution, which will enable them to have these aspirations set in, is also going to be the key. If I continue that example, if a client is investing in a certain set of securities worldwide, what does it mean? So if we can tell him or narrate a story that by investing in certain properties or certain investments, you are in-turn helping, so-and-so community or company or so-and-so, you are creating so-and-so impact, the client is more motivated now to put the money over there or increase that. Primarily because it's not just creating wealth, but it's also creating that emotional impact inside him, with that feeling of, of success, towards that target that he has. So that is going to be the key.

Poorna: Something like wealth with a purpose.

Aditya: Yes. It's always wealth with a purpose now that I'm seeing. So definitely that's going to be the key part. Technologies of course do help over here. Again, that's why I said, in terms of enabling time, maybe, yes. But still, for a human to understand another human emotions, is not still within the realm of AI in my mind. So that continues to be a human work and, and a human's work. So let's see where that trend goes in the future. But for now, that's continues.

Poorna: So coming to my last question, one of the most important questions, I would say, because compliance has been coming throughout our discussion. How do you foresee regulatory changes adapting to accommodate this rapid pace of digital transformation in banking and wealth management, especially with AI and all that coming in?

Aditya: Yeah, definitely. I think there are two ways to or two different things to look at here. One is compliance is not a simple police in my mind. So it's always regulations are designed or have to be always designed with two key objectives in mind. First, how do they foster innovation, and second, how do they continue to put the right guardrails. So this is a very tough balancing act for them. So if somebody is, take the example of one of the governments around the world which was trying to create a framework for blockchain, which kind of companies can operate at the same time. It was also trying to provide a place where people can come and test and then check out and roll out things in a controlled environment. So in a sense, they're trying to provide a framework for them to play safely and at the same time, they're also trying to see what is it that people are doing over here to put in the right, guardrails and framework. If there are networks or if there are if there are solutions growing like this and, and the compliance or the regulators are working in this area, then it probably is a little bit more easier because they are primarily in the game of understanding how the emerging, solutions are evolving over time. And they can already create, the right frameworks or guardrails.

On the other hand, when they're thinking of what to provide as guidance to the industry, but once in a while, things like this come like ChatGPT when it released the 3.5 and it provided a lot of new opportunities. That is something that is completely unexpected, came out of the blue. Now that throws all of this planning away. Or at least the structure that they have out away. So there they would have to play a real catch up game. Now, in that case, they would have to really come up with how dynamic can I be, in reacting to such new things that throw me off balance, so that we cannot plan, obviously. But what they could do or what in general, the, the, what I see regulators doing or what I see industry play is doing is to see how quickly they can dynamically adapt to it.

Every bank probably has their own way. Some people have, certain investment put in or some people have, certain, certain, innovation teams working on such things. But certain other players are more on, how can I quickly partner with somebody, or how can I quickly partner with their fintech, to get that solution out? The solution methodologies could be different. But, what is very, very important, both for regulators and the industry is to be aware of such a possibility that there could be something that throws them off their original planned framework and be dynamic in adopting a measure that mitigates such kind of risk that comes.

Those are the only two things, at best, that we could do, create that framework which enables us, at the same time be prepared for that thing that throws off balance once in a while, where we can see how to get back on the two feet. That's basically going to be the approach in my view.

Poorna: Thanks for taking the time to be on this Enrich podcast. As always, it's been great talking with you. A special thanks for sharing your thoughts and insights on digital transformation trends for 2024.

Aditya: Thanks Poorna. Thanks for having me.