Commercial and Wealth Management Platforms Are Lousy. How To Fix Them
By Justin Estes, Contributor at The Financial Brand
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Executive Summary
- While consumer digital banking has reached impressive levels of sophistication, commercial and wealth management clients continue to struggle with fragmented, outdated digital experiences.
- The days of one-size-fits-all digital banking are over and the winners will be those who can seamlessly serve everyone from individual consumers to complex commercial relationships.
- On a recent episode of the Banking Transformed podcast, host Jim Marous spoke with Alex Jimenez, Lead Principal Consultant at Backbase, about why banks can no longer afford to focus exclusively on consumer digital experiences while neglecting their most profitable client segments.
The Great Digital Divide in Banking
Q: How would you assess the current state of digital banking maturity across consumer, small business, commercial and wealth management segments?
Alex Jimenez: As retail consumer users, we all have our apps on our phone, we’ve done online banking for a long time, it’s a fairly mature technology. And so, we see that while vendors have different capabilities and we certainly have capabilities that are different than others, the experience is already one that is at least satisfactory.
And if you go and just pick up any bank of any kind and look at the ratings, you’re going to find them somewhere between four and five, if you’re under four, give me a call. But somewhere between four and five is what most organizations have because there’s an experience has been built through the past decade on what it is and how it’s presented to customers.
We start getting iffy once you’re a sole proprietor. As you know, Jim, it’s difficult running a business, a small business and getting digital experiences that are akin to what you get in the retail side, or better yet, akin to what you get from PayPal or some other organizations out there. So, that’s with the smallest of small businesses, but then they go up market, go to middle market commercial customers and treasury customers and it gets even more complicated.
You go further up in the market and get to corporations. Corporations do not use digital banking much, but they expect the ability to connect to bank data and there are issues there as well. So, as an industry, we’re not serving businesses of any size or wealth.
Q: What’s driving the demand for better digital experiences in commercial and wealth management?
Jimenez: Last year, Coalition Greenwich did its annual study of middle market, small and commercial customers. They found that over 60% of smaller to medium-sized businesses say that they call themselves digital natives, which I thought was kind of funny because they’re not.
But what it actually means is that the people who are now running these businesses, the finance functions and the accounting department are millennials or Gen Zers and therefore, they’re asking for something different. They’re asking, “Hey, you know, I can do this with my Chime app. Why can’t I do that for my business?”
So, they’re starting to say those things and banks are hearing it. In the wealth space, it’s no longer just the older client who has all the money. The other thing in particular, in the wealth space, is right now we’re going through a massive moment in time where a lot of the wealth is being transferred from the oldest boomers and silent generations that are still out there to their children, who are Gen Xers, Gen Zs, or millennials. And again, all of those groups come with very different expectations.
Why Retail Platforms Don’t Work for Business Banking
Q: What are the pitfalls of adapting retail digital platforms for commercial use?
Jimenez: In my previous role, I conducted a survey of business owners in 2023. This was actually a global survey. We had 10 countries and a sizable number of business owners responded to the survey. The number of business owners using their retail banking products and, therefore, the importance of digital banking for businesses, was huge.
One of the other questions we asked was, “How well are you being supported?” The answer was a resounding no: “I’m using my retail accounts because it’s easier for me than trying to open a banking account. ” Why is that an issue?
Well, in many places, including some parts of the U.S., you can only open a bank account or a business account if you go to the branch. If you’re a digital person, a heavy digital user, you’ll want to do it through the digital channel. If you don’t, then I’ll continue to try to use retail.
Q: What functionality gaps exist when businesses use consumer banking platforms?
Jimenez: But the big problem is that there’s no functionality in the retail world to do things like payroll or to do things like ACH and wire. None of those capabilities exist in the retail space, so you need to move to something else.
Just because you have three employees does not mean that you act like somebody else has three employees; you might be vastly different depending on your industry and you might be better served to be on the commercial side than on the retail side.
Dig deeper:
- How Banks Are Failing Their Most Valuable Clients
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- Bridging Digital Banking Implementation Gaps
So, I see banks struggling with the people who get lost in the gap and then being able to provide capabilities as fast as we are moving in the world. One of our challenges in the commercial space is trying to sell real-time payments. We don’t have a good solution to sell to the market as an industry.
We go and tell somebody, “Hey, we have this real-time payments,” and they say, “How much is that going to cost me?” And they’re like, “Well, we don’t have a product for that.” “Okay, well, don’t sell me that until you come back with a product. By the way, I’m okay with waiting one day with ACH.” So, ultimately, you cannot serve businesses on the retail platform, period.
Building Platforms That Serve All Segments
Q: What should banks consider when deciding between point solutions and comprehensive platforms?
Jimenez: I think a lot of us did the side card idea because that was really the only good solution that we had, but it’s really just not addressing the issue. Again, the collating experiences under a single front door, if you will and then sometimes things are clunky and so on, that’s not working anymore.
So, it’s got to be more of a question of how we build a system that allows us to serve a sole prop all the way to someone who’s about to become a corporate. How do you do that? It’s got to be really extensible and it’s got to be able to turn things on and off.
By the way, it’s funny because one of the things that we found is that as we start working and building our solution that addresses many of these issues, we realize that some of these things we can actually take back into the retail world.
Q: How can banks avoid the technology duplication that drives up costs and complexity?
Jimenez: When I worked at Zions Bank, we spent a lot of time looking at our tech debt and realized that we had five different ways to do document signatures. Our mortgage team used DocuSign, our retail team used something else and our commercial team used something else. We were paying five times for the same capability. How do we collapse that into a single capability?
You have things like, okay, this vendor requires me to do a sign-on that is 10 characters with a special character in two numbers, but this other one does it a different way and therefore we’re not going to have a single sign-on and we’re going to do it.
I mean, these are all dumb decisions that we made back in the day, but when you start looking at the experience, you realize how broken it is and how you need to serve the clients differently.
The Future of AI in Banking Relationships
Q: What role do you see AI playing in the future of commercial and wealth management?
Jimenez: I will sound like everybody else and say AI begrudgingly. And I say begrudgingly because AI is not where it’s the possibility and not necessarily the current capabilities. You get an inkling of what you can do with large language models from what you can do today with ChatGPT, but we haven’t gotten even close to scratching the surface and what could be possible and certainly not in financial services.
In the case that I mentioned already on a wealth management customer, they want to be able to get a daily summary of what’s happening to us, what is it that my portfolio was just affected by S&P going down 900 points, whatever, how is that going to affect me and what do I need to do? Do I need to sell?
Generally, that would be a phone call and your private banker would tell you, “No, don’t worry about it. This is the ups and downs of the market, et cetera.” But you could go to an app and now get a blurb written by generative AI, for example. Tells you what your position is and is very specific to your portfolio.
Q: What are the most significant risks and opportunities as banks implement AI solutions?
Jimenez: AI really is a tool that’s going to help bankers; however, a banker is defined as doing their job better rather than replacing them. I hate seeing people say, “Hey, we have our marketing team. We’ve got to get rid of our content people because we’re going to replace that with ChatGPT.”
But we also need to remember that we need the guardrails and we need to build those. We need the compliance people to be involved and understand how things are done. We need explainable AI, which can’t be a black box. We need to be able to make sure that we don’t slide back to the world of redlining, for example, just because we don’t know what’s going on inside the box.
As the banking industry continues to evolve, the institutions that thrive will recognize the unique needs of every customer segment and build comprehensive digital experiences accordingly. The days of one-size-fits-all digital banking are over and the winners will be those who can seamlessly serve everyone from individual consumers to complex commercial relationships.
