How robo-advice is evolving across the world

How robo-advice is evolving across the world

Fintech developments among US-based wealth managers and banks are taking robo-advice to a new level, which is starting to be replicated across Europe, research from CapGemini has found.

The consultancy's 40-page World Retail Banking Report, in association with Efma, has revealed how the use of application programming interfaces (APIs) is shaping a new trend in customer service and product proposition from wealth managers.

Bill Sullivan and Nilesh Vaidya, spokesmen for CapGemini, explained that as banks and wealth managers in the US and Europe have been developing robo-advisory operations, there has been a shift from providing mere 'robo-advice' towards using APIs to create more bespoke products and services.

Mr Vaidya said: "We have seen that banks in the US are now focusing more on wealth management and advisory work, and they want to know their customers better.

"But to do this, they need technology that can help discern patterns about their customers' accounts so they can create targeted offers. 

"APIs are now being used. These effectively allow wealth managers to really understand the customer better, tailoring investment products, portfolios and service propositions accordingly."

Technology that can use APIs to discern, for example, consumers' spending habits, can feed through to wealth managers' development teams that could provide a more customised service, he explained.

It is a form of rising to the challenge of open banking that has worked well so far in India, for example. 

The World Retail Banking report showed how Indian fintech provider Paytm has more than 200 million users who transacted more than one billion times in 2016 alone, bypassing their banks to carry out basic transactions.

But this meant the banks do not have access to this data - so they cannot develop services.

Yet as FTAdviser learned from Indian outsourcing giant Intelenet, wealth managers in India are evolving quickly, creating inter-connected data-sharing platforms, so the adviser can have a complete view of the client's entire finances, and maintain a relationship with that client.

Susir Kumar, executive chairman of Intelenet, told FTAdviser this use of technology was how advisers could become a one-stop-shop for their clients.

Mr Sullivan said: "The wealth industry has tended to be a slower adopter of technology but we have started to see this evolve.

"They are recognising their clients are not only becoming comfortable with technology but they are also expecting better use of technology from their advisers.

"So the whole concept of robo is not to replace the wealth manager or the adviser but to use technology better.

"APIs can basically put pressure on those advisers who were not delivering value for the prices the client was paying, and enabling quality advisers and wealth managers to deliver more personalised and more customised experiences."