Doing Digital in Wealth Banking - Van Lanschot Kempen
On November 26, we invited David Versteeg, Chief Digital Officer at Van Lanschot Kempen, to investigate how digital transformation looks like at a wealth bank. Whether you look at digital transformation in retail banking, wealth banking or any other industry, the biggest challenges are the same: good, consistent leadership and making sure every employee stands behind the transformation to make it a success.
Yet, Van Lanschot Kempen's digital transformation journey is quite unique from what we heard in the sessions before and a true inspiration for everyone with a passion for banking and digital transformation.
In Het Financieele Dagblad, Richard Bruens, Director Private Banking, said on October 27 that "it is not Van Lanschot's mission to make rich people richer. Our role is to maintain and grow wealth for everyone starting from 10.000€." This societal purpose is important in the bank's identity and strategy, according to David. The bank manages three labels and four business lines.
The first label is Evi, their hybrid robo advisor, where people can start investing from 10.000€. This label is active in the Netherlands and Belgium, although in the latter the business will close, with a migration of the investment products to Van Lanschot, their second label.
Van Lanschot is a full-service private bank, active in the Netherlands, Belgium and Switzerland.
Kempen is the third label, and it consists of two business lines: the institutional asset manager for the Netherlands and the UK, and a merchant bank.
Trust and customer-centricity at the heart of the digital transformation
David consistently tells the employees that they are not building a digital bank: "In wealth management, the personal, the trust relationship is key, and that will remain key for the foreseeable future. That is also the reason, in my opinion, why wealth management is less susceptible to inroads made by the Bigtech."
Customers that have multi-millions to invest look for an entity that they can trust. They look for personal contact, which can, of course, be enhanced by digital means. Everything starts with the question: What do we need to do to make sure our customers keep considering us as a trusted partner to manage their money?
All segments can get an omnichannel service to accomplish that corporate mission 'to maintain and grow wealth for everyone starting from 10.000€', with a different balance between human and digital services for each label. Also, in the product offering, there is a clear segmentation.
Evi has a very straight-forward robo advisor, with a possibility to speak to an advisor over the phone. In contrast, the ultra-high-net-worth individuals expect a highly complex and personalised product offering, with investment products sometimes tailored to a specific client. This requires more personal advice, whether that is remote or face-to-face.
Van Lanschot Kempen's digital transformation helped to deepen the conversation and to create a more personal dialogue about the things that matter for the customer. The people aspect is still extremely valuable and cannot be automated today for Van Lanschot clients.
"At the end of the day, wealth is only a means to an end. Everybody has dreams about what they want to do the rest of their life," explained David. "These questions are much more important for someone that just sold his company than whether he should invest in Philips or in Exxon."
Van Lanschot Kempen did automate most of the client processes that go through the bank resulting in a better customer experience while reducing the cost of handling the many documents, the error rate and the time to process them. David: "We provide online channels because the customer wants it. Our digital transformation at the front is purely about convenience for the customer."
Their website shows personalised content to make sure the client does not get all the available information, but all the relevant information for his situation. And their client online banking environment always provides the guarantee that it requires only one click to get in touch with a human advisor.
Remote banking, with a roll-out at the beginning of 2020, is another example of creating convenience. Their clients are typically very busy people, for which remote banking can be a time-saver.
David: "These entrepreneurs, leaders of the industry, but even retired people have many hobbies, and they don't want to lose a lot of time waiting for the financial advisor to ring their doorbell. A video call in the evening when it suits them is the experience that increasingly more people expect today."
David believes that improving their services will guarantee survival in the long run.
A bank with a young heart and an old soul
Being founded in 1737, Van Lanschot Kempen is the oldest independent Dutch financial institution and yet, the longer the Afterwork session took, the younger the bank seemed to be, and the more it was as if we were talking to a fintech.
Like every bank, they have a legacy system, but they found ways to cope with this to avoid it to be a potential roadblock to innovation at speed.
One way that they overcame legacy as much as possible was by implementing the two-speed architecture, also called bimodal IT approach. Gartner defines it as the practice of managing two separate but coherent styles of work: one focused on predictability; the other on exploration.
"This means that you push back-end systems to where they belong, to the back," explained David, "You separate the front from the back with an API layer, and you speed up front-end developments."
The front-end has its own DevOps teams that talk though the API gateway and basically have fully automated CI/CD pipelines, which allow them to have 10-20 releases per day. That allows the organisation to speed up innovation and to act fast on client feedback. With so many releases, all supported by automated testing, peer review on code and other mitigating actions that you can have in a DevOps team, they reduced the risk associated with going in production to much lower levels compared to a situation of 1-2 releases per year.
David: "Our record of implementing input from a client is 3 hours between the client giving feedback, via our client portal and our teams putting it in production."
Like in any other organisation, David believes that the most challenging factor in digital transformation is the human part: the leadership challenge and the employee challenge.
David: "Having a vision on where the market is heading, is more art than science. Also, we can build great stuff, which costs a lot of money, but the business value is zero if nobody uses it. Driving this adoption with clients and advisors is a challenge. It requires continuous investments in communication, training, coaching, etcetera to get it done, with a lot less predictable results than a technology implementation."
David vs Goliath
Van Lanschot Kempen is relatively small compared to the average retail bank. They needed to be selective on what to invest in. Back-end systems that were not core, like payments, were outsourced. The remaining systems, predominantly concerning investment products, were upgraded.
That is right, this bank outsourced what many see as the veins of a financial institution: payments. Payments are not a differentiating service to them today, or in the future. This conclusion led to the bold decision to outsource these activities to a German fintech, Fidor Bank, probably as the first Dutch bank, temporarily including the front-end.
They did something similar for the mortgage administration.
They always look for new components and services that can help to smoothen the services for their customers. Fintech partnerships are elemental in their digital strategy: "We have to be very selective in what we invest in, where we allocate our own resources and where to leverage existing off-the-shelf third-party solutions. Video banking, for instance, is a kind of secure Whatsapp with chat, video chat and the possibility to share documents. Except this is all done in a closed environment with audit-trail. This is off-the-shelf from a US fintech."
Take the example of Mitek, a valuable partner in creating a seamless identification process. With the many charities, foundations and associations, this is extremely valuable: everyone knows it is required, but no one wants to be bothered to visit a branch for every change in the Board.
In summary, they look at everything, and if it strikes their attention, they start the conversation with these fintechs.
What will the future bring?
The hard work in private and wealth banking led to a backlog that is sufficiently long for the coming 2-3 years for Evi and Van Lanschot business.
But David stays on top of things, with two technologies that deserve extra attention according to him: advanced analytics and voice technology.
In that respect, Van Lanschot Kempen has invested in a new technology in their client services department that analyses your voice in diverse physiological levels, with the consent of the client, which provides a biological passport, like a fingerprint to facilitate authentication of transactions over the phone.
That is highly relevant today in terms of customer experience, employee experience and cost reductions and in the long run, it paves the way to voice assistants.
Advanced analytics will help the organisation to enhance all the steps in the process, from the selection of investments to the way that they can interact with their clients. It will create an even better experience in finding out what the next best offer is.
Is digital transformation so much different for a wealth bank compared to a retail bank? I don't think so, but the devil is in the details, and I am grateful that we could bring this testimonial. That such an old institution is so open to fintech partnerships that they even outsourced their payments shows that they know their priorities and they act on it.
To come back to the topic of The Banking Scene Afterwork: "Digitising Wealth Banking: Quality vs Quantity". The obvious answer is that the priority is quality: making sure their existing market and customers get the services that they expect, whether that is face-to-face or purely digital.
But of course, as David said: "a side effect of all this is that we were able to reduce the wealth band set, the barrier to become a client. So in a way, we grew our market and over the years, digital allowed us to create a more efficient organisation."