Operating models of private banks must evolve. Investor expectations continue to change, while simultaneously AI and digital services are advancing quickly. Is outsourcing an opportunity for private banks as the competition heats up?
Private banks’ profitability is under threat – lack of tech leadership, agility and economic resilience are holding many back.
The private banking digital experience lags as HNW investors' expectations rise, impacted by retail competitors and AI interactions
Revenues are derived from volatile assets, with end-client asset valuations varying 20% year-on-year, leaving little room to maneuver.
The sector relies heavily on fixed-cost operating models, seeing up to 75% of costs as fixed and inflexible.
New operational models are needed to enable private banks to take advantage of recent innovations, deliver on client expectations and stay resilient in volatile times.
Many private banks are considering adjustments to operating models. They are looking at the potential to outsource some or all of their non-differentiating activities and operational processes to:
Meet expectations for digital advice and relationship management.
Make the economics of onshore-offshore "hub and spoke" operating models work in practice.
Keep up with technology advances in data connectivity, AI and advice ecosystems.
Overriding this is the need for a more robust operational base that delivers on cost-efficiency and agility – and alleviates the pressure of excessively high cost-income ratios which often sit in the range of 75 – 85%.
Patrick Laurent, Partner and Innovation Leader at Deloitte Luxembourg
Outsourcing private banking operations end-to-end: a realistic option
Outsourcing to an end-to-end platform provider, which combines infrastructure, technology and business processing operations into one efficient system is a credible way forward.
Pascal Martino, Partner and Banking and Human Capital Leader at Deloitte Luxembourg
Deliver tech leadership for private banks in the era of AI
Philippe Bongrand, Managing Director Private Banking