ING and other private banks that are part of universal banking groups dominate the Belgian wealth management market. ING has reported that it has assets under management (AUM) of €6.8bn in Belgium, meaning that it holds a top three position in the Belgian wealth market. The bank’s success lies in the way that it operates a graduating service proposition in conjunction with tailoring services to appeal to the mass affluent. Its ultimate aim is to build customer loyalty to ensure that if its mass affluent clients do increase their assets, they will choose ING’s private bank over its competitors.

Within ING the mass affluent are catered for by ING Personal Banking, a service for which clients must have €125,000 in liquid wealth to be applicable. Clients can progress into Private Banking when they have approximately €1m in liquid assets. This graduated service proposition is an effective means of onboarding Belgian affluent clients before they are considered to be high net worth.

The range of services available through ING has led to a large segment of affluent individuals choosing to manage their wealth through ING’s Personal Banking channel. ING Personal Banking covers transactional banking needs alongside initiating the wealth relationship through the offer of investment advice and products, as well as planning services for inheritance and retirement. The combination of providing services tailored to clients with growing AUM and effectively graduating clients to more premium services has meant that ING has been able to leverage its large retail base, making it one of the more successful private banks in Belgium.

From July 2014, homeowners aged 65 and above who have owned their family home for at least 25 years and who decide to downsize will have the option to invest surplus funds of up to A$200,000. The funds invested and any earned interest will be exempt from the age pension means test for up to 10 years, meaning that it will not impact on the social security benefits that consumers receive.

The government estimates that up to 30,000 seniors are eligible for the proposal, which suggests that up to A$6bn in additional funds could flow into savings accounts over the next three years. An additional benefit for authorized deposit-taking institutions is that seniors previously deterred by pension eligibility concerns will be more likely to sell their large family homes, providing a boost in business volumes.

Unfortunately, however, the net effects of the various personal tax, levy, benefit, and threshold changes announced in this year’s budget mean that the household income of the average family will drop 2.25% according to analysis by Commonwealth Bank. So while the supply of family homes should see an increase, younger families will be less able to afford them.

Van Lanschot has announced that it will reduce its corporate loan book by almost 50% over the next five years. Its hand has been forced by a combination of stringent Basil III Tier 1 capital requirements and the broader economic climate, which has added risk to its corporate loan book. Yet, as Datamonitor’s 2012 Wealth Manager Survey reveals, 85% of Dutch HNW individuals are either first-generation entrepreneurs or run a family business, so at first glance Van Lanschot seems to be limiting its potential target market.

However, the remaining corporate business will be streamlined and the legacy elements of old-style universal banking phased out. The simplified corporate offering will therefore complement Van Lanschot’s existing wealth management proposition due to the entrepreneurial nature of its private client base, while the soon-to-be-phased-out uncorrelated corporate business would not drain the resources necessary to win new clients on its own. Further according to Datamonitor research, demand for planning services among Dutch HNW clients is expected to jump in the next couple of years; a more focused offering would thereby enable Van Lanschot to use its resources efficiently to tackle the increased planning demand.

In essence, the move will lead to reduced risk and refocused corporate products and resources, which will enable Van Lanschot to spend more time cultivating relationships and offer more tailored solutions to UHNW clients.

Retailer-led payment apps have proven successful in the past, with Starbucks the most prominent example. These apps address problems with merchant acceptance of mobile payments. However, their success will pose challenges for open-loop products.

Wendy’s mobile payments pilot program, linked to its existing mobile app, is launching in Albuquerque, Austin, and Portland. The pilot version of the MyWendy’s app is linked to a credit card or gift card, and generates a one-use, six-digit code that can be given to a cashier to pay for food in Wendy’s outlets.

Of surveyed US consumers with a mobile wallet, 20.3% reported that shop staff didn’t know how the wallets worked at the POS, and 26.1% reported that they would use their wallets but didn’t know where to (source: Datamonitor’s Financial Services Consumer Insight Survey 2012). Retailer-led apps solve these problems, encouraging consumer uptake.

Both retailers and banks can leverage existing customer bases, but merchants can more effectively exploit loyalty and advertising to drive take-up and activity. It is possible that retailer apps will popularize mobile payments and lead consumers to adopt open-loop wallets. However, the focus on loyalty may alter consumer behavior, changing the role of mobile wallets from payments tools to loyalty vehicles. If too many retailers fill the market with one-off wallets, this will prevent open-loop products from gaining traction.

The group will spend an additional £450m to improve its IT systems, on top of its £2bn annual IT budget. Maintaining banking services around the clock has become of crucial importance to banks, as they underpin the smooth interaction for customers via all touchpoints, including branches, call centers, ATMs, and digital channels. Until now, the vast majority of customers that have been hit by service failures have not reacted by ditching their bank. However, this risk will increase after September 2013 due to new rules that make it easier for consumers to switch banks.

RBS’s well-publicized outage in June 2012 cost the group around £175m. The subsequent investigation started in April 2013 by the Financial Conduct Authority is likely to lead to further financial penalties. RBS suffered another service outage in March 2013 that left customers unable to access online and telephone banking, ATM withdrawals, or make card payments. The reputational damage to RBS Group’s brands as a result of these service failures has been significant, with both consumers and the media being very vocal about the effects of the problems.

The RBS investment is thus a timely move to prevent future service failures and the resultant customer losses. Competitors should assess their IT systems to ensure they don’t fall victim to the risks that RBS is guarding against.

In recent months, The Co-operative Bank has experienced a posted loss of £600m, the collapse of the Project Verde deal, a subsequent need for significant IT investment, a downgrade of the bank’s credit rating to junk status, the resignation of its CEO, and admission of an above-average capital shortfall. This makes scary reading for any bank.

Also significant is the announcement that The Co-operative Bank may require “external” support. Historically this has meant a state bailout, as happened with Northern Rock and RBS in the wake of the financial crisis. Significant investment is certainly required to improve The Co-operative Bank’s capital status as well as to update its existing IT systems. However, this cash injection can be sourced from its parent company the Co-operative Group, thereby avoiding state intervention.

Trust plays a significant role in customer loyalty to a bank, according to Datamonitor’s 2012 Financial Services Consumer Insight Survey. The Co-operative Bank enjoys one of the highest ratings for customer service and loyalty in the UK, making the sort of bank runs we saw at Northern Rock much less likely. Many Co-operative Bank customers have chosen it because of its mission to deliver value, while acting fairly and in a socially responsible way.

The Co-operative Bank is therefore in a unique position to benefit from this customer trust and the support that can be offered by its parent, meaning that it will emerge positively from this difficult time.

The product is claimed to be the first mass market telematics product designed for smartphones, as well as the first telematics product to be available through high street brokers. This represents a shift in strategy for Wunelli, as until now the telematics provider had been focused on hardwired and OBD dongle-based solutions targeted at the high-risk and mid-risk markets respectively. Soteria Drive will be available to over 1,000 SSP brokers from the third quarter of 2013, and will be underwritten by a panel of five insurers, which are yet to be announced.

However, smartphone-based telematics solutions are still limited in their capabilities, restricting the profitability benefits to insurers. The quality of collected data is significantly less reliable compared to other devices, potentially affecting the risk assessment, and prohibiting its use for claims validation. Wunelli and SSP are betting on the mass market appeal of a simple smartphone-based solution, but the odds are not in their favor when it comes to the profitability gains provided to insurers.

The Standard Account offers free-if-in-credit banking. The Control Account, aimed at those on lower incomes, does not charge for bounced payments, but carries a monthly £5 fee. Meanwhile the Packaged Account charges £8 per month in return for extras such as travel insurance and breakdown cover.

However, consumers will not flock to open these accounts. The monthly fee for the Control Account will deter the very consumers it is aimed at, and the Packaged Account sports an unremarkable range of features that merely replicates other banks’ offerings.

Prospective customers will find that competing accounts are more innovative. For example, Barclays offers a modular range of extras that customers can choose from, while Santander’s 123 account offers cashback on bill payments, together with in-credit interest.

The lack of switching incentive will not help matters. Unlike Halifax and First Direct, which both offer new customers £100, for instance, the Post Office offers no such inducement.

Furthermore, fears that falling revenues could result in mass branch closures will worry those who depend on local access to face-to-face banking. This will undermine the Post Office’s competitive advantage in branch numbers. The Post Office will have to raise its game ahead of next year’s national rollout if it wants to win significant market share.

Supermarkets such as Tesco and Sainsbury’s are competing with high street banks in terms of the number of credit cards, and are ahead of all of them when it comes to frequency of use according to Datamonitor’s Financial Services Consumer Insight (FSCI) Survey 2012. This suggests retailers have built consumer trust and a good reputation in financial services, meaning they are well-positioned to expand their credit card success to their insurance propositions.

According to Datamonitor’s FSCI Survey 2012, price, trust/reputation, and convenience are the main buying criteria for insurance customers. Therefore supermarkets are at a competitive advantage compared to other insurance providers due to their extensive expertise in devising effective loyalty programs that boost customer trust and sales.

Insurers should partner with retailers to build on their loyalty program success and design similar loyalty strategies for insurance products, given retailers’ interest in expanding into more financial services areas, including insurance, which is a product that still offers good returns if pricing and risk are well-managed. At the same time insurers can tap into supermarkets’ large customer databases and insight in order to tailor insurance products’ features and price, to better target customers and their needs.

Datamonitor’s 2012 Global Wealth Managers Survey shows that 65% of participants believe their clients want more control over their investments. Conversely, participants were equivocal regarding whether clients saw value in paying for advice. Evidently the traditional financial advice model – fact; advice; action – needs an update.

Yet without a credible system to interpret, test, and if appropriate implement client views, advisors will find themselves unable to satisfy their customers’ demands or demonstrate value. This can be addressed by using tablet applications to improve the productivity of client meetings. For example the Sage BlackSwan platform – which is optimized for tablets – provides traditional asset allocation analysis but is also optimized to allow client input. A client’s predictions on economic variables (such as oil prices or inflation) can be inputted and future investment performance is instantly adjusted. Ultimately this confirms the worth of the client’s opinions and his subsequent investment decisions in the eyes of the advisor, allowing for a more productive relationship.

Such functionality adds a new purpose and interactivity to client meetings and provides a competitive advantage for the advisor. With wealth managers around the globe predicting a strong increase in demand for advisory asset management services, revamping the financial advice process will be critical.

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The UBS Optimus Foundation, which supports 127 philanthropic projects globally including 45 across Asia, will use its new office to target HNW clients across Asia Pacific. Furthermore UBS employs an in-house Philanthropy & Values-Based Investing team to address its customers’ philanthropic needs, especially when it comes to advisory services and the selection and execution of philanthropic projects.

According to Datamonitor’s 2012 Global Wealth Managers Survey, demand for philanthropy services remains low in Hong Kong. However, a look at Asia Pacific as a whole indicates that there is a trend building in the wider regional market. In fact, the majority of wealth managers in Asia Pacific anticipate demand for philanthropy to increase over the next two years.

Datamonitor believes that, aided by a first-mover advantage, UBS will be able to capitalize on the growing demand in the region. Furthermore, while there is little growth in demand expected for Hong Kong in particular, its central location in Asia Pacific and its status as a financial hub make it an optimal location to reach out to HNW philanthropists in the region.

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In a recent retail banking opinion piece titled “Buy-to-let still a good bet,” Datamonitor reported that buy-to-let lending has continued to go from strength to strength – amounting to £4.2bn, or 12.4% of gross mortgage lending, in the first quarter of 2013.

Insurers stand to gain from the rising demand for cover from this market. Yet landlords are only required to hold buildings insurance for mortgage agreements, and insurers must work in greater partnership with mortgage advisors to promote cover benefits.

Advisors can be critical in helping to avoid under-insurance and can highlight how, for example, standard home insurance will not be applicable in many situations such as loss of rent. Along with brokers they can also help to educate customers on actions to minimize the incidence of burst pipe damage and other perils.

Only through effective communication with partners can the take-up of landlord insurance, and the health of this business, allow insurers to reap the benefits of the buy-to-let market’s expansion.

• Gross buy-to-let lending amounted to £4.2bn in the first quarter of 2013, a year-on-year increase of 13.5%. These loans accounted for 12.4% of all gross mortgage lending in the first three months, their highest share since 2008.
• Consumer demand for private rental property will remain strong for the foreseeable future, supported by a chronic shortage of social housing.
• Despite the Funding for Lending Scheme, mortgage availability for first-time buyers remains limited, and low earnings growth continues to adversely affect affordability. 

Together these factors will underpin strong rental yields, thus reinforcing the business case for buy-to-let lending. This presents great opportunities for smaller building societies and other niche lenders in particular. While the biggest providers continue to focus on “plain vanilla” lending in an effort to improve their lending book risk profiles, smaller lenders have more room for maneuver.

Coventry Building Society, for example, felt confident enough to purchase Bank of Ireland’s UK buy-to-let mortgage book in 2012, helping to push its outstanding mortgage balances up by 15%. Looking at the mutual sector as a whole, buy-to-let lending played a significant role in the building society’s 30% increase in gross lending in 2012.

With virtually all building societies now catering to the fast-expanding buy-to-let market, the mutual sector is well placed to carry on outperforming the banks in 2013 and beyond.

Barclaycard’s Bespoke Offers service aims to provide consumers with targeted offers based on their preferences and, given consent, spending history. Retailers that sign up to the service will receive a range of tracking tools to monitor the effectiveness of their campaigns and the type of consumers they are attracting.

The service, however, faces considerable challenges in garnering widespread consumer and merchant adoption. With concerns regarding privacy and security of financial information at an all-time high, the pivotal role that data mining plays in the provision of Barclaycard’s service may put many consumers off registering and reduce the reliability of the data provided to merchants.

In addition, the Office of Fair Trading’s recent investigation into the dubious trading practices of popular daily deals provider Groupon – which revealed that the company was offering inaccurate deals based on unrealistic assessments of merchant ability to provide goods or services – could be a major deterrent for many retailers looking to use offers and discounts as a means of driving repeat business.

Innovative risk-taking is, nonetheless, not a new phenomenon for Barclaycard, which has seen its fair share of hits (PayTag) and misses (the Freedom loyalty program). Its efforts to redefine the daily deals market are, however, likely to prove futile due to the massive shift in merchant and consumer attitudes and perceptions needed in order for the service to take off.

The boost in the HNW population can largely be attributed to the strong performance of the stock market at the end of 2012. One notable impact of this was that mutual funds, which are predominantly invested in equities in the UK, recorded their highest performance gains in some years. Given that mutual funds account for around a quarter of total UK retail savings and investments, this performance had a positive effect on the size of the total market and therefore the liquid wealth held by UK residents.

The strong performance of the UK market in 2012 has carried forward into 2013, with the FTSE 100 breaking through the 6,000 barrier for the first time since 2008 in January. Furthermore, Datamonitor’s 2012 Global Wealth Managers Survey shows that wealth managers anticipate increased HNW allocations into equities over the course of 2013, as HNW individuals seek returns that are difficult to find elsewhere. While this augers well for another bumper year of growth, wealth managers should remain wary. The economy is still fragile and the eurozone crisis continues to rumble on; as such any recent gains could quickly and easily be reversed by any sudden shocks. 2013 has some months to run yet, and Datamonitor’s outlook for growth is one of cautious optimism.

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Ensuring that all segments of society have access to a basic banking product is a laudable cause and forces providers to take a more socially responsible role. Yet the general characteristics of the “unbanked” make them potentially less profitable customers: many of these individuals may be bankrupt or unemployed, for example. They are also less likely to develop further relationships with providers through uptake of more profitable products, and therefore simply represent an ongoing cost to a bank.

To expect one provider to step forward in each territory and take on this risky customer segment is optimistic; furthermore it is not yet clear what will happen if no bank is prepared to do so. Forcing all providers to share the risk as well as the social responsibility will be a much easier sell to the market, as well as promoting the very idea of competition and choice for customers.

There are currently a number of devices that are used to record telematics data, ranging from professionally installed black boxes, to self-installed dongles, to smartphone apps. While the implementation costs associated with each declines in this order, so does the granularity and reliability of the data collected.

In order to minimize costs, insurers need to segment their market and target customers with the telematics device that is suited to the risk profile that they fall into: data collected by a smartphone app will not suffice for high-risk younger drivers, but using a lower cost smartphone app may be enough for experienced, low-risk drivers.

However, even then, insurers will have a hard time persuading the latter group. Young drivers have an obvious incentive in the form of reduced premiums; low-risk drivers have less to gain as their premiums would already be relatively low. Considering concerns over privacy and the added risk of their premiums increasing if they do not actually drive as safely as they thought they did, experienced drivers are much less likely to sign up to telematics. Insurers need to get their focus right, and pursue the market segments that have the most to gain from telematics.

The retailer will acquire the 50% stake in Sainsbury’s Bank held by Lloyds Banking Group for £248m, with completion expected in January 2014. The move paves the way for Sainsbury’s to emerge as a genuine challenger bank.

Currently, around one in 20 Sainsbury’s customers holds a financial product with the bank. Taking full ownership will increase this penetration, as it frees up Sainsbury’s to offer a wider range of products, including the launch of a mortgage and current account proposition. In addition to the value derived from cross-selling, Sainsbury’s says that shoppers who take out a banking product become more loyal and spend more time instore.

Sainsbury’s has a number of characteristics that will help it to acquire banking customers. It can offer longer opening hours than traditional banks and leverage data on customer shopping behavior to create more targeted products. Shifting from the Lloyds core IT system to a separate modern platform (provided by FIS) will enable it to offer an improved digital customer experience. There is also a significant customer interest in retailer banks; Datamonitor’s 2012 Financial Services Consumer Insight Survey reveals that 40% of UK consumers would like to see supermarkets enter the banking sector.

With the entry of M&S Bank last year, and Tesco Bank and Virgin Money poised to launch current account products this year, a new breed of retailer banks will eat away at the market share of incumbents.

The German market has a strong bias towards deposits, which constitute more than two thirds of total retail liquid assets in the country according to Datamonitor’s Global Retail Savings and Investments Analytics. Mutual funds and other securities, on the other hand, only account for a minority of retail liquid assets, which means that there is a huge pool of money trapped in deposits that is just waiting to be tapped. In fact, now is an opportune time to convince investors about the benefits of greater portfolio diversification. Wealth managers will be able to make a compelling case for higher-yielding investments considering the European Central Bank’s latest interest rate cut, which penalizes deposit holders even further.

Source: Datamonitor Global Retail Savings and Investment Analytics

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Kieran highlighted the differences amongst Asian consumers’ attitudes to emerging digital payments in his presentation at the Cards & Payments Asia 2013 event in Singapore.

Access this presentation to learn:

• What’s the shape of the mobile payments market today
• How digital wallets are the central platform for any mobile payments strategy
• What’s the proportion of active users compared to those who can access this technology
• Which Asian markets are the most primed for growth in mobile payments

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