The consumerisation of private banking

The recent announcement that personal finance service, Nutmeg, has launched private banking-like services for all, only shows how few industries are immune to the trend of ‘consumerisation’. We have seen it unfold in the business sphere, with Bring Your Own Device policies, social networking and collaborative trends influencing existing working models and spawning completely new businesses and ways of working, but now it is increasingly making in-roads into the banking and financial sectors.

Banks have already started tailoring their customer communications to suit the individual’s preference. This includes developing and harnessing multiple channels of communication for customers to pick and choose how they wish to engage. From traditional letter and phone-based interaction to online and social media, many financial institutions are embracing new ways of working. Many mortgage brokers or bank managers will now use tablets to show the customer the different options available, making the experience more intuitive and akin to their own experiences at home.

This consumerisation drive is only set to increase and private banking is a surprising, if inevitable, next step along this journey. The likes of Nutmeg, but also PayPal, Square, Google Wallet and others are examples of disintermediation, whereby the retailer is removed from the chain between the producer and the consumer, offering time and cost savings in delivery. It is thanks to the rise of the internet and online-based services, as well as this consumerisation trend that the industry is facing a shake-up and retail banks facing disintermediation need to be agile in how they respond.

Private banking has traditionally been exclusive and relatively expensive, which is why it was until recently the domain of large companies and the extremely wealthy. However, as retail banking faces increasingly challenging times – subject not only to a difficult economic market but also to ever stringent regulations and restrictions – private banking and wealth management are emerging growth areas that can help large banks protect some of their eroding margins.

In all areas of banking, but especially in private banking, trust is vital. As long as all players, including newer ones, are FSA regulated and can offer more transparent and flexible services that are more easily accessible than other existing banking players, it will cause positive competitive tension in an extremely lucrative market.

The consumerisation of private banking is a young market, but has huge potential. The question to ask, however, is whether consumer demand for it exists yet.

Guest blog post by Cognizant's Tony Virdi.