In the midst of talent shortage, and competition from neobanks and fintechs leveraging AI, private banks have to innovate to transform these challenges into real opportunities.

Growing urbanization and aging populations across the Asia Pacific (APAC) region are leading to new opportunities for private banks and wealth managers.

According to PwC, assets under management in APAC will almost double from US$15.1 trillion in 2017 to US$29.6 trillion in 2025, outpacing any other region globally.

But these opportunities do not come without their challenges.

DigiconAsia deep-dives into these opportunities and challenges with Pascal Wengi, Managing Director, Asia Pacific, the Middle East and Africa, Avaloq.

What are the top challenges faced by private banks and wealth managers, and how do they differ in Asia Pacific compared to other regions?

Pascal Wengi (PW): Asia Pacific is a unique region for the banking and wealth management sector, as it is home to a mix of mature and developing economies. Despite the differences in maturity, we see strong demand for personalized wealth management services across the region as a whole. The region also shares two demographic factors that impact the services that wealth managers provide: generational wealth transfer and a large expatriate population.

Private banks and wealth managers need to look beyond meeting the current needs of investors and focus on building long-term investment plans, brand familiarity and trust to win and retain the next generation of investors. These younger generations often have different expectations from their parents, including a greater preference for digital technologies as well as a more hands-off approach that may even favour discretionary portfolio management (DPM), especially in China and Hong Kong.

Additionally, the wealth management needs of Asia Pacific’s expat population should not be overlooked. Many expats prefer working with a financial institution they are familiar with. They want quick, simple access to their assets while working overseas and to receive the same banking experience across locations. It is therefore important for regional wealth management firms to create a seamless client experience for clients who work in different locations. This will become all the more important, as younger investors are more likely to explore work opportunities abroad.

Pascal Wengi, Managing Director, Asia Pacific, the Middle East and Africa, Avaloq

Where will the next wave of wealth come from, and what challenges do private banks and wealth managers face in capturing this market?

Finally, by promoting greater uptake of DPM services, wealth managers can focus more on delivering high-quality services rather than simply executing orders. The flat-fee model of DPM also ensures more predictable revenue streams for financial institutions, which can support future capacity planning.

What role does cloud technology play, and what are some key concerns private banks and wealth managers have in adopting and leveraging the cloud?

PW: The cloud is a key enabler of digital transformation in the finance sector. It enables wealth managers to roll out new services more quickly, increase cost efficiency through flexible pricing models, and rapidly expand into new markets – without the substantial capital expenditure of on-premises infrastructure and development teams. For front end applications such as web and mobile banking, cloud technology is essential to ensure constant availability across devices. This is a demand that we see globally – not just in Asia Pacific.

The key concerns for financial institutions are security and compliance with local regulations – especially data privacy and data residency laws governing the storage, use and processing of sensitive data and personal information. For critical backend systems, including the core banking platform, it is essential to ensure that data is kept physically isolated from the internet with no shared pool of resources. This means that the cloud vendor has no access during storage and processing.

Cloud technology has great potential to support digitalization and improve operational efficiency for banks and wealth managers, but care must be taken to balance performance with security and regulatory compliance.