Pilatus Bank is a shining example of the bank of the future – capturing the true essence of digital innovation for improving customer service. We met Chairman Ali Sadr to get a better understanding of what private banking will look like in the near future and to explore the phenomenon he refers to as the ‘Uber moment of banking’.
Whilst other banks are leaving London and the UK, Pilatus Bank has now expanded its offices to Mayfair. Despite uncertainty at the moment, how do you see markets moving forward?
London is the most resilient city in Europe, if not in the world. This city has faced many challenges greater than Brexit in the past, and has always come out stronger. It is evident that uncertainties during pre-Brexit is effecting the economy, but I believe that the city of London once again is going to overcome this and come out stronger. However, in the meantime, we are witnessing a lot of banks shifting their service centres abroad, which will undoubtedly result in a service gap, and we, at Pilatus Bank, hope to take advantage of that.
Currently, established banks are moving from branch banking to online banking, and even though online banking has failed to capture the imagination of most customers, how do you explain the record numbers in online banking usage?
The reason behind the apparent record numbers in online banking is not due to its superior service, but rather, because it’s effectively the only option available for most customers. Numerous communities are experiencing bank closures to the point where there are cities without a single branch left. Banks are taking away the community-based access, and replacing it with self-service online banking. In my view, the moment a new service-based banking model becomes scalable and affordable, online banking will seize to exist.
Are banks going to stay relevant in the near future? Financial Technology has been able to explore many of these service channels in order to provide quality-based options to customers, wouldn’t this be a direct challenge to banks?
The shift from branch-banking to online-banking has indeed created a service quality gap, and innovative FinTech companies are certainly challenging banks in filling such gaps for the benefit of the customers. However, in my opinion, there are two reasons for why FinTech has failed to make banks irrelevant. Firstly, the fee structure is set up by the banks in a way that doesn’t allow FinTech to make a major dent into the market. This naturally leaves not much of a margin for a FinTech company to operate within.
Additionally, FinTech companies are still very reliant on banks for custody and transactions. This model leaves a large gap between service and custody. The only place that you still find a decent combination of quality service and custody is within the traditional private banking model, but the problem has always been scalability. Unfortunately, with the traditional banking model, providing this level of service has been extremely expensive for banks, making it non-scalable.
The likes of UBS have tackled the scalability by shifting to robo-advisory platforms, could that be the solution to the scalability challenge?
Robo-advisory is a glorified online banking platform with a focus on wealth management, and that will not address the scalability issue with high quality of service. The answer to scalability in my opinion is when a private banker is able to serve 10 times the capacity of what they handle today and how we could streamline the back-end operations to cater for such an expansion plan. This model would retain the relationship-based banking, while making it scalable and affordable. Today, private banking is expensive, which usually translates to high fees for customers. I believe that if we bring technology and innovation into private banking, not only we could reduce the fees, but also increasee quality of service. Consequently, in this model where you’re given a dedicated private banker at your fingertip, you wouldn’t have any incentive to ever go online to do anything yourself. The convenience of having a private baker will be a game changer. Therefore, the solution is embedded in combining new technology with traditional private banking model, and self-service platforms like robo-advisory, while scalable, fail to provide a convenient and simple solution.
Can you give us a picture of the banking sector in 5 years?
I hope and I predict that in the next 5 years, the Uber moment of banking is in full force. By then, I see a single mother as a private banker, serving hundreds of clients of hers, from the comfort of her home and all those clients having the ability to rate the quality of service they are receiving. No customer would have the time or the reason to go online when they can simply instruct their dedicated private banker to do it for them. This is the future of banking – this is where banking needs to go and technology is going to be an integral part of this future.
The UK has always been on the forefront of technological advances, how do you think this will play with your vision of the future?
The UK, when compared to other European countries, has the largest mass affluent population, while London is a very tech-savvy city. The mass affluent have proven to be early adopters of technology and FinTech platforms, which makes the city the perfect location for many challenger banks, especially Pilatus Bank and our vision of the future of private banking.