The private banking industry has fallen into the crosshairs of fintech firms seeking to enter the fast-growing business of managing the wealthy’s money.
These new firms are aggressive in that they favor bold advertising over partnerships with luxury brands or even mingling at events to identify potential clients. Their business models typically involve using AI to provide the same services as private banks and charging lower fees, all while having a small number of staff to provide “human touch” when needed.”
Since its launch in Singapore late last year, US fintech Arta Finance has promoted its AI-powered app on social media. It claims to deliver capabilities once reserved for the wealthy faster and more cost-efficiently. “Can your private bank do this?” is one of its key catchphrases.
New Players in Singapore
Arta is a new Singapore player with over a year’s experience. Its investors include former Google CEO Eric Schmidt and ex-UBS CEO Ralph Hamers.
One of the company’s most significant selling points is its low investment threshold. Clients can access their unlimited assets, including hedge funds, with a minimum investment of just $25,000 in a product. This seems almost impossible compared to the typical $200,000 to $250,000 minimum imposed by many banks.
Moomoo, a popular trading and investing firm, has also targeted high-net-worth individuals and their Singapore family offices. With its mobile app and lower commissions, Moomoo has already worked to disrupt the local stockbroking industry.
Moomoo Private Wealth caters to clients with more than $1 million in investments.
“We wanted to apply the same principle of making investing more accessible, utilizing our tech-enabled platform to complement the personalized service that high-net-worth individuals have come to expect,” Moomoo Singapore’s CEO, Gavin Chia, stated earlier this month.
Arta and Moomoo are not the only ones looking to establish ground in Singapore, one of the leading global hubs for private banking, alongside those in Switzerland and Hong Kong. The Monetary Authority of Singapore has said that about 40 wealth-tech firms target customer segments in the city-state.
An Opportunity for Lower-Tier Clients
Private banks provide access to alternative investments and help customers set up trusts and other tax and legacy planning structures.
Chandrima Das, a fintech entrepreneur, has explained that the ultra-wealthy net-worth segment provides more significant challenges than serving lower-tiered banking clients.
“Those with over $50 million in assets under management get an entirely differentiated level of service,” explained Das.
While Arta’s advertisements target private banks, they are targeting “accredited investors” from Singapore and the Asia-Pacific regions. Accredited investor status requires an annual income exceeding 300,000 Singapore dollars (USD 220,000) or financial assets exceeding $1 million in Singapore. In contrast, many private banks want clients to have at least $5 million in their accounts.
Challenges With Growth
Fintech firms targeting these high-net-worth investors face some obstacles.
Zennon Kapron, a fintech industry analyst, stated: “A challenge is that the margin in robo is so low, you need billions in AUM to be profitable.”
Teleskop’s Das added that acquiring new customers might not result in AUM inflows. Private banks may impose higher charges, while most investors will continue to park their assets with banks for greater peace of mind.
Amanda Ong, Arta’s country manager for Singapore, has said that a number of wealthy individuals are more comfortable with fintech technology.
“Many of our competitors have not fully embraced the shift toward integrating technology with personalized service,” she said.
While fintech firms may face challenges, their emergence will disrupt the private banking industry, forcing them to adapt and innovate. This competition will eventually benefit high-net-worth investors, who now have more choices and access to solutions for managing their wealth.
