The question is not whether private banks will outsource their back office but when. The back office carries no differentiating potential but puts a constant pressure on the bank to reduce IT and operations costs. Back office services such as payments, securities administration, and reference data management are well suited for automation, consistent processes, and the industrialization approach of business process outsourcing providers.

The situation for the private banking front office is quite different, however. Unlike the back office, the front office enables a bank to differentiate itself from the competition. Therefore, the front office benefits most from customization and bank-specific solutions. But front office solutions are challenging to develop because technology and client expectations have changed dramatically in recent years. More and more of the world's high net worth individuals manage their wealth digitally. Private banks and wealth management companies must place their front office on the digital map to stay competitive, but many banks struggle to do so. Except perhaps for the wealth management arms of large banks, their IT capabilities are not sufficiently equipped for an in-house development. This leaves banks with basically three options.

For large private banks, the shift toward digital banking creates a special challenge. Typically, large banks have a substantial IT department that manages an array of proprietary banking applications. This department can be an asset because it offers IT skills in-house, and it can be a liability because its organization may not be fit for digital banking.

As private banks and wealth management companies are increasingly competing with financial technology (fintech) companies, whether they are giants such as Google and Apple, or small startups, they need to adjust their IT management approach:

Sigrid Unseld
Sigrid has worked as an IT consultant for more than 17 years, for major Swiss Banks and Private Banks in Europe, the Asian Pacific and the Americas. She has managed international projects and has extensive experience in many areas of private banking. Sigrid is a managing partner of Scilla East Consulting.

Richard Zweng
Richard has over 15 years' experience in the private banking industry, which was acquired in dynamic and ever-changing financial environments. He has demonstrated long-term leadership ability, and has worked extensively with numerous different cultures globally. Richard is a managing partner of Scilla East Consulting.

George Ong
George is Founder and Chief Executive Officer of Axisoft. Since 1998, he has been leading the company to offer IT solutions and services to Private Banks. His experience includes solutions and services strategy, technology consultancy and business development functions in Asia Pacific.

Axisoft is a Top-Notch Wealth Management Solutions Provider. Since 1998, we have been helping global top-tier Private Banks improving their profitability and operation efficiency.

At Scilla East, a best-in-business, senior team delivers both viable strategies and hands-on solutions. We have a proven track record of success in numerous private banking assignments around the globe. Our approach to projects involves combining extensive private banking expertise with state-of-the-art IT knowledge.