Phoebe Courtley, Director of Digital Experience at Coutts, discusses how private banking could wake up in the autumn edition of our Chief Disruptor magazine.
‘Perhaps the question is, “how do you ensure that the digital experience is premium?” rather than “is digital premium?”’
Phoebe Courtley is the director of digital experience at Coutts. I had suggested digital experiences can sometimes feel cheap. ‘Why do people come to private banks for their finance?’ She asked, to set context. ‘Because you get the tailored, personalised, face-to-face relationship.’ Phoebe’s job is to digitise that relationship.
But is this the reason people join Coutts? I had imagined, separately, that people were motivated by a combination of ROI, and an “experience” far greater than the sum of its parts. Exclusivity; the club. People get a Coutts account because they have £1 million plus liquid assets and they want some recognition. They do it because they can; because it’s not available to others.
Coutts was founded in 1692, two years before the Bank of England. A visit to the website gives a light, four-century history – mainly a lineage, like you’d find at the entry of a royal estate. London in the 18th and 19th centuries involved bewigged men who trusted their friend James Coutts and his successors. Then, during the 20th century, Coutts became an unlimited liability, it was acquired by NatWest, which in turn was acquired by RBS. Following the 2008 recession, the UK government bailed out the RBS Group, retaining a 62.4% stake (which they plan to sell).1 This means that in the 21st century, Coutts is owned mostly by the British taxpayer.
‘If you look back fifty years,’ said Phoebe, ‘the wealthy were a particular demographic. Now, it's changing, we get a lot of young entrepreneurs, coming up through the system, making a lot of money, quickly. Their needs and their expectations of their bank are significantly different.’
Before, ‘maybe you'd be around forty to fifty [years old] when you sold your business, so you'd be at the tail-end of your career. Nowadays we find that we have quite a lot of younger entrepreneurs who sell their businesses quite young. They’re in their twenties, and thirties, and then they're reinvesting; they become serial entrepreneurs – their lifecycle is slightly different in that respect. Regardless of age, Coutts’ clients all engage with digital more sophisticatedly than ever before.’
Phoebe disagreed with the suggestion that AI could radically change how investment functioned in the imminent future. This makes the main threat to Coutts perceived by Phoebe an experiential one, perhaps from a Monzo-like competitor. In retail, she noted, ‘they're continually facing the challenge of “well I'm taking all my money to Monzo” or “I'm taking my banking to Monzo” or “I don't like the way that you can't service me digitally.”’
‘If you can see that retail is being disrupted, it doesn’t take a genius to see that private banking could be disrupted.’ For now, the target audience is different: Monzo offers no interest and, along with most of their competitors, they target people wanting to manage their day-to-day finances. But if Monzo’s target audience get a seamless digital experience, so must the kind of person who becomes a Coutts client.
‘Everyone has a standard,’ said Phoebe. ‘They engage with things like Uber, Netflix, on a regular basis; and that makes them have a standard assumption around what interacting with a business digitally means. Anything below that, they are just a bit disappointed. For us, it's continually having to meet that minimum standard. Then saying, "how do we make it premium on top of that?”
Within that, are the specific, mechanical ambitions for Phoebe: the ability to access multiple different platforms via a single sign-on. A personalised, locked-in experience for every client. Frictionless architecture. Further away, Phoebe also mentioned chatbots, with the caveat that they have to be good enough to enhance the client experience. These are presently being rolled out by some competitors. There’s a principle around behavioural analytics there: that chatbots aggregate information about what a user wants, where they’re going, and improve customer journeys with the data.
‘If disruption isn't directly happening to us in a way that's making us sweat, should we disrupt?’ another rhetorical question. ‘Private banking has been kind of shielded,’ she said. ‘We're not being made to sweat yet. It sometimes gets deprioritised, or, it's a “nice to have” rather than a “must have.”’
Disruption is only worthwhile, argued Phoebe, if it’s ‘empathetic’ to stakeholders across the client-base and business.
Financial firms were some of the first users of AI. There’s a category issue here, because what is characterised as AI is often an algorithm as simple as an “if/then” function. The 2012 “flash crash” was like that – a set of automatic instructions misapplied to freak conditions.
Historically, AI has been useful in trading because of speed. “High frequency trading” is a form of investment where speed matters: characterised as ‘picking up pennies in front of a bulldozer’ by Gaurav Chakravorty, the CEO of qplum, an AI-led trading firm. Algorithms which have the power to execute investment decisions are not generally predictive or decision-making. Rather, they either execute pre-set instructions set by investors, or summarise data to decision-making investors, sometimes including predictive data.
The idea that you could let a neural net loose on a bunch of data to beat the stock market is an attractive one.
Sherjeel Aman is a former Executive Director at Goldman Sachs, now a financial adviser. He perceives the most important factor in wealth management to be big data. To some extent, this must be powered by AI.
Sherjeel said by email: ‘Man Group President [Luke Ellis] famously said, [wealth management] firms that don’t focus on big data will be eaten alive. The power of technology now means that portfolio managers need help to digest the vast amounts of information available to them.’
‘Consumers, while selecting wealth providers, should consider how their provider is utilising big data to make intelligent investment decisions.’ But, he adds, ‘it is important to note that relying on big data does not mean robo-advisors, because these robo-advisors have not had their "stress scenario" test yet.’
AI bots, in other words, have only entered work since 2008. The Titanic has not yet hit the iceberg: who knows whether the anti-sinking measures will work?
‘The first and foremost limitation of AI-based trading is the same risk that many in financial markets quote as a disclaimer,’ said Sherjeel. That is, ‘past performance does not guarantee future returns. Therefore, it depends how complex the AI platform “codes” its trading strategy. Is it based purely on historic data? Is it based on technical chart analysis?’
‘The risk with these things is that there is potential that you lose the human instinct and are unable to react to the Trump/Musk tweet, and as we have seen recently, there are thousands of factors that impact a stock price, tweets being one of them.’
Phoebe agreed: AI is not likely to be used by Coutts for investment decisions just yet. ‘Markets can be hugely irrational. They’re often powered by sentiments. I’m not convinced that AI could really power investments in a meaningful way until the sophistication is there. They could do some of the heavy lifting but you still need a human being to validate and apply the intuition layer that is distinctly absent from a lot of AI technology at present.’
The Human Touch
I wondered whether non-sentimentality, and failure to be swayed by hype or gimmicky indicators like tweets, could be an advantage, not a disadvantage, for AI. It only needs to beat human judgement after all.
‘There are always gimmicks in digital technology,’ said Phoebe, ‘and I'm not saying that AI is a gimmick, but we have to be really careful within private banking that we don’t chase after everything - we need to play to our strengths and what our clients come to us for. Our clients are so unique and because our scale is significantly smaller than retail; we have to really pick and choose our innovations wisely.’
‘If there are start-ups that are pairing something that is really useful for our clients, then we will integrate that as a technical solution, rather than building something from scratch ourselves…so being a little more agile will allow us to test things with our user base and develop a digital experience that is useful to them.’
So how will technology change private banks and wealth management?
‘It's the experience layer on top,’ said Phoebe. ‘You can get a credit card all over the place, you can get a loan from most places within reason. But we can make the loan flexible to your income needs, your future needs. We can make it painless, we can make it seamless. Those things, if we start thinking about our USP and digitising that, that's where I think we'll really make a significant difference.’
‘Where AI could be a little bit more useful for us, is if we're able to serve clients quicker and more reliably, if we’re able to apprehend their needs. Then artificial intelligence is only a good thing.’
It’s a bet. Coutts has traded on the experience associated with lavish wealth. Can this be digitally conjured?
Phoebe stressed that experience was personal, and as such, should be personalised. ‘What digital empowers so beautifully is choice. We want to take this to the next level and ensure that what a client could do face-to-face, they would be able to do digitally.’
‘If you only want to engage with us via a bot,’ said Phoebe, ‘that allows us to automate almost everything for you then absolutely – that is your choice. If you want to come into the Strand and you want to sit down with your banker and that's the only way you like to do business, that's entirely your choice.’