Saving the world from robo advisors

15. January 2018.

It takes a minute or two to get your mind around what Pilatus Bank is trying to accomplish.

At first, the self-described challenger bank appears to be the embodiment of contradiction. It both is and isn’t about technology. Further, it is all about relationships, but definitely is not about branches.

Founded in 2014, the bank—with headquarters in Malta and an office in London—concentrated initially on providing private banking for the high-net worth market. It has since broadened its focus to embrace the mass-affluent segment using a proprietary technology platform it developed.

Pilatus Bank’s CEO, Hamidreza Ghanbari, in an interview, explains that banks offering private banking services in the traditional manner haven’t been able to scale that business successfully to the mass-affluent market. In recent years, in fact, many universal banks have implemented so-called robo-advisor services, which Ghanbari disdains.

“With robo advisory the whole essence of relationship banking is lost,” he says. Banks using it are just turning personalized private banking and premier services into self-service banking.

“It’s very important to people to know their bank and to be known by their bank,” Ghanbari continues. “That is completely killed by robo banking.” At the end of the day it’s a cost-cutting measure, he says, and it creates another gap in service.

A gap that Pilatus is endeavoring to fill.

Relationship managers via live chat

In Ghanbari’s view, it’s much the same as has happened in retail banking where human interaction at the branch has been replaced by self-service banking. He believes the branch banking model’s day is done. The reason? “Because service has been pushed down in the priority list,” he says. Now, he adds, going to a branch is sometimes a daunting task. “You actually end up with more problems when you visit a branch.”

Some banks have been working to improve the branch experience, but Ghanbari doesn’t see the future in that. Pilatus Bank is using technology, not branches, to bring relationship banking back into banking. The bank’s technology allows customers to easily and conveniently connect with their banker on their mobile phone.

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The bank’s model is centered on relationship managers. Every Pilatus customer has one.

“Instead of dialing an 800 number and getting somebody different every time you call and having to re-explain your requirement,” Ghanbari explains, “you have a designated relationship manager that you can interact with through the technology platform.”

The interaction is through an app on the customer’s mobile phone. Communication is primarily via text-based live chat, although the app allows customers to call their banker or email him or her.

In addition, Ghanbari points out, the relationship manager can bring other experts to the chat. “If you need to talk to your loan officer or your portfolio manager, the relationship manager can connect you.”

Names of kids and pets

In a typical private banking model, says Ghanbari, a relationship manager can handle 100-150 clients. It isn’t been scalable beyond that, he says, without much different, “disruptive,” technology.

“We don’t see disruptive technology the way some fintech companies do, as a replacement for personalized, human interaction,” says Ghanbari. “We see it as a tool that allows us to actually scale up.”

Because of the bank’s patented communication platform, called ARX, one relationship manager can scale up to handle from 500-750 clients, says the CEO.

Asked how one manager can give personalized attention to so many people, Ghanbari notes that the technology captures the behavior of the client from each interaction, including personal information that would allow the banker to know the names of a client’s children or even pets.

Everyone likes convenience

Generation X—people born roughly from the mid 1960s to the early 1980s—is the predominant target segment for Pilatus Bank’s mass-affluent push. People in that segment are tech savvy, though often because they’ve had to become so, Ghanbari maintains, by contrast to Millennials, who were born into a digital world. Both GenX, and the Baby Boomers ahead of them, value relationships, says the banker.

As to whether Millennials will value relationships to the same degree, Ghanbari says it remains to be seen. He points out, however, that “all human beings very much appreciate convenience and efficiency.”

“We’re trying to make private banking affordable, accessible, and scalable,” says Ghanbari. Ultimately, the model could be applied to retail banking broadly, and the Pilatus exec says that is down their “end game,” as he puts it.

Working the gap

Overall, Ghanbari sees Pilatus Bank filling a gap that exists between universal banks on the one hand and the fintech community at large on the other.

“The issue with universal banks,” he says, “is their legacy systems. They are not agile.” Until they can sort that out, he continues, all the new ideas they have will take a lot of time to implement.

“Fintech companies on the other hand are very agile,” Ghanbari continues, “but they are not banks. As a result, there are issues with data protection and the rest of it because they are not regulated.”

Pilatus Bank, as he sees it, sits between these two extremes. It has agility based on its disruptive platform, plus is highly regulated as a bank.

As one example of the benefit of the latter, the ARX platform, Ghanbari notes, was built specifically to facilitate anti-money laundering regulations. He says that the technology provides the relationship manager with the documentary evidence supporting the customer’s transaction. “It can actually send documentation through the app,” says Ghanbari, “so the manager can register it, verify it, get approval, and issue the payment.”

Sound like something your institution would want?

The technology, alas, is, not for sale, at least for now. Ghanbari indicates it could be a possibility at some point, if his board approves.

We will be happy to hear your thoughts

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