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Morgan Stanley launches robo-advisor to attract young investors

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Morgan Stanley has announced a new “robo-advisor” service to help young investors get started with small portfolios.

As Computer Business Review reports, the robo-advisor is tailored specifically towards younger investors who have “less complex needs.” It comes with a 0.35% advisory fee that’s designed to reflect its aims of helping new investors manage their first portfolios.

Built entirely inhouse by Morgan Stanley, the fully automated system is available online and comes with several customization options.

Automated investment

Robo-advising is set to become much more common over the next few years, making it easier for new investors to get started. Increasing amounts of wealth will be overseen by digital agents, with Business Insider predicting the figure will reach $4.6 trillion by 2022.

By launching its own service with a specific target audience, Morgan Stanley also positions itself to remain relevant as robo-advising becomes more prolific.

In the near-term, technological and human advisers are likely to coalesce to deliver more timely information to investors. An investor might retain traditional advice options for when they need to make major financial decisions or engage with large portfolios. Robo-advisers will allow investors to get real-time details using a smartphone, enabling more rapid responses to changes in their portfolio.

The introduction of digital assistance services could make investment more efficient and allow participants to create higher returns. This will eventually lead investors back to companies like Morgan Stanley, seeking advice on how to manage increasingly complex portfolios. Morgan Stanley’s new robo-advisor is designed to step towards this scenario, where the use of digital tech brings about new opportunities for investors and financial providers.

Socially-responsible portfolios

The service requires a $5,000 starting investment, which Morgan Stanley believes will be accessible to young people interested in seriously investing. Users can follow the service’s advice to invest in specially-designed portfolios, including options built around sustainability and emerging technology. The company hopes the seven themed portfolios will have enough appeal to attract investors by matching their interests.

Morgan Stanley intends the service to diversify its client base by allowing it to reach young customers sooner. People who start to accumulate wealth through the robo-advisor will be able to transfer to the company’s main advisory services.

The program will allow investors to start small, learning how to make decisions by engaging with socially responsible portfolios. As their needs become more complex, Morgan Stanley will be prepared to sell its more lucrative advice services. The strategy lets the company access a new demographic by using digital technology to upsell young clients to more expensive services.

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How BMO branch technology saves employees up to 30 minutes per day

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When it comes to banking, it comes as little surprise that customers are increasingly preferring tellerless interactions. 

A recent customer insight report from Mercator Advisory Group found that those who don’t like using mobile and online banking prefer to use self-service kiosks at physical branch locations.

Even back in 2015, a study by Source Technologies found that self-service retail banking kiosks improve operations, “reducing the time it takes to get an official check from nine minutes (using a teller) to 40 seconds – 13.5 times faster than a teller-conducted transaction.”

When banks invest in features like remote authentication and mobile deposits, it isn’t just customers who benefit — staff are able to better focus on more complex transactions, and developing relationships with clients.

“We see that more and more of our customers are migrating toward self-serve interactions, especially for the simpler, straightforward transactions,” explained Kyle Barnett, BMO’s chief operating officer for US personal and business banking, in an interview with PYMNTS. 

One of technologies implemented by BMO was a faster, real-time process for scanning and depositing cheques, saving customers from having to fill out a paper deposit slip. This has led to deposits clearing within hours instead of days. 

Another BMO implementation was its easy PIN authentication; instead of using a driver’s licenses or state-issued ID, customers use debit cards to verify their identities. The transaction is therefore accelerated, and data is aggregated instantly on the teller’s screen.

Both of these improvements were implemented in more than 500 branches by the end of 2019.

“If a customer walks in and opens up an account [during the] same interaction, they can actually leave with a fully functioning, embossed card that has their name on it,” Barnett said. 

And unlike before, when a customer was issued a temporary card and had to wait for the fully-functioning replacement to arrive in the mail, “they also get the PIN right there as part of the account opening, and can even set up a custom PIN if they want at the ATM.”

With the in-branch experience changing, and customers requiring fewer interactions with tellers, the result has been “really freeing up our branch bankers to have more time to dedicate to customers, and have better holistic conversations, and create more personalized recommendations.” 

One case study found that employees have saved between 15 and 30 minutes per day on processing forms. Multiply that by the number of employees within BMO, and you get a major win for efficiency and time saving. 

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81% of banking executives would look to collaboration for digital transformation

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According to Finextra’s The Future of Payments 2019 report, it’s been “the year of digital transformation for legacy-era brick-and-mortar banking giants.”

And collaboration is overwhelming the favored path to get there.

At EBADay, hosted by Finextra in association with the EBA, it was reported that 81% of banking executives would seek to collaborate with partners to better, more successfully execute digital transformation. 

 

While collaboration was the clearly-favored choice, some respondents did choose options for digital transformation that either kept the process in-house, or completely outsource it:

  • 8% would build a new operating layer on their own
  • 6% would outsource processes
  • 5% would create a new bank “on the side”

When asked to describe digital transformation (DX), 55% said that it means fully changing an institution’s fabric. For others, DX means:

  • Offering more innovative products while reducing costs (20%)
  • Replacing and renewing the core banking operating system (13%) 
  • Offering digital channels such as mobile (12%)

Thanks to consumer demand, banks have been forced to step up and introduce new products and services that leverage current and emerging technologies — all in the name of giving customers better choice. 

As it stands, customers of the retail banks are able to deposit cheques, transfer funds, and apply for loans via their smartphones. 

“This collaborative attitude underscores how the rise of digital banking may not need to be an all-out competition between incumbents and startups,” explains Business Insider, “and may even tilt the scales in the direction of collaboration.”

And it looks like it’s already been happening: Lloyds found that 48% of financial services they polled said they have completed acquisition deals for fintech firms, or have taken a minority or majority stake in them. 

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Why private label banking apps and products are on the rise

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Private labeling has long been a pervasive strategy in retail, where products are made by third party manufacturers and sold under a retailer’s name. The cost to manufacture is often much lower than reselling another brand name, resulting in higher margins and increased revenue for sellers.

Retailers who implement this strategy also maintain wholesale control of the brand, including packaging and pricing, which generates product exclusivity as well as promotes customer recognition of and loyalty to the brand.

Possibly the biggest benefit of private labels, however, is that they eliminate the pains of having to design and build a new product — especially when entering a new market. By outsourcing the entire process and leaving those details to the experts, sellers can instead focus on what they excel at: branding and marketing the finished product.

Because the benefits of this strategy are so multifaceted, it’s no wonder private labeling is moving beyond consumer goods and gaining traction in service-based industries. Businesses looking to develop new offerings and product functionalities can now easily outsource entire technology stacks and tedious regulatory administration.

As tech giants like Apple, Amazon, and Google deepen their financial services plays, banking and personal finance tools have become a prime opportunity for fintechs and smaller firms to leverage private labeling to compete, and for established players to unlock new revenue streams.

Here’s a look inside how private labeling is transforming the banking industry— and which products are on the rise.

What is white label banking?

White label banking is another term for private label banking or banking-as-a-service (BaaS), in which banks open up their application program interfaces (APIs) to let third parties build their own financial products with existing infrastructure. White label banking accelerates the builder’s go-to-market strategy by removing regulatory, legal, and technical obstacles.

White label banking services

White label banking services enable fintechs and third parties to showcase a sleek, company-branded frontend, while leveraging an established bank’s license, regulatory compliance, and technology on the backend to offer core banking features that rival major institutions’.

Common white label banking services include:

  • Savings and checking accounts
  • Current accounts
  • Debit and credit cards
  • Simplified bill payments
  • Online payment transfer systems
  • Personal loans
  • Mortgages
  • Insurance
  • Bank statements with transaction details
  • Balance notifications

White label banking apps

Some examples of mobile banking apps built with white label features include:

  • ADIB
  • Albaraka Mobil
  • Azlo
  • Börse Stuttgart App
  • Chime
  • Compte CO2
  • Digit
  • Dozens
  • Knotist business banking
  • MoneyLion
  • Nationwide Mobile
  • Qapital
  • Qonto
  • Score Kompass
  • Simple
  • Spendesk
  • Stash
  • Tomorrow
  • Trade Republic
  • Van Lanschot
  • Vitesse Mobile
  • Xero Accounting & Invoices

Future of white label banking services

Across industries, digital technologies are democratizing information to spur more competition and innovation. Because of this, the trend towards “open access” will only become more pervasive. In the banking industry, particularly, the open banking movement has been unfurling from its epicenter in the UK and stretching across the globe for the past few years.

White label banking and BaaS technology are no longer brand new technologies in the industry, but firms that get involved now will still be ahead of the curve by the time regulation becomes mainstream. The UK’s Competition and Markets Authority has already enrolled the nine biggest banks and building societies in its Open Banking Directory, and others are coming soon. After that, it won’t be long before other countries follow suit with their own regulations.

Per Accenture estimates, €61 billion ($70 billion) or 7% of total banking revenue in Europe will be associated with open banking-enabled activities by 2020. Incumbent banks around the world that invest in open banking platforms now – before it’s mandated – will be rewarded with new revenue streams, an early boost in demand, partnerships with tech-savvy fintechs, and an overall competitive advantage against newcomers in the space.

To stay ahead of trends like white label banking, Business Insider Intelligence is launching a Banking coverage area in September. Tailored for top decision-makers in the financial services industry, this vertical covers digital transformation across the industry, including open banking and BaaS, consumer and business banking, mobile and online banking, digital account opening, and neobanks.

This article originally appeared on Business Insider and is reprinted with permission. To read the original article, visit this link.

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