WealthTech vs. Banks: The battle for Asia’s $700b digital wealth opportunity

Banks, insurers, and asset managers in Asia Pacific (APAC) could soon be faced with a partial transition of new wealth flows to WealthTechs. What can they do before it is too late?

Wealth in Asia is undergoing a seismic shift. According to a McKinsey analysis, ultra-high-net-worth and high-net-worth families are set to experience an intergenerational wealth transfer estimated at $5.8t between 2023 and 2030. It is expected that $700b of personal financial assets (PFAs) will flow into WealthTechs as customers increasingly seek digital platforms to help manage their wealth - and this could be happening at a faster rate than previously expected. There has been a proliferation of WealthTechs in the region whilst over 70 WealthTechs in APAC raised funds at seed or pre-seed stage since 2023.

To meet this demand, there has been a burgeoning of new WealthTech companies in the region. This presents a challenge to insurers, banks, and asset managers in APAC. To understand the fast-shifting dynamics, McKinsey conducted a research surveying 1,000 consumers, and had in-depth conversations with industry leaders in Hong Kong and other Asian markets. The survey uncovered a variety of customer preferences when it comes to digital wealth management:

Customer segmentation: As customers become wealthier, affluent and high-net-worth individual (HNWI) segments are playing a bigger role in the digital wealth market, projected at over 75% of the new industry PFA shift expected for the WealthTechs.

Digital adoption: Amongst the respondents, 80% indicated a strong preference for using digital solutions, highlighting advantages like cost savings (59% of customers), increased transparency and control (61%), and tailored investment strategies (57%).

A price-sensitive market: Half of the survey participants expressed a willingness to pay only 10-20% of the fees typically charged by traditional advisory service providers when opting for WealthTech solutions. The majority of these respondents fell within the mass affluent segment and were under the age of 45. Additionally, around 20% of participants viewed digital platform services as on par with traditional bank offerings, considering WealthTechs a cost-effective and trustworthy alternative.

A hybrid automation-human approach: Approximately 80% of respondents said they trust digital wealth platforms, reflecting comfort in technology for investment advisory services. Nonetheless, of these respondents, 45% reported they still prefer some form of human assistance for complex decisions—a need that various WealthTechs have identified, and are offering hybrid support as a result.

Digital risks: Despite customers’ willingness to shift to digital for financial services, data security and privacy emerged as the top concerns for around 70% of respondents, whilst about 60% voiced apprehension about the reliability of technology. These lingering concerns could affect the transition of new PFA wealth flows to WealthTech, and digital wealth management platforms will need to prioritise robust security measures to ensure their services are consistently dependable and secure.

Digital wealth becomes mandate for banks
Banks, meanwhile, are recognising that digital capabilities have become an expectation, if not a necessity. Staying out of the space is not an option; digital capabilities are expected, even by resolutely analog consumers. “If you don’t have it, you don’t get the business done,” notes Patricia Quek, head of UBS Global Wealth Management Singapore. “You snooze, you lose.”  Building a digital wealth capability is not just a matter of providing a useful app. It is about understanding the customer journey—and being prepared to go along with each client, every step of the way.

As customers look to digital wealth platforms for cost efficiencies, banks may need to start justifying the premium they charge. Banks may need to carefully consider how they price their services to ensure they are delivering value to customers whilst overcoming various obstacles, including banks’ legacy systems, relationship manager-led operating models, and hierarchical structures that can slow down investment in (and the adoption of) digital models.

Most critically, banks need to be on the look-out to losing market share. WealthTech firms have been making inroads into the HNWI segment, traditionally dominated by banks. Michele Ferrario, co-founder and CEO of StashAway, described the company’s strategy: “The core opportunity is to keep building market share with the 30- to 45-year-old professionals, who mainly are mass affluent and affluent.” He further explained how StashAway also has created an offering to serve HNWI customers: “We have launched StashAway Reserve to serve our growing HNWI customer base, offering access to private credit, private equity, venture capital, and angel investing, in addition to our core offering.”

For banks, the rise of WealthTechs represents a new competitive challenge as these innovators make inroads into high-net-worth individual segments and being digitally-native becomes an imperative. At the same time, WealthTechs are figuring out how to sustain their business model with their current pricing strategy, as well as the conundrum of expanding to holistic financial planning that goes beyond protection, retirement and potentially health.

What comes next? 
Given this backdrop, the lines between banks and WealthTechs are blurring, creating unique opportunities for collaboration across the wealth continuum.

WealthTech companies are increasingly forming B2B partnerships with traditional financial institutions. Accessibility, affordability, and innovation have become key hallmarks that define a successful partnership. For instance, banks are redefining the role of relationship managers from sales-focused to digitally enabled advisory-focused, whilst WealthTechs are broadening their reach to serve diverse customer segments, including the HNWI segments.

The banking landscape has been fundamentally transformed with the insurgence of digital wealth. By embracing opportunities and addressing the risks tied to evolving consumer preferences in wealth management, banks and WealthTechs can work together to achieve a shared goal: fostering the growth of Asia’s wealth management ecosystem.