Back in 2014, many UK High Street banks had wealth management aspirations with ambitious targets set to achieve significant assets under management from their retail client base, yet by 2018 these targets still seemed out of reach. Mis-selling and PPI scandals have prompted some in the sector to pull back from offering savings and investment products, yet other players have invested many millions and have still failed to date to turn a profit from these services. So now, in 2021, are UK retail banks presenting customer-friendly savings and investment propositions for retail clients? And what will it take for more incumbents to get on board with this once again?

In our ‘Banking on Air’ podcast host Helene Panzarino welcomed Nikolai Hack, Head of Strategy & Partnerships at cloud-native savings and investment platform, Nucoro to explore how Nucoro’s powerful tech platform can deliver highly versatile and cost-effective savings and investment solutions for retail banking. The cost structures of traditional money management offerings render this broad tier of customers in the moderate wealth bracket unprofitable, given the small total amount of assets in their portfolios. However, customer demand certainly exists, with more than 80% of UK bank customers saying they would like their retail banks to come back with savings and investment propositions, but the banks are mostly failing to come forward. So how does Nikolai think incumbents are currently positioned?

“High Street banks have an extremely strong entry point with customers because current accounts are so ubiquitous and touch on daily life. This contact should also translate into one of the biggest opportunities to capture people’s attention when it comes to offering additional financial services such as savings, investing and pensions.” – Nikolai Hack

Thus, retail banks have a huge relationship ‘reserve’ that they should be able to capitalize on. As a high street provider you have strong long-term connections to an enormous breadth of customers: individuals who are with you for the long haul, not just to take advantage of a specific perk, or extra convenience in their day-to-day finances. But it’s clear that the high street banks have been failing badly to transfer this relationship capital to the bottom line.

According to Nikolai, Nucoro’s aim with its platform is

“…to build something for retail banking incumbents which is every bit as exciting as what some of the challenger banks are offering and creates real benefits and value for individual customers so that you can stem your loss of market share that’s currently being grabbed by the neobanks.”

Nucoro is part of a joint venture and its partners are investment house Edmond de Rothschild in Switzerland and Spain-based ETS Asset Management, one of Europe’s biggest quantitative asset managers. Nikolai stressed that even though the Rothschilds have been around as a dynasty for hundreds of years, you only stay relevant as a banking powerhouse over that length of time if you’ve made some very good business decisions along the way. So when the time came to define Nucoro’s business concept it was decided that scalability was going to be paramount to their offering:

“Our powerful technology was already providing wealth management solutions for HNWs and incorporating a significant degree of automation. So why not use this tech to bring private banking-grade asset management to a much broader retail market? To deliver this, the technology needs to automate as many processes as possible so you’re still able to deliver individually-managed portfolios for every client, but at scale. The automation creates the all-important cost efficiencies.”  – Nikolai Hack

Nucoro initially launched as a live, regulated platform in the UK but this move was primarily a testbed and stepping stone. The JV partners collectively saw much greater potential to utilize the tech foundation that they had built to support external partnerships. Therefore rather than to try and directly build just one proposition and grow that in the marketplace, it made much more strategic sense to enable others to build a wide variety of propositions on Nucoro’s platform. Nikolai says,

“You can build a single ecommerce online shop, or, you can build a Shopify. With Shopify you enable millions of other people to build their own ecommerce stores. And enabling multiple unique offerings is our model at Nucoro too. We provide an amazing platform on which to build savings, trading and investing propositions for retail clients.”

The initial strategy was to target wealth managers and IFAs however these markets proved extremely legacy heavy and insufficiently agile with a poor appetite for change. So Nucoro pivoted away from this sector picking out a new niche—It’s the High Street, Jim but not as we know it. This is a much wider market, with some UK retail banks and insurers having tens of millions of customers.

How can a High Street bank plug into and capitalize on ‘unmet demand’ using Nucoro’s solutions? Nucoro’s platform is secure, highly scalable and 100% cloud native. It can be customized to incorporate automated saving, goal-based saving and investing, direct equities trading, automated investment solutions and personalized investment goal setting. The bank can create extra value from its underutilized balance sheet through using the platform to encourage customers to channel funds into savings and investment products. Nikolai emphasizes that:

“At the same time, you as the bank can seek to capture a new generation of customers in the 18 to 25 age bracket through your digital money management offerings—thereby leveraging your existing customer relationships to secure new ones, such as attracting the young adult offspring of your core customer base.”  

Most importantly, a bank putting its own solutions on a customizable platform is going to result in much better product fits because you’re going to be getting best-in-class. On the back of these tech solutions a savvy bank will be able to bring new products to market to rival the challengers. What’s more Nikolai underscores that partnering means you can deliver new products:

“On time and on budget. And at a fraction of the cost of what it would’ve cost you had you attempted this yourself and will also take only a fraction of the time.”

Nikolai highlights how the platform approach is gaining steady ground as the business strategy of choice but there can still be a conceptual disconnect:

“It makes little sense to try and build something that someone else is clearly better positioned than you to do. Though, the biggest hurdle for us to overcome isn’t another market player. Rather, it’s the internal mindset of High Street banks, believing that they can build these investment platforms on their own. That’s the lever we need to push because otherwise they are setting themselves up for failure. Whereas if you partner you can offer your customers best-in-class solutions.”

Banks should take inspiration from what has already been newly created:

“If you build around your current business model and processes, it’s not going to work. It’s going to fail from a UX perspective. Instead look to integrate the right elements: choose the right players and then by connecting them, build a solution where the total sum greatly exceeds that of its parts in what it delivers in terms of value to your business.”

Building on a platform there’s no need to reinvent the wheel and you can play to your strengths—accessing your client base and capitalizing on your brand. This is where existing players have a significant advantage they can leverage their strong and enduring relationships.

So incumbents bring the relationships into the profit equation, companies such as Nucora bring the tech solutions and we at Vacuumlabs can help you integrate this technology to create amazing products with wonderful customer experiences. 

And, at Vacuumlabs, we share Nikolai view:

“We believe that an ecosystem of best-in-class players will innovate much faster than anyone going at it alone.”

To find out more about opportunities of banks to leverage on their client base and provide efficient saving & investment opportunities, listen to our new Banking on Air podcast episode featuring Nikolai Hack of Nucoro – Available on Apple Podcasts, Breaker, Google Podcasts, Overcast, Pocket Casts, Spotify or here:

Full transcript of this episode is available here.

Here’s a rundown of this episode:

• 00:40 Who is Nikolai and what Nucoro is, how it was created
• 09:05 Banks and opportunities for their clients
• 12:50 Banking platforms and technology development
• 16:20 Where Nucoro operates
• 17:50 Investment opportunities
• 20:54 Journey as an entrepreneur

Nikolai Hack – Head of Strategy and Partnerships
Prior to joining Nucoro as one of the founding team, Nikolai spent a number of years in management consulting. There he focussed on operational excellence and process optimisation projects in European bluechip clients and international organisations. As Head of Strategy & Partnerships at Nucoro, Nikolai leads on the direction of the business and the development of our partnership programme. He holds an MSc in Political Economy from LSE.

‘Banking on Air’ is the official Vacuumlabs podcast covering the challenges, opportunities, perspectives and opinions that matter to you and to our community. In this podcast, we are looking under the hood of the changing face of tech: the acceleration in all things digital, the impact of regulation (and disruption), the need for genuine collaboration – and the specter of competitors old and new as it plays out in fintech and financial services around the world.

This podcast is brought to you by Vacuumlabs – and we’re sharing our experience and expertise in creating solutions for the digital journey for professionals, community banks, and fintechs. We believe that the future is in communities when it comes to digital transformation in financial services, and we invite you to join us and our guests over the coming weeks and months.