The survival of the (digitally) fittest

By Damián Gelerstein: CEO of Abaqus

According to PwC's latest report on Asset and Wealth Management, it is estimated that by 2027, one in six existing asset and wealth management organizations will be absorbed or will disappear. The financial industry faces challenges of great magnitude that surpass any previous era. To the topics widely discussed for a long time, such as digital transformation, personalization and fee reduction, are added a new regulatory structure, the adoption of artificial intelligence and changes in client behavior toward digital solutions.

Although the Chilean market shows higher levels of concentration and banking stability, it is not exempt from these challenges. The Fintech Law poses a series of challenges for established institutions, mainly in two key areas. First, competition, since the law brings changes that will allow the entry of new players, who will probably be more agile, have modern infrastructure and offer renewed value propositions. Second, traditional institutions will have to build a technology infrastructure that allows the opening and integration of client data. Adapting to these challenges and seizing the opportunities offered by the opening of financial data will be key to success in this new environment.

The irruption of artificial intelligence also requires the attention of local financial institutions. It's not something happening thousands of kilometers away at technology-leading institutions; it's already happening in Chile. This brings a series of opportunities for those who adapt quickly, but it can be a major blow for those who fall behind. While these processes must be approached with care, if used correctly they can significantly increase operational efficiency by automating repetitive tasks. In addition, the proper use of artificial intelligence can substantially improve interaction with and management of end clients.

Since the digital offering of products and platforms is still underdeveloped in the region, it is extremely important that wealth and asset managers update their offering for the coming decade. We believe that having control of the customer experience will be as important as having quality products in the near future. Technological advances and the availability of data, as well as financial openness, provide new opportunities to create a truly personalized offering for each client, just as happens with Netflix or Spotify.

For all of the above, it is essential that traditional financial institutions change their mindset and realize that they must become technology companies if they want to survive the coming decades.

Damián Gelerstein

Founding partner and CEO of Abaqus

This column was originally published in El Mercurio Inversiones [LINK] on 19-07-2023