Can Technology solve the Cross-border Conundrum?

A visit to an APAC airport will show that people in the region travel a lot. Given the cross-border market for goods and services that underpins wealth creation, the dynamism of the region’s economy largely depends on it. However, capital in the form of personal savings must also move from place to place. How to make this as frictionless as possible??

International financial planning a necessity

For many people, the place they generate their income may not be the same as where they wish or need to spend it in future. International migration is increasingly commonplace and business interests may be located in second or third countries. Hence, there is the cross-border movement of personal savings and the need to plan accordingly.?

Technology has increased the speed, volume and rails for investors to transfer payments for goods and services. However, outside unregulated crypto currencies, it has made much less of an impact on cross-border personal investments. This is unfortunate, as better investment opportunities may exist in other countries and markets, more suitable for future liabilities.?

Wealth industry fragmentation

The foremost implication is that the regional wealth management industry remains highly fragmented. Regional players need to ensure that their business operations in each country comply with local laws and regulations. This reduces scalability and raises the barriers to investing across borders, arguably inhibiting the development of each jurisdiction’s financial sector.

Cross-border rules in investment exist to protect the majority of citizens from the destabilizing effects of excessive capital flows, the need to trace sources of income and the accountability of financial market intermediaries. While such rules are enforced locally, they are often the result of discussions on a trans-national level and follow sound international principles. However, where differences exist, these details matter.

This creates a real conundrum for international wealth managers. According to Deloitte, this is one of the factors that has caused international wealth management volumes to stagnate in recent years [1].

Keeping it simple(r)

Until these issues are resolved [2], the solution for such investors might be to become cross-border financial citizens or ultimately, obtain citizenship in their target domicile, subject to complex regulations. Such investors are numerous enough for large or specialised financial institutions to wish to service them, who may consider a technology-based solution to assist with:?

• Seamless digital onboarding - ability to open new accounts remotely in full compliance with local anti-money laundering (AML) and know-your-client (KYC) rules
• Local adaptation - configurable, modular systems can be more easily adapted to the needs of local markets, reducing onshore physical presence
• Self-service portfolio management and execution platforms - reducing the risk of active solicitation of financial products if prohibited
• Tokenisation of client data - so that only the relevant portfolio details may be transferred to the offshore cloud servers as needed
• Chatbots and artificial intelligence (AI) - to respond to investors’ practical, non-investment related or administrative questions remotely
• Configurable record-keeping and reporting - ability to store and download account information in easily configurable formats to satisfy regulatory reporting requirements in multiple jurisdictions.

While cross-border restrictions will remain a reality for the foreseeable future, being equipped with adaptable technological solutions to service cross-border clients in compliance with the variety of rules can help manage risks for financial provIders.

[1] https://www2.deloitte.com/content/dam/Deloitte/ch/Documents/financial-services/deloitte-ch-en-international-wealth-management-centre-ranking-2021.pdf

[2] a number of cross-border schemes have sought to address these issues from an organised market perspective including Wealth Connect, Mutual Recognition of Funds (MRF) and the ASEAN fund passport for example - so far with only limited impact

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