Private banking stands at a pivotal moment, as institutions navigate the balance between technological innovation and the fundamental human relationships that define wealth management. While digitalisation offers efficiency and scalability, it cannot replace the trust and personalisation that high-net-worth clients expect.
At The Banking Scene event on Tuesday in Luxembourg, industry leaders highlighted how collaboration, adaptability, and a measured approach to digital transformation are key to overcoming today’s challenges.
“Banking is about more than just transactions—we can help people create their dreams,” said Rik Coeckelbergs, host of The Banking Scene and author of Collaborate to Innovate: Redefining Financial Services in the Digital Age. “Finding synergies in non-competitive areas, like compliance and digital infrastructure, allows banks to focus on what truly differentiates them: client relationships and trust.”
This sentiment was echoed by Leda Glyptis, author of Bankers are Us, who stressed that digital transformation is not just about technology but also about organisational adaptability. “Teachability is more important than resilience,” she said. “The leaders who succeed pivot based on feedback and recognise the need for organisational trade-offs.”
Client complexities
Luca Derlin, managing director and head of international markets at Quintet Private Bank, highlighted the increasing complexity of client needs. High-net-worth individuals are moving away from traditional banking models, establishing family offices and seeking highly customised solutions rather than one-size-fits-all products.
“The type of advice we need to offer as private bankers is far more complex than before,” Derlin said. “Private banking today is about delivering meaningful, value-based solutions, not just events and transactions.”
One of the biggest challenges is wealth mobility. Increasingly, wealthy individuals are moving assets across jurisdictions, with Brexit, tax policies, and regulatory uncertainty influencing their decisions. The U.K. has lost some 10,800 millionaires in 2024, according to the Henley Wealth Migration Dashboard.
“Luxembourg is a net beneficiary, because we have the privileged luck of having an ecosystem which is very internationally geared, and therefore we have the capabilities and skill set to support these clients no matter where they live.”
Luca Derlin, Quintet Private Bank
“This is a different experience compared to what they would encounter if they were to trust their wealth to a local bank in Italy, Spain, or Germany. While those institutions may have more domestic knowledge, they often lack the ability to serve clients effectively across borders.”
Digitalisation: A double-edged sword
Technology is revolutionising private banking, offering new efficiencies but also creating challenges. Derlin acknowledged that while digital tools reduce administrative burdens, they cannot replace the human relationships that underpin private banking.
“Technology improves efficiency, but personal trust remains paramount,” he said. “Clients value digital solutions for convenience, but they want a trusted relationship manager for critical decisions.”
Reflecting on digital-only banking models, he cited Revolut’s expansion into investment services. While fintechs excel at streamlining services, they struggle to replicate the deep, trust-based relationships that define private banking. Revolut, it was made clear at the event, now is the fastest growing bank in Luxembourg.
Generational shifts and digital expectations
The next generation of wealth owners—Millennials and Generation Z—brings new expectations. According to Sandrine De Vuyst, member of the executive committee at Banque Raiffeisen, younger clients demand digital-first experiences yet still require guidance.
“Younger generations are vocal about their preferences but are not necessarily more active in managing their wealth,” she observed. “They expect digital access but still need the human touch.”
“We have five generations to be looked at. It’s huge in terms of the different expectations.»
Sandrine De Vuyst, Banque Raifeissen
Vanessa Müller, partner at EY, highlighted that while these generations prioritise ESG (Environmental, Social, and Governance) factors in investments, satisfaction with banks’ ESG offerings remains low. “There is a clear demand for ESG products, but banks are still adapting to meet these expectations.”
Finding the right balance
For banks, the challenge lies in maintaining a high level of personal service while integrating digital tools effectively. Raiffeisen remains committed to personal client relationships but recognises the necessity of digital transformation.
“Proximity doesn’t always have to be physical; it can be digital as well,” De Vuyst noted. “We aim to offer both seamless digital interactions and human engagement where needed.”
A major hurdle is compliance, particularly in Know Your Customer (KYC) processes. Many banks struggle with the cost and complexity of compliance requirements.
“KYC is burdensome,” De Vuyst admitted. “Blockchain and AI have the potential to streamline processes, but we are not there yet.”
Digital collaboration
Collaboration between banks and fintechs is increasingly viewed as a solution to operational and compliance challenges. Didier Richter, head of products and services at Banque Internationale à Luxembourg (BIL), noted that banks in Luxembourg benefit from a cooperative regulatory environment that facilitates partnerships.
Emanuele Vignoli, CEO of HSBC Luxembourg, emphasised that successful digital transformation requires internal and external collaboration. “We must play to our strengths and integrate fintech partnerships where they add value.”
However, regulatory hurdles remain. Claude Marx, director general of supervisor CSSF, pointed out that while initiatives like Open Banking and mutualised KYC utilities can reduce costs, legal and data protection frameworks across Europe remain fragmented.
“Collaboration is essential, but navigating different regulatory environments is still a challenge,”
Claude Marx, CSSF
Progress however is made in Luxembourg, he said, noting that the cost-income ratio for banks has improved from around 48 percent to 44 percent over the past year. However, he cautioned that this improvement was largely driven by strong interest income, masking the underlying challenges faced by some players.
«There are still 11 out of 115 banks in Luxembourg that have a negative cost-income ratio, meaning they are loss-making,» Marx said, highlighting the strain that smaller institutions face in meeting the rising compliance costs.
