New Swiss banking service Alpian, for example, is looking to attract mass affluent customers with a service that combines the best element of both private and retail banking.

Alpian, which was incubated by Swiss private bank Reyl, has today announced CHF12.2 million raised in Series A funding. It will be targeting customers with between CHF100K and CHF1 million in investible assets.

“Our deposits from customers are going to be higher than in a retail bank and lower than at a private bank, so our number of customers will need to be in between the two as well,” Alpian’s CEO, Schuyler Weiss, tells Finextra Research.

As UK challenger bank OakNorth targets the ‘missing middle’ of SMES, Alpian views the mass-affluent client base as underserved by both retail and private banking, citing research that 40% of this segment are looking for a new bank, while 70% would be open to using a bank without branches.

“We’ve done a ton of market research into what mass-affluent clients are looking and how we can differentiate our offering from both retail and private banking,” Weiss tells Finextra.

“What we’ve found is that they need everyday banking features, such as paying people easily, using their debit cards, seeing how much money they have and so on, but they also want to grow their wealth and they need help doing that.”

Alpian was incubated by Swiss private bank Reyl and is aiming to receive a full banking licence from FINMA in 2021, spurred by the funding announced today.

Partner at Reyl, Pasha Bakhitar, says Alpian is identifying a “blue ocean space” and describes its development as realising “the full potential of this unique, ground-breaking value proposition.”

The gap in the market

Targeting the mass affluent segment in Switzerland, which it estimates to be worth CHF660 billion, Alpian is aiming to create a digital banking service that incorporates the more exceptional level of personalised service to be found at a private bank.

Alpian is tailoring its offering to a market it describes as “untapped” compared to the retail mass market on the one hand, and the high-net-worth (HNW) segment on the other.

The latter would be well served by the Swiss wealth management giants of UBS and Credit Suisse, while the former would turn to the country’s competitive retail banking market manned by incumbents like Raiffeisen and possibly digital newcomers like Yapeal.

Alpian is building its offering around investment boutique products and secure, digitised human interaction with advisers.

With the help of fintech banking licences, introduced last year by FINMA, Switzerland could see greater competition in its banking industry, as has happened in other markets.

Weiss believes that the established retail and private banks have taken note of these developments and used them as a stimulus to improve their own digital offering, possibly undercutting the unique selling-point of new challengers.

“I would say that the fintech industry in Switzerland is taking a different approach because the incumbent banks have been the ones that have pushed the digital movements to date,” Weiss says.

Therefore, far from seeing a Swiss Monzo or a Swiss N26 emerge, it may be more likely that newcomers will appear courtesy of established players, who create spin-off brands tailored to underserved segments and providing niche products.

Best of both

Alpian is looking to combine the everyday convenience of a retail bank with the human-led, personalised service offered by a private bank.

Weiss describes the dichotomy between the very personal interactions of private banking which are difficult to scale while maintaining quality, and those of retail banking, which are not so personalised but far more scalable.

“What we’re trying to do is offer a scalable level of service, combining cutting-edge, modern technology with innovative processes, procedures and planning to enable this, while also adding the functions that exist in retail banking,” he says.

“We want to allow clients to see and speak with an adviser via virtual meetings to discuss the more intricate areas of their finances.”

The problem for Alpian may be that this method of interacting with clients will become increasingly commonplace among incumbents as a result of the Covid-19 pandemic.

Video calls have been in use by private banks for a number of years, with lockdown and social distancing forcing them to become a common method of communication between advisers and their clients in retail banking as well.

While a majority of the client bases of both are more than happy to use digital platforms to handle their finances on a day-to-day basis, there are many who would prefer access to a traditional, human-led service for matters more complex.

Branches however are less accessible with banks closing as many as they can get away with, while they are also less able to employ as many staff in their call centres due to social distancing necessities, making their telephone banking services equally stretched.

With interactions forced into becoming digitised by default, Alpian’s unique selling point may struggle to hit home.

This is where targeting the mass affluent becomes important. In opening an account for a customer with CHF100K, Alpian receives the same deposit as a retail bank would get from 100 customers with CHF1000 for only 1% of the overheads relating to onboarding, customer service and so on.

As Finextra has recently highlighted, digital challengers struggle to attract deposits of sufficient sizes to turn their healthy customer bases into profits. This makes Alpian’s mass affluent strategy a compelling one.