UBS to start venture capital fund in effort to digitise bank

ZURICH • UBS Group is setting aside hundreds of millions of dollars of its own money to invest in financial technology companies, joining peers in financing start-ups that are upending traditional banking.

The Swiss wealth manager is planning a corporate venture capital fund to make investments of between US$10 million (S$14 million) and US$20 million in dozens of companies, according to a person familiar with the matter.

UBS plans to hold the stakes for at least five years, the person said, asking for anonymity because details have not been finalised.

A UBS spokesman confirmed the bank is starting such a fund, while declining to comment on specifics.

The venture fund comes just months after UBS named ING Group's Mr Ralph Hamers, an outspoken champion of digital banking, to succeed Mr Sergio Ermotti as chief executive officer from October.

While wealth management - UBS's biggest business - is traditionally a high-touch operation, with clients valuing personal contact, the coronavirus pandemic has accelerated a shift towards digital services.

"UBS wants to further engage with and support fintech firms," said Mr Mike Dargan, UBS' global head of group technology. "The new venture investment portfolio is a next step to accelerate our innovation and digitisation efforts."

The new fund will look at three broad categories to invest in: client engagement, investing and financing platforms, and improving underlying operations of the bank. While it is already screening potential investments, the bank is still in the process of hiring a team dedicated to run the fund, sources said.

More digital tools are a key part of a revamp plan for UBS' wealth unit unveiled earlier this year. The bank wants to use them to save time on administrative tasks and cut costs, as competition for rich clients and a flight to cheaper, passive investment products erode profitability.

Globally, United States banks have been at the forefront of spending on fintech, according to Bloomberg Intelligence. The firms are generally more profitable and can afford to plough large sums into such efforts. UBS' Zurich rival Credit Suisse Group invests in fintech through its entrepreneur capital arm.

UBS is also looking to use technology to make inroads in the Chinese wealth market. The bank is in the process of acquiring a digital fund distribution licence, which would provide a plain-vanilla fund offering to rich Chinese customers. Over time, UBS plans to use such a digital licence to move into advisory and on-boarding of new wealth clients, according to Mr Edmund Koh, UBS' head for the Asia-Pacific region.

A previous effort by UBS in this area flopped. A 2017 internal project in Britain called SmartWealth was shut down a year later.

BLOOMBERG

Join ST's Telegram channel and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Straits Times on May 27, 2020, with the headline UBS to start venture capital fund in effort to digitise bank. Subscribe