February 1, 2021

Today’s Ultra high net worth customers are looking beyond checkbook philanthropy and exploring avenues of purpose driven impactful contributions. Social entrepreneurship philanthropy has become a major goal for generation-Y ultra-high net worth individuals. Per the trend, the younger super-wealthy donors are prone to taking a more targeted approach towards contributing to one or two causes that they are both financially and practically involved with

By the beginning of this decade, almost half of all wealth will be held by millennials. A Major Giving Index forecasts growth in major donor population (those who have donated USD 1 million to good causes in their lifetime) to 27,000 by 2020 from 18,500 in 2015, and foresees further contributions. This would create a new breed of digitally savvy private WM clients. In the new paradigm philanthropy will be a strategic tool for both wealth management advisors and for their high net worth clients. 

Philanthropic Advisory: Going Digital 

Traditionally, philanthropy has helped banks open direct access to UHNW who otherwise were inaccessible. Personal wealth management has evolved as a trust-based long-term relationship between the institutions and their clients and wealth managers have used philanthropy to reinforce this trust in the existing relationships. 

However, with the emergence of digital technologies, the traditional robust but non-digital customer engagement strategies are becoming less effective. The accumulation of wealth with Gen-Y and millennials has translated to change in customer behavior and expectations. The lack of digital channels of engagement with the wealth managers has become a deterrent for the new HNWIs. Industry survey indicates that 51% of high-wealth donors prefer to use digital technologies when it comes to making philanthropic decisions. They are interested in convenient and digitally immersive experiences that closely resonate with them. Additionally, the donors are looking to understand the vehicles of philanthropy, identify the right philanthropic opportunities and integrate individual passion and values in the wealth management plan. 

Donors are also curious about the outcome from the existing philanthropic contribution in delivering social and economic value and insist on clear communications related with the same.

Digital and open banking API powered impactful philanthropy

Over the years, philanthropic donations primarily have been one-time affairs. There is little factual and tangible information flowing back to the donors regarding the impact of the change their contributions made to the life of the beneficiaries. However, now the donors are seeking a system of engagement that can simplify the strategy for philanthropy and make the process transparent by making data available at various stages of the execution of the strategy.  

The need of the hour is a system of engagement that can keep the donors involved with the philanthropic causes. We believe, the use of AI and Open Banking capabilities can help identify the opportunities and create a meaningful impact map for philanthropy aligned with donor interest, passion and their aggregated wealth potential. Account and financial information aggregation through consented Open Banking and Open Data APIs will allow the consolidation of the wealth and other relevant information from several data sources in one place. AI capabilities applied on top of the consolidated view of individual wealth can provide useful and tailored insights that will allow relationship managers to deliver customized philanthropic advice aligned with preferred donor causes. The right level of insight combined with useful, intelligent recommendations will help donors achieve their strategic philanthropic goals. 

Additionally, the system of engagement should provide an opportunity for philanthropic foundations, charities and charitable institutions to broadcast validated and certified information for the potential donors. This integrated system can help simplify philanthropy by offering transparency and accountability by fostering an end to end connected digital ecosystem and empower donors with better philanthropic information. 

Looking ahead

With aggressive competition in private wealth management banking, philanthropy represents a huge opportunity for the banking and financial institutions. However, there may be challenges in capitalizing on the opportunity and the way forward will need development of digital partnerships with the existing network of foundations and charities. We believe, private wealth management institutions need to be vigilant about choosing the right partners after evaluating organization-specific requirements and a well-rounded market analysis. In the longer-term, a connected platform for philanthropy or the proactive adoption of open banking specifically to realize business benefits, can help private wealth management institutions become an agile enterprise. 

Devjeet Sarkar is a Solution Architect in the Open Banking strategic initiative group of TCS Banking, Financial services, and Insurance (BFSI). He has over 16 years of experience in Retail Banking, IT and Consulting with expertise in Open Banking and next gen digital banking. He is also an intrapreneur designing next-gen digital propositions as part of a garage team operating as a startup within TCS. He holds a Bachelor's degree in Electronics and Communication from BN College of Engineering, Amravati University, Maharashtra.

Chiranjib Bhattacharjee is a Domain Consultant in the Open Banking Strategic Initiatives group with TCS Banking, Financial Services, and Insurance business unit. He is a part of a small digital native team operating as a startup within TCS. He has over 15 years of experience in IT consulting and solution development across Insurance and Retail Banking domains. Chiranjib is an intrapreneur who designs next-gen digital propositions for global customers for their small and medium business banking, retail banking and wealth management portfolios. He is an alumnus of XLRI, Jamshedpur and Jadavpur University, Kolkata, India.