Photo: iStock

As private banks become more digital, one concern is security. Discretion and secrecy have always been at the core of the traditional Swiss banking model. Indeed, bank secrecy laws are perhaps the defining characteristic that enabled Switzerland to become a global centre for private banking, and are one of the biggest obstacles to bringing private banking into the digital age. This confidentiality explains why so many wealth managers continue to rely on tradition rather than innovation. A gang of hackers-for-hire in Russia cannot worm their way into a locked briefcase in Geneva.

The biggest banks, especially those with large retail banking networks, clearly have the resources to spend vast sums on state-of-the-art security solutions, but such options are not so readily available to smaller banks.

Even with the best security, data shared over the internet (or stored on devices connected to it) is vulnerable. Indeed, the internet was built as an open platform, which is why it has been so successful and so widely adopted. Through social media in particular we have all become accustomed to conducting our lives online through our devices. And while we all know that apps such as Facebook and WeChat are not entirely secure, we happily trade that risk for the joy we get from sharing food pictures with friends.

Put simply, we have been groomed to be connected at all times. And today’s generation of wealth now expects that experience to reach every aspect of their lives, including interactions with their private bank. So how to deliver on this expectation while maintaining digital discretion?

Photo: iStock

The blockchain could be the answer to this conundrum — and many others. While not as eye-catching as a robot adviser or even a smartphone app, the blockchain is potentially far more important for the future of financial services in general. As the technology that underpins bitcoin, the blockchain is an online ledger that allows for the secure exchange of digital information between strangers. Not just bitcoins, but anything from stocks and bonds to titles and deeds. It is a form of digital trust that could simply do away with the need for many of the intermediaries in the financial services industry, further reducing transaction costs at the same time as creating a truly digital infrastructure.

The implications of this are mind-boggling and still in the very early stages of implementation. Private banks, needless to say, are particularly interested in the opportunities. UBS, for example, has set up at Level39, an accelerator space dedicated to looking at blockchain ledgers in London’s Canary Wharf.

Blockchain technology is not something that private bank clients will notice directly, but it will radically alter the kinds of services that they are offered — and how they are delivered.