HUAWEI CONNECT 2016 brought together big global names from multiple industries, including banking – the vertical that leads the pack when it comes to ICT adoption and innovation. We caught up with HSBC CIO and keynote speaker, Darryl West. He gave us the heads up on what’s happening with the banking behemoth’s transformation and how a traditional multinational can put some spring in its digital step.
Established in 1865 and now active in more than 70 countries, HSBC is a veteran heavyweight in the banking arena. But in a world that’s turning mobile, the pace of change is such that digital adaptability and speed are likely to trump size and experience when it comes to disruption, a fact that’s not lost on West, “One of the biggest challenges for HSBC is to move at the pace our customers are moving.” And customers are quickly moving into the service driving seat, expecting financial products to be on-demand, mobile, and personal. In response, “We need to be agile and flexible,” states West, “with a much higher clock speed for delivering solutions.”
It’s no surprise that a major part of the bank’s agile technology strategy focuses on the mobile space. “I’m seeing a massive shift towards people consuming our services through applications on their mobile,” confirms West. From his standpoint this requires sufficiently flexible architecture to create compelling experiences for customers via the mobile form factor.
Given that the mobile technological shift is firmly underway in banking, a multinational that serves over 47 million customers needs to frame agility within a feasible strategy that protects existing investment. That’s why HSBC isn’t planning to rip out its existing IT infrastructure and start again at enormous cost. With some of its core systems approaching their fourth decade in use, it’s as much about consolidation as it is revolution. HSBC’s legacy platforms provide, in West’s words, a “function-rich and very reliable” foundation that, with the right sort of planning, can act as a gateway to the omnichannel world: “The issue for us is to build a flexible architecture to leverage the quality and functional richness of the platforms...and build the mobile channels [and] browser channels that customers are expecting.”
With pre-tax profits hitting US$18.9 billion in 2015 and revenues reaching US$57.8 billion, HSBC – the world’s fourth largest bank – is packing some serious financial brawn, and West expresses confidence in a technology strategy that’s backed by sufficient investment. So where will this investment go and how will HSBC fully utilize its legacy architecture? According to West, the bank is moving to a “service-oriented architecture” that will include a “sophisticated integration layer [between] the legacy back end and the front end that customers use on their mobile devices.” In the age of app banking, the integration layer will be the key to getting services from the back end into the hands – or rather fingers and thumbs – of consumers quickly and securely.
A compelling experience isn’t just about ticking the box of mobility; it’s also about providing something innovative and useful. For individual customers, HSBC piloted its nudge app with 400 customers at Davos last February as part of the bank’s commitment to encourage responsible money management. Working as an unobtrusive behavioral financial tool that has its roots in behavioral science, the nudge app analytics function warns customers if they’re over-spending on items in more than 300 categories – in West’s case, he knows from the app that he goes a little bit too heavy on Starbucks.
HSBC is looking at ways of integrating this data-driven tech into their product and service portfolio, with wider rollout expected over the next couple of years. By tracking spending habits over a very broad range of spending categories, the app can help keep people on point with the long-term financial goals they’ve set.
HSBC is also trying out new things on the business front. In a press release issued in August, the bank announced that it had teamed up with Bank of America Merrill Lynch and Singapore’s Infocomm Development Authority to develop a prototype solution based on blockchain technology that “could change the way businesses around the world trade with each other.” The application works like a Letter of Credit (LC) transaction by sharing information between exporters, importers, and their banks on a private distributed ledger, enabling trade deals to be executed automatically through a series of smart digital contracts. With the kind of speed, ease, visibility, and security that shifts the LC premise to today’s digital world, blockchain has much potential as an unconventional yet effective way of completing transactions: “It’s quite a different way of doing things in regards to the transfer of value, from a centralized database, clearing house model to a distributed model,” states West. Though the technology is promising, he does add a caveat, “It will require a fundamental shift in thinking on the part of everybody, including regulators.” Specifically, a critical mass of players will need to get behind blockchain tech for it to take hold under a standardized framework.
It’s impossible to mention banking without referencing security, a key concern of consumers. After all, it wasn’t so long ago when people were nervous about using their credit cards online, even though today’s treasure trove of data wasn’t at stake. West believes that HSBC’s robustness in privacy and security is HSBC’s “number one asset,” with the bank taking a three-tiered approach: internal staff training, customer education, and technology. “We invest a significant amount of our budget on keeping at the forefront of protection and detection mechanisms for data protection and privacy,” says West. It’s also another area where the bank is getting innovative.
Despite HSBC’s commitment to innovation, West acknowledges that, “We’re not a technology company at the core, we’re a bank,” meaning that partnerships with tech companies with a proven pedigree of R&D and innovation is essential to move forward.
A company the size of HSBC has a large turning circle where change is involved, and so a focused infrastructure with built-in agility is necessary to re-engineer and digitize internal processes, recreate customer experience through digital channels, and explore forward-looking tech and solutions like virtual teller machines, cloud solutions, and big data.
West is realistic about HSBC’s roadmap and what he expects to achieve with the bank’s partners: taking the bank “from being in the position of a slow follower, to being a fast follower in some areas, to becoming a leader.”
Fueled by agility, innovation, and partnerships, HSBC is confident about connecting its customers to opportunities and is taking decisive steps to raise its game with relevant, secure, and timely services.