"We are applying a texture of innovation with a maniacal customer focus," Raman Bhatia, head of digital in the UK & Europe at HSBC Retail Banking and Wealth Management, told attendees at LeadersIn Tech, part of London Tech Week.
He said HSBC was investing $2 billion over two years on digital transformation in the UK. "Our focus is on embracing open architecture. We need to open APIs and embrace the world of application development instead of legacy product mindset."
In the UK, the way government has embraced the second Payment Services Directive (PSD2) and its approach to opening up financial services has allowed FinTech to flourish in London. One company it has attracted is Starling Bank. Megan Caywood, chief platform officer at Starling, describes the firm as "a tech startup with a banking licence."
Starling is a mobile-only business, but offers a full banking service for customers. It uses open banking APIs to add services to customers. "It's not about competing across a number of services, it is about being really good at one service. For Starling, TransferWise was the best at doing forex (Foreign Exchange), so we just integrated using their APIs," Caywood explained.
If the likes of HSBC and Barclays are to fend off the startup threat, they must focus more on the consumer.
For Harsh Sinha, vice president of engineering at TransferWise, this reflects the way customers now view things. "People take a specific task then go after it. They want to solve a problem and work out the value of doing that themselves. This is going to make it harder for banks. If your bank provides a better service than TranferWise then fine, but if it doesn’t people will go elsewhere."
Bhatia agreed. "There is always the spectre for a bank of being seen as a utility. Of course, you can look at the dumb back end as a utility, but there is a smart front-end utility."
He said that HSBC is adopting the developer mentality of innovation and test and learn. And the panel agreed that legacy banking was fighting back. One advantage they had was trust. "My dad walked me into the bank to open my first account. It was like saying, here, you can trust this bank with your money," said chair Eric Van der Kleij, adviser on fintech and blockchain to DIT's GEP Programme in the Department for International Trade for the UK Government.
"Complexity is greater than it is in a startup, but we are confident that we are investing in the right things," Bhatia concluded.
— Niall Hunt, Digital Transformation Lead, Content & Communities, KNect365