How can banks reinvent themselves to embrace innovation and digitisation whilst continuing to protect the values and trust they have built up over many years? José Viñals, Group Chairman of Standard Chartered shares his insights on the role of banks, and the value of partnerships that bring together the strengths of diverse industry players.
How have innovation and disruption changed the financial services industry, and how can banks embrace technology and innovation to meet emerging client demands?
Viñals: While innovation and disruption are dominating the conversation in many industries including banking, it is important to maintain some perspective. New market entrants and business models challenge and disrupt, but they also present opportunity for transformational partnerships. At the same time, the need for core banking services remains as strong as ever. The banking industry continues to innovate in step with social, industrial and technological developments as it has done through the ages, and those that do not adapt will disappear.
What has changed, however, is the environment in which we operate — evolving social demographics and consumer expectations, the technologies available and the pace of innovation. Many discussions about innovation in banking relate to the growing role of non-banks and technology firms. But it would be a mistake to look in isolation at who is providing the services. The more important questions are: who is the client that these services are designed for? What are the client needs? How are they changing? Who is best positioned to deliver?
Technology is an enabler, and partnerships between players along the value chain like technology firms and banks can create opportunities that neither party could deliver alone. For example, we have partnered with Ant Financial to offer the world’s first blockchain-enabled wallet remittance service between Hong Kong and the Philippines and are now extending this to other corridors.
What technologies do you think will have the greatest impact in transforming and disrupting the industry?
Viñals: The financial services industry understands the opportunity to use technology and the vast amount of available data, to inform the way we design and deliver custom solutions for clients. We’re applying artificial intelligence and advanced analytics to help shape strategic and operational decisions. Open application programme interfaces (APIs) are allowing dynamic exchange of transactions and data across financial systems and counterparties. New technologies, including distributed ledgers, are accelerating transactions and improving the way that data is disseminated through financial ecosystems. New asset classes are coming online, such as virtual or crypto assets. Each of these pose their own challenges, as well as opportunities, and have caught the attention of regulators as they become more mainstream.
How has Standard Chartered demonstrated its digital leadership, and how have clients responded?
Viñals: We see being a digital leader as a way to deliver on our wider strategic objective to help people and businesses prosper across our markets. For example, as an expression of our brand promise to be ‘Here for good’, we are committed to lead sustainability in banking and increase financial inclusion. One element of this is digital banking. Since launching a digital-only bank in Cote d’Ivoire in 2018, we have rolled out seven more digital banks in Uganda, Ghana, Tanzania, Kenya, Botswana, Zambia and Zimbabwe within 15 months, an achievement which would be inconceivable without the powerful opportunities presented through new technologies. The impact has been extraordinary. In Cote d’Ivoire, we have already onboarded 18,000 digital-only accounts. In Uganda, new account openings increased by eight times, and in Tanzania, more accounts were opened in the first two months of launch than the whole of 2018. It takes only 15 minutes to onboard clients to our digital-only banks, with access to a comprehensive range of services.
It is not only in developing markets where demand for digital banking is growing. In Hong Kong, we have established a strategic joint venture with telecoms providers PCCW and HKT and fintech Ctrip Finance to deliver a new standalone digital retail bank for young, urban digital natives. While this potentially disrupts our existing retail business, we recognise the need to respond to the changing needs of our digital-savvy clients and provide banking services in a way that integrates with their lifestyles.
You mentioned the importance of partnerships to the Bank. What role do new market entrants and financial technology firms play?
Viñals: Successful partnerships are key to digital leadership, and a partnership model helps cement our role connecting clients, markets and products to facilitate trade and investment.
We formed SC Ventures in 2018 to harness innovation across the bank, invest in fintech startups, and establish new partnerships. Through our eXellerator labs in Singapore, Hong Kong, Shanghai, London, Nairobi and San Francisco, we review and provide support to fintechs and community builders to help move from proof of concept to industrial scale.
We have taken minority stakes in a variety of fintechs to digitise our own business and provide clients with new digital services. We also continue to build partnerships with banks and technology companies to develop new platforms and networks, for example in trade finance, to digitise and remove friction from global trade and finance flows.
Innovation is about culture as well as technology. How is the culture of the Bank evolving to reflect its digital leadership position?
Viñals: To address the question of culture, let’s consider the future of banks and banking. While I do not envisage financial services being dominated by the big technology and fintech companies, banks have a lot to learn from their culture, such as adopting innovation as a mindset across the enterprise. This mindset will shape the way we think and the way we make decisions. We would also do well to keep the client experience at the heart of our value offering. Ant Financial manages a client base that is much bigger than any bank. Its success in maintaining customer satisfaction has largely been based on its ability to anticipate and meet consumers’ digital demands and expectations. What I’ve mentioned are just some of the important things that banks can learn from technology and fintech companies.
That said, we should not try to emulate or become them. Banks have a long history of governance and controls, risk management, supervision and regulatory compliance, and market conduct, and all these have contributed to a high degree of client trust. This trust is eroded when banks do not display the behaviour that is expected of them, emphasising the importance of my ‘1 C and 3 Hs’ in our culture: competence, honesty, humanity, humility. These principles must remain at the centre of how we think, how we behave, and how we engage with clients and partners to develop and retain trust, which is essential to the success of the sector.
Banks need to complement their core strengths and values with the digital qualities valued by a new generation to remain relevant, trusted and a force for good in the future.
This article was also published in Bankable Insights Issue 11