Plugged in banking

Can e-commerce be all things to all people? HSBC’s Marcus Treacher thinks so.

By thinking like treasurers and our customers, we can work in terms of what’s required versus what we believe we should be delivering for people. What we’re trying to do with e-commerce at HSBC is working like the treasurers we are supporting and creating value for. That moves us away from creating core product to thinking about solutions, thinking about things that really matter to business leaders and treasurers within the organisations that we work with.

That mode of thinking, that way of tackling the transaction banking challenge is, if anything, more important when times are difficult. If you’re thinking in terms of where your clients are focusing, what their challenges and concerns are, it’s easier for you to then be helpful to them. Maybe they want to focus more on their supply chains; they want to focus more on their credit; they want to focus more on delivering value from their operations. It’s really about knowing how they work versus traditionally thinking in terms of product and gadget and precooked solutions.
 
It’s really about working with the markets, being out there, spending a lot of time with corporate treasurers and the market research organisations and just dealing with our clients as if they were partners. We focus on our sales teams and our relationship managers, so we get a very incisive feel for what’s behind the requirements that could come.

This way of thinking has led us to change our ways quite a bit. For example, a few years back, we were challenged with SWIFT’s repositioning as a method for corporates that connect to their banks. At HSBC we spent a lot of time with our customers, getting under the skin of what they really needed and where the issues really were. We made a very early decision to drive our SWIFT capability for our corporates and we’re now arguably one of the leading corporate access banks in the world in the SWIFT community. That’s a direct result of not looking at SWIFT per se, but figuring out the value that it can bring to the larger corporations and the midsize corporations around the world.  Understanding where these people are coming from, what their concerns are around security, around efficiency, around lack of information and tackling that, then saying, “Okay, well, what does that tell us about our views on where SWIFT is trying to go?  Should we, as a bank at HSBC, be a supporter of that, should we be positioning in that field?”

But it’s also important that you strike a balance between being reactive and being proactive. You have to lead the market as well as respond to it. There’s a quote from Henry Ford that goes something like, “If I gave my customers what they wanted, I’d have given them a faster horse.” There’s an element of getting a balance between understanding what people are trying to achieve in the field and then demonstrating thought leadership, figuring out where they could go. I think the two are very closely linked together.

If you understand where your clients are heading and what their concerns are, then combine that with some good innovation, you free people up to think openly. You can connect dots in very, very value-added ways. It’s that combination of looking ahead, being a leader in the thinking space because as a bank you touch corporates around the world. You have a view that most organizations don’t have of the financial process, but it’s critical not to lose touch with your clients’ thinking and their needs. The two come together. 

One of the big concerns engendered by the current financial situation is that the industry could neglect innovation in favour of sticking to what they know, but I don’t think that is a problem as far as e-commerce is concerned. E-commerce is changing how banks work with their customers in a fundamental way that is bigger and deeper than any economic cycle. I think the trend towards greater use of technology and of information will continue. I can’t see that really changing on an overall basis.

What I can see happening in the next few months though is a refocus from using e-commerce for organizations to create new capability to go to market, to using it for greater efficiency. It’s that which we as a bank provider are focusing more on with our clients. We’re being asked to look more at helping clients be more efficient in the treasuries through ERP integration linking into their back offices, better reconciliation of data, looking at the payment to cash cycles and working on the efficiency side.  So the focus might changes but the underlying trend is very strong, and I think will it continue through economic cycles.

For e-commerce, we’re very much outwardly focused.  We focus on our clients and on the support of where our corporate and financial institution clients are heading. We are clearly adding value, helping them develop and helping them focus on their cost basis.  For us, that translates into transaction volume, revenue and market share growth.  This is a very positive thing for the bank as a whole. It demonstrates viability to work with organizations in good times and bad times.

So in terms of our investment in the e-commerce world that I’m responsible for, we’re always cautious, and we’re always careful. In this current environment, we are just continuing as we always have been to be carefully focused in where we spend our money.  Also, we’re very careful to look at the value that we gain as a corporation for shareholders, as well as a value we gain for our clients as a result of the solutions we are creating. It’s pretty much business as usual for us at HSBC with e-commerce.

That said, I still believe we are in the early days of e-commerce and we still have a way to go before we realise its full potential, particularly with issues around authenticating and validating online customers and the potential of straight through processing with digital signatures. There’s clearly a growing need worldwide to get smarter at identifying individuals for authentication or repudiation digitally. Most corporations find it very difficult dealing with multiple banks, which demand multiple certificates, multiple passwords and multiple access. It’s very difficult and on an individual level, most people have wallets full of cards and full of ID’s.  So there’s clearly a need there, both in the corporate world and in the consumer world to unlock the power of e-commerce. There is a temptation to write off technologies if they don’t start to perform as quickly as hoped, and that is something that has happened to an extent with ideas around biometrics. But I think that is a mistake.

There’s a concept of technological maturity. Most new technologies go through an initial phase of euphoria, then through a trough of despair. Then gradually, they tend to find a level that they originally were intended to achieve, but often many years further on than the futurologists originally projected. A good example of that is image processing. In the late eighties, the idea that you could dematerialize documents and put them on to image processing systems captured the imagination of most organizations looking to save money and reduce paper. The initial technology didn’t get too far. It had issues and there were things that just didn’t work properly. There were legal issues, a lot of barriers to taking documents and putting them onto nonmaterial media. If you roll forward ten years, we’re now in a world where, in the US for example, physical checks are happily scanned in the process as images. It works very well.

Both within the corporate world, and the consumer world, we now often use images online. We don’t think about it any more. It’s a technology that’s built into the fabric of the internet and we are very familiar with it today. It just happened 12 years later than we thought it would. I think that biometrics will go the same way. There’s an inevitability to being able to track biological traits with an individual. I think there are lots of barriers there to getting that right and getting the balance right. There certainly are some social barriers as well.  But I think if you fast-forward 10 or 15 years, probably beyond our career lifetimes, you’ll probably see a world where little pieces of biometric technique are imbedded in how people identify themselves and where people are comfortable with those technologies.

The major challenge is to create solutions that fit the many different types of client that we work with through internet technology and through e-commerce. We deal as a global bank with corporations around the world who reside in very different financial cultures.  For example, in continental Europe, we have a very SWIFT-aware, collaborative culture where networks that are owned by members of banks, or members of financial players, are highly regarded. 

In the Anglo-Saxon world, the internet is highly regarded as a method to connect to banks. As a global bank, we have to work in a number of these different models and connect the dots together, so that we can create a banking service to our global clients that fits their specific need without focusing too much any more on any one technique.

There’s also a need to provide solutions for the very small companies who require very simple, reliable and easy to use banking services online. At the other end of the spectrum, we have to provide inventive bespoke solutions for some of the larger organisations that have particularly unique pressing global challenges. Banks that work in any one of those or segments, whether it’s the global banks or regional banks, or consumer banking, can afford to focus on one method.  For a global bank with a customer base as wide as HSBC, our challenge is to blend those different techniques together. Doing that well creates a huge differentiation for a global bank. It helps us stitch together the global economy for our clients, and that’s the prize. But the challenge in attaining that prize is significant.

Looking ahead, I think a few major themes emerging which are very important to us.  One is the maturity of mobile technology, and the mobile changing from the phone in your pocket to the gadget that’s the window to the world. I think the handheld computer will be a thinking machine, window to the world much more so for consumers and corporates. There are some very exciting developments around international payments from mobile connections. I think we’ll transform how people look at payment processing, for example. In time that will drive change in how banks and providers address that new need.

Coupled with this is what I call the iPod generation. People are coming through today who are very comfortable with click and push technology. They expect information now; they live online and chat online. That generation will put a much greater demand on information and will push the banking industry to create new ways of executing banking services in much higher volume, which will also put pressure on the infrastructures that we have and the oversight that we maintain.

The third important trend is internationalisation. Currently, globalisation is a thing for the larger corporates around the world, the big guys. We’re increasingly seeing the smaller corporates working extensively and interactively internationally, mainly through the growth of the internet and online sales. We’re seeing a lot more companies operate in combinations around the world than just the usual suspects we’ve worked with for decades. We’re also seeing individuals, not just the private banking individuals, but mainstream banking individuals, consumer bankers, starting to interact internationally.  So the whole idea of the globe is really coming to life as a long-term trend that will play to the advantage of banks that can connect up globally and can be a leading international partner in order to create that linkage. This will soon which be common to people individually, to small companies and large companies in a way that just isn’t there today.

Staying on the fence
Why HSBC’s e-commerce has to be platform neutral
We are in the business of transaction banking through ecommerce solutions. We feel very strongly that we should provide an open connectivity solution to our clients worldwide.  So we work closely with the leading vendors globally to make us more relevant and to make it easier for us to add value. But we’re very careful not to focus in on any one technology or vendor over another in the corporate world and the FI world, purely because that creates difficulty for our clients.  If we were an SAP-only bank, for example, then that would make it difficult for us to be relevant to clients using something like Oracle Financials. If we were a SWIFT-only bank, it makes it more difficult for us to be relevant to organizations that require more open network solutions, direct IP and XML solutions.  So we try and create a proposition that really is truly open. We concentrate on the most prevalent and the most widespread and leading technologies, and we work on creating solutions in those technologies, but solutions that are vendor and method-agnostic. 

Banking 2.0
What impact will new web technologies have on business?
It’s interesting. I think the value is really around creating ways to be relevant to touch the client and maintain the engagement in a world that is more internet-based and arguably remote for the use of Internet technology. I can see how using a collaborative information exchange and not a transaction-based exchange opens up the field for greater client contact, adding more value and direct conversation, as well as using e-commerce to do process transactions, machine-to-machine, or person-to-machine. I think as people use theses Web 2.0 technologies, whether it’s an online chat or YouTube concepts, I think over time, it’ll probably settle into the fabric of how banks connect to the corporates. But I think at the moment, it’s very early days.

Marcus Treacher is global head of e-commerce for HSBC's cash management business. Previously at Citigroup and Accenture, Treacher has spent over 20 years in the financial services industry and is a specialist in global transaction banking services. He holds a B.Sc. Hons degree in Physics from Nottingham University.