Banks in this digital era

According to SAP APJ’s Chief Operating Officer, Scott Russell, “Digital is more relevant in Asia Pacific because we have the geographic, demographic and populace (profiles) for it.” A general perception because of this, is that digital enterprises would be able to thrive in this region, and possibly more than in some other parts of the world.

During SIBOS 2015 in Singapore, a premier global financial services event that ended in late October, Russell also observed, “Non-banks are looking at alternative mechanisms for lending. For a lot of businesses, it has become a norm and the financial services provider, doesn’t have to be a traditional bank.

(L-R): Falk, Chazot and Russell

“Since traditional sources may not be the way of the future, how can traditional banks still be relevant?” he asked.

According to HSBC’s Group Head of Innovation, Christophe Chazot, technology is the most transformative factor in the finance industry. This was shared during SIBOS 2015 as well, where the head of innovation gave his views about the trends and technologies that HSBC is looking to leverage during this digital age.

Chazot who leads the teams responsible for strategic innovation investment, said that HSBC invests in minority stakes usually alongside venture capitalists, with the clear goal of bringing external knowledge into the bank.

In summary, the Innovation Strategy team identifies and analyses themes that are key to HSBC’s future and the Innovation Centre, which organises internal initiatives including incubation.

Trends to capitalise on

“The major changes we see happening are around digitisation of customer experience, rapid advances in exploiting data and the ability to provide scale quickly and efficiently,” Chazot observed.

The Internet of Things (IoT) for example. IoT technologies like sensors that can track cargo in the trade and finance sector, is changing customer behaviour and their expectations of solutions and services.

Chazot said, “Banks used to compete based on their physical coverage. But, this is no longer a barrier to entry. The basis to compete is changing from being product-led, to being customer-led, to service-led.”

Digital disruption

Russell opined that traditional banks, not unlike HSBC, have the opportunity to leverage their existing strengths, and look into new lines of businesses. “They are in unique position to move into new offerings for customers… a new level of innovation is possible to expand the economy and to interact with that customer or corporate base, better than ever before.”

For example, SAP’s Ariba Network is the largest, most global business-to-business (B2B) trading platform in the world, enabling USD650 billion worth of transactions by banks around the globe. Banks can now discover, connect, and collaborate with key customers and other partners via the Ariba Network, all while maintaining purchasing controls and central compliance.

Together with the SAP Financial Services Network, a cloud-based, on-demand platform that simplifies and speeds transactions between corporations and financial institutions in real-time, customers have more access to a greater number of suppliers through one platform.

This provides real value to banks’ commercial and retail customers who usually have to go through a time consuming search process for goods and services, like a bank loan for a home renovation project, for example.

Russell commented, “SAP is very active in the networked economy, through Ariba. The market place for the banking space, can expand beyond traditional goods and services, very, very quickly in this digital economy.”

Simplicity in a complex world

From SAP’s point of view, the future of banking requires simplification, given today’s current scenario of crippling complexity, and evolving regulatory requirements.

For the German-based company, financial services is one the fastest growing sectors, serving over 19,700 customers in over 150 countries, and resulting in 74-percent of the world’s transaction revenue touching an SAP system.

SAP’s Global Head of IBU Banking, Falk Rieker said, “Banking of the future is about providing financial and non-financial services. Banking of the future is about rethinking the value chain. We see networks coming together, and more and more in business as well. And the financial services industry will be instrumental in this.”