Recognised as one of the most powerful women in banking, Diane S Reyes, HSBC’s Head of Global Liquidity & Cash Management talks to Helen Sanders, Editor, about the impact and potential of digitisation in cash management.
What would you say the distinctive characteristics of digitisation in cash management are today compared with a year or two ago?
The concept of digitisation of cash management is not new, and indeed substantial progress has already been made in recent years, but the vision is now truly becoming a reality. In the past, retail customers have tended to benefit first from emerging payment innovations compared with wholesale customers. However, the retail and wholesale customers are part of a single ecosystem and we all expect a comparable experience of banking in our personal and professional lives. Consequently, there is now significant convergence taking place between retail, small business, mid-market and corporate banking to align the functionality, convenience and value delivered through banking channels and payment innovations.
Mobile is a good example of this. Users download the HSBCnet Mobile app in the same way as any other mobile app, so adoption is seamless: a big difference from receiving packages in the mail with electronic banking software and tokens! In addition, a key characteristic of mobile banking in 2018 is that users do not simply consider it to be a tool to manage small transactions, but it is a core element of their banking communications. Over the past year alone, use of HSBCnet Mobile has grown by 38% by volume with a comparable growth in value. Recently we saw $2.6bn of transactions in a single week, and one transaction from a single client exceeded $1bn in size.
Not only are users benefiting from rich functionality and convenience through HSBCnet Mobile, but they are also able to enjoy the highest level of security with an increasing use of biometric technology. HSBC’s thumbprint access, Touch ID, is now live across 35 markets, with remarkable uptake. Thirty percent of clients in the UK and 40% in Australia downloaded this capability as soon as it was made available. HSBC is also a pioneer in the banking community of biometric tools, with voice recognition already in live operation and facial recognition now being piloted.
It is not only channels and payment types that are changing, but also the concept of identity. With the Internet of Things, devices rather than people are initiating payments, such as a vehicle automatically making toll payments, and increasingly we will see machine to machine interaction and payment initiation according to user-defined rules and limits. This marks a fundamental change in the payment process, and the way in which users engage with it.
What challenges can cash management digitisation create, and how are you helping clients to overcome them?
One of the issues associated with the development of new payment methods and channels is that the collections process becomes more complex as companies need to support this expanding range of collection methods. This complexity increases further for multinational corporations operating across different markets. As a result, HSBC has pioneered an omnichannel strategy that enables companies to support multiple payment and collection methods through a single channel, whilst offering their customers a consistent user experience however they choose to pay. For example, we are rolling out a solution in China that enables payments of different types, such as Alipay, WeChat Pay and UnionPay, according to users’ preference, to be initiated through a single interface provided by HSBC. Purchasers enjoy a convenient payment experience irrespective of their chosen payment method while the seller avoids the need to support each method individually, instead benefiting from a single solution and consistent processes and information flows.
The focus on convenience and a high-quality user experience, whether purchaser or seller, retail or wholesale, is critical to HSBC’s digitisation strategy. For example, functionality offered through HSBCnet Mobile, such as ‘Move Money’, which has been rolled out to over 75,000 users, defaults to each user’s most frequent payment type, as opposed to clicking through multiple screens to access the right tools. We have also analysed customer service calls to understand in detail the nature of user queries and developed tools accordingly. One of the most common questions is ‘Where is my payment?’. As a result, we are now piloting a payment tracking tool, integrated with SWIFT, which will be rolled out from April 2018. During the pilot, we have already seen a notable drop in the number of these queries as users can interrogate directly the status of a payment, which is particularly valuable for urgent payments.
Similarly, we were finding that amongst our larger customers, many payments had an FX component. Consequently, we have integrated the payment and FX capabilities of our systems to create a more cohesive user experience, which has now been rolled out to clients.
With innovation also comes additional risks: how are you helping customers to manage these risks?
Cybersecurity is a growing concern for all banking users, but the nature of the risk is not always apparent to smaller customers in particular. Banks such as HSBC have developed a highly sophisticated approach to preventing and fighting cyberattack, with major incident groups and detailed response plans. However, as the attack on the SWIFT network through the Bank of Bangladesh emphasised, an effective approach to cybersecurity needs to be consistent and equally rigorous across banking participants. Consequently, we are working closely with clients of all sizes to educate and support them in their cybersecurity strategies. Recently, we have held a number of very well-attended webinars, and we will continue to educate clients in this space into 2018. These webinars have helped clients to understand how to prevent, identify and respond to attacks, with details on appropriate governance structures, compliance processes, response plans and supplier engagement strategies.
Clients have been very appreciative of this support. Treasury functions typically lack specialist skills in this area, but by developing their knowledge, they can assess their own processes and controls and work more effectively with IT teams.
What do you see as the major digitisation themes in cash management for the year ahead?
2018 marks a significant milestone with the launch of open banking under the second payment services directive (PSD2) in Europe. Some capabilities are already being launched at the start of the year, and further services will emerge over the next 18 months. These developments will give an early indication of the potential and ramifications of open banking and help to resolve open questions around security, liability and consumer protection.
Distributed ledger technology (DLT) will also translate into real-life solutions beyond the ‘noise’ around cryptocurrencies. An example of this is Project Ubin, a collaborative project undertaken by the Monetary Authority of Singapore (MAS) that brings together a consortium of banks and technology partners, including HSBC, to explore the use of DLT for the clearing and settlement of payments and securities. The project has progressed rapidly since its initial launch in November 2016. Only a year later, the technical documentation was released to migrate to DLT-based domestic payments initially, with cross-border payments to follow, with the expectation that a fully-fledged digital Singapore dollar that will be in place by November 2019. This will be cleared and settled 24/7, with no single point of failure, as the transaction processing will be distributed between the parties to a transaction, and underpinned by rigorous security. The development of a central bank digital currency is not only a major achievement in itself, but as the real-time gross settlement system in Singapore will be retired, participation will be mandatory, potentially heralding the future of currencies and a step change in cash management.
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