LIVE FROM HUAWEI CONNECT, SHANGHAI: Executives from HSBC and GE are convinced the move to fully digitise their businesses is essential for maintaining market share and healthy margins.
HSBC, one of the largest banks in the world, is investing nearly $2 billion to completely digitise its business from front to back, said HSBC CIO Darryl West.
“We are going to restructure the cost base of the bank by fundamentally digitising everything. We are on a mission to take every customer interaction and every process and digitise the whole thing,” he said.
“If we don’t respond, we’ll have non-banks like Tencent, Alibaba and others moving in and taking our market share. Fin-techs are biting at our margins and we need to respond.”
West said the bank aims to eliminate paper, improve the customer experience, improve controls and reduce costs. He predicts that in five years there will be no paper used at the bank and no more passwords, which are a major pain for customers.
The three-year transformation plan started last June and is pushing a mobile-first strategy that includes partnerships with Apple and Android on mobile payments.
In the industrial sector, GE has set the goal of boosting productivity. “Even a 1 per cent increase will drive trillions of dollars of value to the market,” said Denzil Samuels, head of channels and alliances at GE. “The way we do that is to digitise industries.”
He said that between 1991 and 2010 industrial productivity improved 4 per cent annually. But over the last five years, there has been almost no productivity gains. “Why? Because the technology hasn’t changed. Not that much.”
With the sensor technology available, GE is creating what it calls a “digital twin”, a cyber copy of a product, such as a jet engine, that allows the company to simulate a real product and move from a reactive to a predictive response, reducing the downtime for airlines. “Sharing digital information in real time helps them improve their business across business lines, such as crew scheduling and cargo.”
“Imagine if we could do that with cars as they become connected – if a vehicle is connected to the manufacturer, dealership or service station. That’s what digitisation can do.”
Before it takes the model to its customers and other industries, he said it aims to first prove it internally.
HSBC’s West said China is leading the way in digital adoption. For example, Ant Financial’s Yu’e Bao investment product moved to more than 100 million users in less than a year, because it was simple to use and the country saw a massive shift to mobile apps about the time it was launched in 2014.
More than 90 per cent of online purchases in China are done via mobile. And China is also the most advanced in integrating social media with financial services, he said.
According to data from McKinsey, three-quarters of people in China said they would consider moving to a purely online bank with no branches or call centres.
These moves are pushing HSBC to completely rethink the way it offers services to customers. “We’re seeing a massive shift from transactions at branches and ATMs to mobile banking.”
Last year there was a 50 per cent increase in mobile and contactless payments in western Europe and a reduction in the use of cash and cheques, he said.