Digitalized banking service in HSBC

‘Go digital or Go home’, fast improving digital models enable companies to increase their efficiency and revenue under a sharing economy, on the other hand, for companies who couldn’t keep up in the line might get ‘send home’ no matter how successful they were in the past. A good example is the photography giant Kodak, which has failed to adapt this sharing economy and further led to its bankruptcy against its digitalized competitors like Apple and Nikon.

From traditional to digital

As a matter of fact, the connection in the digital world is not only about technology. Peter Weill suggested a four-dimensional approach of choosing a suitable digital business model. Peter’s model indicates that the organization should think from ‘omnichannel conduction’, ‘ecosystem driver’, ‘supplier expansion’ and ‘modular producer’ by setting a clear initial strategy and further applying appropriate digital methods to solve the challenges that arose from its strategy, instead of applying the most recent technology without a specific business drive. HSBC is one of the organizations which utilized this model to conduct their digital operations.

How HSBC reinvented its digital business model

As a leader in the world banking industry, HSBC has directed $2.3 billion on improving its artificial intelligence (AI) and digital capabilities around the globe in the past 2 years, as part of its effort to improve the experience of existing customers and attract more of the customer segments it is targeting for growth. Here are some approaches they have conducted:

• Build a mature contact center

You don’t want to visit a branch just with a question that can be answered in a minute or call up and wait to be answered forever (even though you could do other stuff while ringing, how many of us enjoy the constant beeping in the background?). To solve this ‘omnichannel’ challenge, HSBC has launched a 24/7 contact center in 2017 for people that need a general banking assistant. HSBC’s live Chatbot AiDA resulted in a $3.5 million annual cost saving (staff cost etc.) and provides more flexibility to clients as well as a more comfortable experience.

• Develop an ‘ecosystem’ mobile app

HSBC worked with IBM and improved the HSBC app that gives users more authorization to trade financial products, which increases its potential margins. After upgrading the additional features in HSBC app, the download increased by 55% in 2017, and was up by 60% in terms of value payments. According to HSBC , there was a 333% increase in the number of mobile banking customers over the past 5 years.

• Enhanced collaboration with tech giants

With the rise in payment giants like Wechat Pay, which combines social media with mobile payment, our society is moving not only to cashless but ‘cardless’. The ‘modular producer’ dimension is getting more and more important.

In response to the above issue, HSBC began to collaborate with other Fintech companies and further launched the massively well-received Apple Pay and Android Pay services; and created a data lake that performs the analytics monitoring customer behavior for compliance purposes. By doing this, HSBC had an additional 1.5 million customers of its digital banking services globally. This further can be used to construct a better consumer profile, thus a better marketing strategy on its financial products.

• Upcoming future unmanned bank

HSBC’s new robot assistant ‘Pepper’ has recently launched in HSBC flagship Fifth Avenue branch in New York. ‘Pepper’ gives not only amusement in the queue, but also effectively solves customers’ query and improves their banking experience. With more ‘Peppers’ being applied in the future, branches front stuff cost can be reduced. As a matter of fact, the first unmanned bank has already launched in Shanghai last year with all unmanned counters and AI ‘staffs’.

Tradeoffs of digitization

It is crucial for the organization to be aware of the drawbacks within its digital transition. HSBC has confirmed its information breach in 2018. The clients’ information leaked to public including user names and transaction details. Although HSBC has quickly managed to get back control by updating its system and minimized the damage, the lost in clients’ trust is not as easy as fixing the technology issues.

Compatibility is always another problem for digital models. With the increased urbanization and globalization, although more and more of us are getting used to the fast-moving technologies, there is still a huge proportion of our population that couldn’t access to internet. Thus, are these high-tech equipped models like unmanned bank really practical at the moment? Especially for a bank, where people keep most of their assets, upgrading it to be unmanned will be a completely different story compare to digitalized shops like Amazon Go. Therefore, how to efficiently apply the digital technologies is still a question for HSBC to consider.

Conclusion

Digital business models and the sharing economy have inevitably the potential to increase value of organizations. But the question is where and how to apply these models in order to make the best use of them. The organizations should also consider their company profile and strategy in order to apply the correct digital methods instead of chasing the latest digital technology without a clear future vision.