Transcript
Speaker: Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
Speaker: Make sure you're subscribed to stay up to date with new episodes.
Speaker: Thanks for listening.
Speaker: And now onto today's show.
Speaker: Hello and welcome to this podcast on digital innovation and how it is shaping the future of security services.
Speaker: I'm Jane Cooper, the editor of TMI, and today I'm joined by Kim-Nyo Chibata and Zhu Kwang Lee, or ZK, from HSBC.
Speaker: We'll be discussing how client needs are changing, some examples of innovation, the challenges with adoption, ESG and sustainability considerations, and how to realize the full potential of innovations.
Speaker: So thank you both for joining us.
Speaker: It's good to have you here today.
Speaker: ZK, do you want to get us started then?
Speaker: Should we just sort of set the scene a little bit?
Speaker: And can you tell us how client behavior or client needs are changing?
Speaker: Sure.
Speaker: So many things in this day and age, they are available on demand.
Speaker: So let's look at car rides, glossary, food, and so on.
Speaker: That all can be fulfilled with a few clicks on a smartphone almost instantaneously.
Speaker: However, this is rarely the case when it comes to data or processes in business context.
Speaker: So as COVID-19 changed the way that we work and we feel it,
Speaker: digitalization.
Speaker: We saw increasing needs from clients who want seamless and intuitive user experience, where banking services are integrated into their workflows, personalized recommendation and insight, etc.
Speaker: And real-time access to data for decision-making are also priorities that need to be addressed.
Speaker: So many things change with the pandemic and the shift to digitalisation.
Speaker: Everybody on a personal level has seen big changes.
Speaker: Can you give us some examples of innovation that you have seen or the ones that have the most potential or the ones that you're most excited about?
Speaker: Yeah, of course.
Speaker: So at the heart of digitalisation and innovation of financial services is the idea of access.
Speaker: It ranges from AI, where it expires to help improving the efficiency on all fronts, to as-a-service solutions, where it's easy to be deployed by businesses, to blockchain technology, where it strives to promote greater transparency and financial access.
Speaker: I'm sure that we all use ChatGPT very often in our personal life right now.
Speaker: So for example, when we plan for holidays, we are writing a post on LinkedIn and so on, etc.
Speaker: So the financial services industry players, including HSBC,
Speaker: We are exploring the use of AI in improving client services, risk management, marketing, and so on to enhance and optimize the existing processes we have today.
Speaker: And in addition to AI, we're also looking to provide better access to our client on data management solutions and tokenization, including custody of digital assets to help our clients to accelerate their efforts on digitization.
Speaker: In today's digital age, data has become the lifeblood of the security services industry.
Speaker: Companies have tons and tons of data, but the challenge isn't about data collection.
Speaker: It is about data management and generating insights.
Speaker: So with cloud technology, data management as a service is becoming a very significant enabler for institutional investors
Speaker: not only tackle challenges around scalability, it also allows seamless data aggregation from different service providers and helping them to keep their data infrastructure and operations team efficient.
Speaker: Data management as a service, it also allows flexible distribution and omnichannel integration into the operational workflows while maintaining the access control and enhancement governance.
Speaker: So this component will work together to create an efficient yet resilient data management ecosystem.
Speaker: Kim, do you have anything to add to that?
Speaker: Are you using ChatGPT in your personal lives?
Speaker: Sounds like I need to use it more to match the LinkedIn profiles everybody else is doing.
Speaker: But, you know, it goes without saying that HSBC is investing resources into the digital asset space as the digital assets are becoming a significant part of the financial market.
Speaker: We've engaged in various global tokenization initiatives and launched our own propriety DLT-based tokenization platform created for financial institutions and corporates wanting to issue digital bonds.
Speaker: Since its launch, HSBC Orion has led the way in the digitization of capital market infrastructure.
Speaker: It facilitated the launch of the European Investment Bank's first ever digital bond
Speaker: NGBP for registration and issuance under Luxembourg.
Speaker: Building on this experience, we've also worked with the Hong Kong Monetary Authority in February 2024 when it issued a Hong Kong 6 billion equivalent of a digital green bond denominated in Hong Kong dollars, RMEMB, U.S. dollars, and Euro under the government green bond program.
Speaker: It will be the digital asset custody is supplementary to this service post the tokenization of the assets.
Speaker: Hence, we're also in the midst of developing this capacity to be able to provide a full suite of services for our clients who are looking to issue digital bonds and the custody of the digital assets post issuance.
Speaker: So there's a lot to be excited about there.
Speaker: So what kind of challenges are there then with adoption?
Speaker: Like the potential is enormous, but actually putting this into practice, what kind of challenges are there?
Speaker: Yeah, as with any change, the challenges are usually related to people, process and systems.
Speaker: So adopting innovation comes with these same challenges, including a complexity of an operating model or processes, a regulatory environment,
Speaker: and the lack of an innovation culture within the financial services industry.
Speaker: Many organizations operate on legacy systems that are not easily compatible with newer technologies, which creates friction when incorporating innovations because it requires costly upgrades, system overhauls, and complex workaround.
Speaker: And there's big buckets of data, as ZK mentioned.
Speaker: When it comes to the use of blockchain technology within financial services industries, for example,
Speaker: While the regulators are supportive of the use cases and are actively driving the adoption, there is still regulatory ambiguity that it is consistently evolving.
Speaker: It's quite unclear even though regulators are trying to make it clear.
Speaker: Lastly, it's important to bring everyone on the journey.
Speaker: It's the people part.
Speaker: Constant educating and learning is a must, and the mindset for innovation, thinking, and being curious should really be encouraged.
Speaker: Even if the leadership supports innovation, there can be resistance from employees who are accustomed to existing processes and systems.
Speaker: Overcoming this resistance requires robust change management strategies, education, and continuous communication.
Speaker: Yeah, it's interesting.
Speaker: So you mentioned about regulation and change.
Speaker: And another area that's changing quite a lot, and there's a lot of talk about regulation in this space, is ESG and sustainability.
Speaker: So what kind of considerations are there from your point of view?
Speaker: Yeah, on the sustainability front, I would like to highlight that blockchain technology is actually playing an increasingly important role in advancing the ESG initiatives within the financial sector.
Speaker: Financial institutions are exploring blockchain as a tool for enhancing transparency, accountability, and trust.
Speaker: By leveraging blockchain's decentralized and immutable nature, institutions can track and verify ESG-related metrics with greater accuracy,
Speaker: which helps ensure that investments align with sustainability goals.
Speaker: Blockchain can provide real-time verification of ESG outcomes, such as tracking the carbon footprint of investments or the social impact of projects funded by green bonds.
Speaker: For example, blockchain can be used to create digital assets or tokens that represent ownership in green infrastructure projects, allowing investors to directly see the impact of their investments.
Speaker: This increases transparency by ensuring that the reporting ESG performance is backed by verifiable data.
Speaker: By integrating blockchain, financial institutions can not only enhance trust in ESG-related investments,
Speaker: but also expand access to these products, offering fractional ownership of sustainable assets or projects similar to the tokenization of other financial assets.
Speaker: This can then democratize access to impact investing, allow a broader base of investors to participate in sustainable financial products, ultimately driving demand.
Speaker: Brilliant, thank you.
Speaker: And ZK, do you have anything to add on that, on the ESG and sustainability points?
Speaker: Yeah, so besides blockchain, right, so we are also paying a lot of focus and attention on data as well.
Speaker: So data management as a service, it also contributes to sustainability and ESG by reducing the need for physical data centers and in-house IT infrastructure by offering cloud-based type of solutions, which results in lower energy consumption and reduced carbon footprint.
Speaker: Through data management as a service,
Speaker: Investors can also integrate data from various sources to have a holistic view of their environmental and social impacts.
Speaker: Okay, brilliant.
Speaker: When we're talking about the future and innovations, all things that are possible, it can be quite hard to realise the full potential of innovation.
Speaker: So Kim, maybe you can comment on how can the potential of innovations be realised?
Speaker: There is a fundamental change in how our clients behave.
Speaker: We will have to be agile and stay ahead of the industry in order to meet the ever-changing client's strategies and needs.
Speaker: One of the most important breakthroughs in the digitization efforts within the financial services industry is banking as a service.
Speaker: By enabling the integration of banking functionality into a business's existing platform, banks such as HSBC are opening up a new world of opportunities for organizations to add value to their customers.
Speaker: In many ways, banking as a service has changed the game and how businesses think about banking.
Speaker: The ability to embed various microservices based on clients' needs into their workflow, shorten the time to deploy and go to market.
Speaker: Other benefits for both the bank and our clients include enhanced customer experience, cost efficiency, and accelerated innovation.
Speaker: The global banking-as-a-service market is expected to grow some five times from $4 billion in 2022 to $22.6 billion in 2032.
Speaker: We are excited to leverage on cross-business synergies, as well as enhancing HSBC's traditional systems and operations with modern infrastructure to capture this opportunity.
Speaker: Building out based on the foundation that the Security Services operates on, HSBC Security Services platform is a platform that creates a connected ecosystem for clients, third parties, and market infrastructure.
Speaker: We strive to future-proof the security services business by moving towards a platform business model.
Speaker: We'll be a digital backbone that offers clients with a wide range of services and introduces a new age of client experience, ultimately making it easy for them to do business.
Speaker: Great.
Speaker: And ZK, do you have anything to add to that?
Speaker: We have to think of this as an ecosystem.
Speaker: So it allows us to offer open APIs to our clients and their developers to access banking data and services.
Speaker: as well as to fintechs and other businesses to incorporate banking functionality into their service.
Speaker: So it is a huge value add when it comes to information reporting, simplifying payments and more.
Speaker: So to accelerate the momentum around banking as a service,
Speaker: strategic collaboration will need to remain as the priority and this could take the form of partnerships between banks and fintechs where business solution as a service are made directly available on front-end user platforms where our clients can access so this will help to address our clients needs on instant access to any services on demand so looking ahead
Speaker: Assessing the HSBC security services can be as simple as ordering food or right on a super app.
Speaker: It is just a few clicks away.
Speaker: Yeah, brilliant.
Speaker: OK, thank you.
Speaker: So we're coming to the end of the podcast now.
Speaker: Maybe CK, would you like to wrap up for us or give us a final thoughts or a closing comment?
Speaker: Sure.
Speaker: So we are very excited to be launching innovative products and services that are meeting our clients' needs in the security services business.
Speaker: But at the same time, we are working very closely with regulators to make sure that we are aligned on the regulatory front.
Speaker: HSBC is ready to partner and collaborate with other industry players because the success in realizing the benefits of the ecosystem will only come through market collaborations and corporations.
Speaker: Brilliant.
Speaker: And thank you.
Speaker: I'd like to take this opportunity to thank you both, Zike and Kim, for joining us.
Speaker: Thank you.
Speaker: Thank you.
Speaker: Thank you for joining us at HSBC Global Viewpoint.
Speaker: We hope you enjoyed the discussion.
Speaker: Make sure you're subscribed to stay up to date with new episodes.
