Bill Winters CBE was appointed group chief executive of Standard Chartered PLC in June 2015 and chief executive of Standard Chartered Bank in April 2019. Describing Standard Chartered as “a mid-sized global bank”, Winters said the bank has stepped up its investment in technology “dramatically”. Four years ago, he noted, the bank was spending about $650 million in new investment but that more than 90% of this was “defensive – catching up in terms of compliance or dealing with acute obsolescence”. By contrast, in 2018, the bank spent $1.6 billion and in 2019, this figure will rise to $1.7 billion, with “more than a tripling of our discretionary investment spending”.

Winters added that: “$1.7 billion, for a bank whose aggregate expenses are $10 billion, is material. The bulk is on technology and technology-related projects. This is a trend we see increasing for some time. We’ll have a higher and higher proportion of our annual spending on technology.”

Winters broke down his investment into thirds, saying: “A bit over a third is what we call ‘new’ innovation; another third is innovation – finding ways of taking what we have today and making it better; the final third is defence. Like any bank, we have a technology deficit that we are continuing to close. Investment spending on risk and compliance has reduced after many years of above-trend growth but [has been] offset by increases in investment in cyber security.”

Virtual banking in Hong Kong

In March 2019, Standard Chartered announced it had received a licence to operate a virtual bank – a new standalone digital retail bank – by the Hong Kong Monetary Authority. Standard Chartered will hold 65.1% of the equity with the rest held by Ctrip Finance (9.9%) and PCCW and HKT (collectively 25%).

While Standard Chartered’s tech spending is dwarfed by that of, for example, JP Morgan at $11 billion a year, Winters believes Standard Chartered will continue to be competitive, saying: “Do I think we can go head to head with JP Morgan or Bank of China?… no question about it, in the areas we focus on!”

Speaking of the “de novo virtual bank in Hong Kong”, he said: “For every dollar we spend there’s another two our partners are spending; we are effectively renting rather than buying. We feel we have access to the best technology in the market. Sometimes we develop it ourselves, sometimes we get it through outsourced solutions, sometimes we get it through partnerships.

“Each of the components we are putting into the bank from the core banking system upwards will either come from Standard Chartered as a ‘drag and drop’ or come from partners either as a product already developed or that they are developing along with us.

“Hanging off the virtual bank will be dozens of APIs to allow partners to plug in as we are able to identify a customer need and bring in the right partner. This is the way of the future for everybody. It is critical for us because we are not going to outspend JP Morgan or HSBC. We are targeting the millennial population, people who aspire to affluence and are ‘young’ by definition. Our virtual bank will be separately branded but powered by Standard Chartered to bring in the strength of the brand.”

Winters said the bank is seen as a very stable player and a committed player in the Hong Kong market and a meaningful business in China. “The challenge we have is that millennials will look at us and say that’s my father’s or my mother’s bank,” he said. “That’s not how we want to position this.” Winters expects to launch the virtual bank early in 2020 and to be one of the first to launch.

On the subject of the unrest seen in Hong Kong in 2019, Winters said it had not disrupted the bank’s progress but noted that four of the others “have mainland Chinese anchors” and said that “they may have a difficult job navigating sentiment [in Hong Kong] now”.

He added: “Everybody participating in this venture is someone to be taken seriously… Ant and Tencent are ubiquitous payment apps in China… they have outstanding tech and access to excellent resources in the mainland but they don’t have the depth of experience and understanding of Hong Kong… There’s plenty of competition but we are perfectly comfortable that we can develop a differentiated proposition that our customers want.

“Our objective is pure and simple: we expect to have a bigger market share rather than smaller and we expect to be making more money rather than less. Why else would we do it?”

Off the shelf in Africa

While Standard Chartered is working to develop its virtual bank in Hong Kong, it has effectively already developed a digital banking solution in Africa, in Ivory Coast. Winters said: “We may cannibalise part of our existing proposition; that’s okay – if we don’t, someone else will!”

The bank is present in 17 countries in Africa, with a retail banking presence in 10. Rather than wait for the development of the virtual bank in Hong Kong, which could have meant no similar work in Africa until 2022-2023, Standard Chartered’s African team took the bank’s existing technology, described by Winters as “somewhere between pretty good and very good – award-winning mobile banking apps for most of the last decade” and built an offering around existing services. Winters admitted that it may “not be the latest cutting-edge mobile banking payments technology but it will be good”.

“We don’t have a retail banking business in the Ivory Coast but if we can make it relevant, it can be relevant in other markets,” he said. “Our worst case is clients see they have another channel. Now they can deal with us through a mobile banking app with a lot of functionality. This doesn’t feel particularly threatening. The game in Africa is to expand the market… We have given the mobile banking app to our existing customers… all they have to do is download the app. The objective for us is to significantly increase the number of clients we have. Our pace of acquisition is between 30 and 300% higher since we launched the mobile banking platform.”

Seeking the right partners

“We have a couple of hundred partnerships with fintechs,” said Winters. Going on to identify some of the key relationships, he said: “We have a series of partnerships with Ant Financial on cross-border remittances; on the corporate side we have partnered with Linklogis on a supply chain solution; we have an SME-based open platform that we are launching in India to connect SMEs to each other and to their financial services.

“I think Asia has been a real hotbed of innovation. A lot started in China – revolutions in small value payment systems and P2P lending; even companies such as Grab Singapore, which started with ride sharing but has moved well beyond that in ecommerce.

“It all creates opportunities for a bank to do our own thing or to partner with them or with others that wish they were them. There are a lot of ‘wannabe’ Grabs and Alibabas. Every one of the wannabes has an opportunity to leapfrog in this environment. In some cases we may be the ones to help them leapfrog or they may help us to leapfrog.

“I watched with great interest our friends and clients Stripe reach a valuation of $35 billion [following a a $250 million funding round joined by General Catalyst, Sequoia and Andreessen Horowitz]. This is really a striking figure. This is a company that didn’t exist 12 years ago that is carving out that value. Some may quibble but smart people have paid that money.

“We have to develop technologies and mechanisms in partnership with other people that can help us to connect one to another. Whether that comes in the form of fintech partners or clients. These are the keys for us whether in cross-border or domestic payments, trade finance, securities services, foreign exchange and so on.

“There’s room for all of us. Even today despite fierce competition between banks, there’s money being left on the table that people a bit more nimble than we are or a bit more innovative are finding ways to attract. That must be our mission.”

Competition and cyber threats

Commenting on the threat posed to banks from Silicon Valley, Winters said: “To the extent you can package financial services with other offerings, it’s a tremendous advantage. There’s everything to play for – the key for the banks is to understand the banking needs of their customers and to create our own ecosystems that are compelling.

“Banking [retains] the element of trust. You wouldn’t guess it reading [the media] that banks are trusted but the fact is people do trust banks: with their data, with their money and they trust them to basically give good advice, which is why people get so upset when banks don’t give good advice. The banking industry has gone to great lengths to rebuild some of the trust that was lost.”

On the protection of customer data, Winters said: “There’s the intentional misuse and unintentional. There is a massive focus on cyber security. We all recognise that one of the greatest vulnerabilities on the cyber security front is third-party service suppliers. For some banks this could be thousands of people… each need to be vetted as they have access to the bank’s data or systems.

“In terms of intentional sharing, I know Standard Chartered is very, very careful about the way we use customer data. With GDPR there are quite stringent rules. We can quibble over specifics, but this is a good thing and the rest of the world is likely to follow the European lead on data protection. The key for a bank is not just to protect data per the law but to protect data to customer expectations.

“There’s no explanation for having less stringent rules [than Europe] but that’s not sufficient in some cases. When customers are sharing insights about their retirement planning or some of the details about their health in the context of health and life insurance, there may not [for example] be legislation in Thailand that protects that data but there would be in a bank like ours.”

Article by-

Robin Amlôt

Managing Editor

by IBS Intelligence
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