“To serve our customers better, the objective is not to bring in technology for the sake of technology…. we think open banking could be one of the approaches to help us improve that,” says Hang Seng’s Gilbert Lee, Head of Strategy & Planning and Chief of Staff to the Chief Executive of Hang Seng Bank.
Regulators play an important role in advocating the core ideas behind open API adoption, putting forth a framework for the banks and setting the rules and regulations for the industry to follow - banks are supportive of the development, says Lee.
“Banks need to think about how best to leverage this new development,” to strengthen the relationship with the bank’s customers and regulatory partners, he says.
“So, when we see technology and innovation like API and open banking, we see it as a tool to improve customer services. If we can work with more partners externally to enrich the experience that would be great, if we can take on-board more products that can serve our customers better that would be great too.
“The way Hang Seng defines digitisation is that we want to serve our customers… on a digital [level], so we define digital as a distribution channel. The objective is for Hang Seng to facilitate our customers to do business and transactions with the option of not visiting us physically, that we can serve our customers better, we can talk to them better.”
The concept should ultimately be a win-win for banks and third-party developers. “Fintechs have brilliant ideas and we are hungry for those ideas, so we want to work with them,” says Lee. “And I believe the fintech companies want to work with us to learn about the global standards, reporting requirements and regulatory specifications required by a regulated business and a listed enterprise, so that’s one option and another potential option for the newcomers is to do things very differently and create a different market than the incumbents.”
There are some key decisions that the bank’s strategic management needs to make to move forward on this “transformational journey,” he says. “The first one is who do we ask to undertake these transformations, who will lead this transformation. We can decide to have the existing teams in our business units to take it. We can decide to bring in new people to move forward the organisation, or we can decide to have the CEO office centrally execute these ideas.
“Our experience is, for those capabilities that can easily or quickly bring in results, we usually assign them to the business because the business will have incentives and motivations to quickly execute and they can enjoy and see the benefits themselves … but we monitor, we motivate, we moderate.
“There are other initiatives that we need to bring to the central team, those are areas where you would expect a medium-to-long term result and would probably will drag down your short-term P&L … so we need to invest and build these capabilities centrally while make sure the rest of the organisation is supportive of the initiative but they are not accountable to the short-term negative potential financial result. As the capabilities become mature, we can integrate them back to the business.”
Given the regulators’ enthusiastic support of a tech overhaul of the banking industry, and client’s expectations that Hong Kong’s incumbent banks will adapt to fulfil their needs, Hang Seng’s Lee suggests that the adoption of Open API will be a gradual change in the market, rather than an epochal shift.
“While there are undeniably and unavoidably innovations coming to market, that will be a gradual process for new and incumbent players to find out what gaps in customer needs exist in the market and how innovation can address them,” he says.
The data gold rush
“Banks have a wealth of historical customer data at their disposal and yet have not been well equipped to translate that information into actionable insights and better personalised services,” says Marc Entwistle, Principal of Digital Financial Services at Oliver Wyman, and a Co-founding director and board member at the FinTech Association of Hong Kong.
Primed for partnership
“We are keen to drive the development of new smart banking initiatives and industry partnerships to better support our customers,” says Daniel Chan, HSBC’s Head of Business Banking, Commercial Banking, Hong Kong.