Technology is now at the heart of big finance, prompting bankers to change their approach to running an industry that is considered more traditional than any other in existence today. Bank CEOs now ‘think themselves as running technology companies, as much as they do about running financial companies,’ Standard Chartered Plc Chief Executive Bill Winters tells Arijit Barman in an interview. Edited excerpts:
Before we go into the macro picture, we would like to understand how technology is reshaping Standard Chartered and the bank’s way of existence.
It’s the core as you would have imagined. And in many ways, I expect other bank CEOs think themselves as running technology companies as much as running financial companies. The whole legacy of business that we do needs to be digitized – the way we interact with our customers, the way we process transactions, needs to be automated and digitized because that’s what our customers expect. Then, there is this whole new stuff – whether neo bank, or new ways of delivering credit to customers, perhaps with partnerships with technology companies. So, it’s a tech proposition or tech offering.But at the core, it’s a banking product. It’s important to make sure that we have the skills and understanding to deliver the technology in a human way. There are customers who are using the latest technology, but still dealing with Standard Chartered Bank. So, technology is at the heart of everything we are doing.
Would you say Covid and the two years of lockdown actually accelerated this process? How did your bank fare during this period?
I have been extremely impressed with the way my colleagues were able to deliver and 20,000 of them are in India. Great news is we fared very well during the pandemic. We were able to maintain our transaction flows without any interruption whatsoever. We also saw a dramatic shift by our clients into our channels for obvious reasons. And that tested those components and the bandwidth of everyone in the financial services sector. The trend is very clear anyway – we were well on the way in processing 70/80/90% – 99% in some of our businesses – digitally already, but the pandemic definitely accelerated that. It was a real life test for the underlying robustness and resilience of our infrastructure. I am happy to say that we have passed that.
Big tech is making a big foray in financial services. We have seen Amazon getting into payments, we have seen Google testing payments products first in India and now taking it across the world. How do you see this big onslaught of big tech into banking and in the larger financial services play?
It’s an excellent question. We know what customers want is convenience. And they want it in the platform they are already using very actively – media platform, messaging platform, payment platform, to the extent that they want to acquire some additional financial services. Somebody is going to make it easy for them to do that. Customer’s desire for convenience is best met on some existing platforms. It would be our job to ensure the products they acquire through these platforms are best in class. We are looking to be the partner of some of the big tech companies. These partnerships take different forms in different markets.We have other missions as well – that’s to create some platforms of our own. We are extremely proud of something we set up in India – a technology platform that allows SMEs to interact with each other, with their suppliers, with the financial services providers. We have well over 100,000 customers now and are growing very fast. We also rolled out that platform in other markets. However, it’s key to make sure that our customers get all the convenience through digital and automated tools, without losing human interaction – the advice that comes with human relationships.
So, the lines are really blurring between a technology or a retail company and a financial services company… Everyone seems to be doing everything.
The lines are blurring, but there are some lines that have not been crossed. For example, the tech companies don’t want to be in capital-intensive businesses. The tech companies are trading in phenomenal multiples. Last thing they want to do is to bog down their balance sheets with capital-intensive activities like lending.Secondly, very few technology companies like to be regulated like a bank. I can tell you, operating like a bank is a very heavy burden. It’s a price we pay for having the access to deposits, to central bank liquidity in times of stress. We have privileges as banks and in exchanges we have regulations.
Would you be open to partnering with any of these fintech companies, or maybe look at acquisitions?
We have hundreds of fintech partners. We made investments either into the fintech companies or we have very deep rooted partnerships across markets; so that we can deliver banking services on the back of credit origination capabilities. Every partnership is different, every equity investment we make is different. We love it when we can help to establish a fintech player through our partnership or through equity investments.
Do you feel that the first level of disruption will actually take place in retail banking? That seems to be the first thing many of the fintech firms or neobanks are looking to disrupt.
Absolutely. More specifically, the initial disruptions came in the payment space. It’s expensive to make small value payments domestically, and very expensive in some cases in making payments crossborder. Fintech companies stole the march on banks, stole the march on credit card companies by offering convenience, and offering services at a more reasonable price. It was a wakeup call for banks. We must wake up every morning thinking about how you can deliver a better quality product or better service or else somebody can do it for you.
The moment we talk about customers, the big issue of privacy, issue of data come into play. This is a big concern for regulators, even for sovereigns. How do you see the regulatory landscape evolving when it comes to monitoring and controlling the data flow?
We are extremely aware of the valuable data we possess that comes from our clients and we take every reasonable step to protect it. Banks have been very strong custodians of customers’ wealth. When we don’t act in the interest of our clients in helping them manage their savings, their wealth and the data, the consequences are quite severe. In many cases, data is as valuable as their wealth. There is contract pressure from regulators, and most importantly, pressure from ourselves to live up to very high standards around data protection.
How are you planning to leverage digital solutions on your retail strategy? Is there any particular theme that stands out?
We made statements to our shareholders to deliver a substantial increase in the number of customers – double the number of customers in three years. That can only happen when we deliver our product and services digitally, with very much straight- through processing. No human intervention on these 95% transactions that are going through digitally. It can also be cheaper in the long run. In the short run, it’s expensive because we have to invest in technology to generate our capabilities. The key driver for retail business is to digitize everything end-to-end so that customers get the highest quality of service.
Most bankers like you have scoffed at the idea of digital currency. Where do you stand?
I never scoffed at the idea of digital currency. I think there can be a lot of opportunities if we flow the digital currency in an effective way. There are many types of it. The most attractive at this point is the central bank digital currencies. There will be Chinese digital currencies and others are in various stages of it. We need to understand what customers need. I don’t think that the central banks have answered that question adequately. Time will tell how the combination of digital economy, cryptocurrencies, stablecoins, central bank digital currencies and the full range of other tokenized assets will shape.