On this episode, we’re taking a look at global consumer and market trends that are influencing the future of banking. To do this, we’re joined by a great guest with rich experience connecting the order of mathematics with the nuances of customer needs for business banking clients. In his role, Dan Roberts, Global Head of Business Banking for HSBC, travels a lot to get perspective on financial trends around the world. Here, Dan talks about the current state of banking and beyond, invisible finance and the power of data-driven experiences.
Download the Chief Challenges 5: Banking on Invisibility report.
Design Mind frogcast
Episode 36: Reimagining Banking for Tomorrow
[00:09] Elizabeth Wood: Welcome to the Design Mind frogcast. Each episode, we go behind the scenes to meet the people designing what’s next in the world of products, services and experiences, both here at frog and far, far outside the pond. I’m Elizabeth Wood.
[00:24] Elizabeth Wood: Today on our show, we’re jumping in again to the world of financial services. At a time when how we pay for things and how we manage our money has increasingly become embedded into our everyday interactions, from using our devices for contactless payments to getting financial advice online, financial institutions are integrated into everything and yet in some ways less visible than they’ve ever been. To talk about what this means for institutions and consumers alike, we’re joined by Dan Roberts, Global Head of Business Banking for HSBC. In his role, Dan travels a lot to get perspective on financial trends around the world. Here’s Dan now to talk about the current state of banking and beyond.
[01:05] Dan Roberts: ‘Beyond banking’ is quite bank-y language, but what’s really at the heart of it is how we step up to a changing world where technology means that these things are much, much more blurred than they were in the past five, 10 years. I do fall into the trap of saying ‘beyond banking,’ but I try to avoid the term actually, because what we really mean by that is the sort of connectedness of banking into other things our business does. And this is a really important trend. My name is Dan Roberts, and I am the Global Head of Business Banking at HSBC, based in Hong Kong.
[01:40] Dan Roberts: So we definitely see that the way that companies do the things they need to do—whether it’s their payroll, pay their customers, manage risk in their business—in the past, they would do that by working out which banking product was the right product, and they would deal with their bank, and they would procure that particular product or service. But more and more, they need to drive efficiency in their business. But also, they want to create product journeys for their customers in their own right that often need the banking element to be beautifully and seamlessly integrated into that experience. And so we talk about beyond banking, but what we really mean is that the edges of banking are getting more blurred as the things that banking does extend into other other parts of what a business does.
[02:25] Dan Roberts: Let me give you an example just to bring this to life. So you could imagine, it’s a real thing now, but a connected car that’s filling up petrol at the pump. And rather than handing over a card, or paying at the till for the gas that we’ve put into the vehicle, the technology absolutely exists today to just integrate that whole thing. So the car can have a chip in it that automatically connects with the pump, and there’s a digital handshake, and the money moves in the background. So that requires the car manufacturer, the petrol station provider and the bank to all be developing products and services and solutions and thinking differently. And that requires different things of banks and how they work with business clients than we frankly had to do in the past.
[03:14] Elizabeth Wood: Dan’s background in math helps him see the crucial connections between the order of numbers and the serendipity of human experience, and what that might mean for the future of banking.
[03:25] Dan Roberts: I’m a naturally curious person, so I try to get out and about. My wife is a historian. I tend to look in the past for some hints about the future, and I’ve definitely found over the years that’s actually been quite a good place to look sometimes—to try and maybe spot some of the things that have happened much further back in time as a way of trying to think about what might be coming or how you might adapt to it. I read a lot of books that, you know, are definitely not directly related to banking, as hopefully all the listeners would be pleased to hear. I’ve worked in a bookshop as a student. There’s a great maths and philosophy book by an author called Douglas Hofstadter called Gödel, Escher, Bach: an Eternal Golden Braid. It’s a book about elegance and design and how things acquire meaning. And it’s a book I go back to every few years and sort of read. Whether you’re thinking about how do you create purpose and meaning to colleagues or to a customer relationship? Or what does it mean, you know, what do things like advice from an AI machine, what does that actually mean? How do you create purpose in an organization or a company? So yeah, I just embrace any kind of different sorts of idea or information.
[04:37] Dan Roberts: I’m a mathematician by training. I started in credit scoring in what is now called data science. But back when I started, it was still called statistics. And I was involved in building one of the first behavioral risk scorecards in use for SMEs or in business banking. And pretty much since then, I’ve done various roles in relationship management, in technology, in risk and product management. I think I’ve managed most of the different products that a commercial bank has. And now I find myself in a lucky position of running a very large segment within HSBC, which is one of the world’s largest commercial banks.
[05:13] Dan Roberts: Commercial banking, very simply, is the provision of banking to companies, to businesses. And it’s very similar in many respects to retail banking in the sense of companies—like people—they need to move money, they need to payroll, they need to pay for their supplies, they need to take revenue, and sell their products to customers, they need to get the money in, they need to borrow money to grow and invest or to invest in their stock. They sometimes have surplus cash, and they need to invest that and make sure that it’s managed safely. And like people, they have risks they might be exposed to, changes in foreign exchange. They may be exposed to other sorts of risks. And commercial banking is basically the part of banking that looks at all of those things and makes sure that all of those things are well managed and delivered for businesses and companies.
[05:59] Dan Roberts: So within commercial banking, different banks and different markets have slightly different terminology. But essentially, you can imagine there’s a huge spectrum of businesses from the very, very smallest, which might be you know, an individual setting up as a self-employed painter, decorator or something like that, through to a small shop, or a market trader, all the way through to some of the world’s largest companies and institutions. And so commercial banking can cover a huge, huge spectrum. And so what we tend to mean when we talk about SME, which stands for small and medium-sized enterprises, is generally the smaller end of that range. And it can mean from very first day one startup through to businesses, that depending on the country and different regulations, but typically might be turning over somewhere in the order of 30, or 40, or 50 million US dollars. So at that stage, you’re actually talking about really quite a substantial business that may have many hundreds of employees, and almost certainly has a finance department and a full management team.
[07:03] Elizabeth Wood: During our conversation, Dan shared how market trends and consumer behaviors from outside the banking industry are shaping financial services.
[07:12] Dan Roberts: There’s so many exciting things in banking at the moment. There’s a lot of opportunity out there. There’s lots of things changing in the economy. Lots of consumer behavior is changing. And all of those things require companies to think about how they do things differently. Margins might be under pressure. They have to think about how they can run their business more efficiently. And that all drives change in the banking industry as well.
[07:34] Dan Roberts: I was up in southern China a couple of weeks ago. China’s obviously opened up post the COVID pandemic earlier this year. And we did a couple of events around eCommerce. So this is businesses selling typically on the big international marketplaces like Amazon or competitors to Amazon. And if you think about the way that they sell and their digital requirements, it’s been a fast growing area of banking. Over the last few years, we’ve been working a lot on investing in this space, thinking about the needs of businesses that are selling in this space, and how we respond to that. So that’s been one. Again, I was in India, not so long ago, and just saw the pace of change there. The government’s introduced a lot of standards around how business is done digitally, actually, in India in the last one or two years. And that has just unleashed a huge amount of change of growth in India. We’re spending a lot of time thinking about what does that mean for banking? And how do we serve customer needs well in a fast growing and fast changing environment?
[08:39] Dan Roberts: Each of us as individuals is experiencing changes in our personal expectations, our consumer expectations. Whether it’s in banking or whether it’s in other journeys. So, you know, we’ve definitely got higher expectations in terms of getting speed of resolution, expectations in terms of what you can get done or not get done on devices like your mobile phone, expectations around the level of transparency or instant gratification—all of the things that we’re more and more taking for granted in our personal lives. And, of course, businesses are run by people. So those people have those experiences as well. And we’re definitely seeing that trickle through into business banking.
[09:18] Dan Roberts: What typically has happened, and I think it’s still happening at the moment for business banking, is there’s a bit of a lag effect. I was traveling in Indonesia last week and met a lot of businesses, a lot of customers. Indonesia is an economy that has very rapidly adopted, very rapidly digitized. Everything’s done on mobile, government’s gone mobile, lots and lots of interactions on a day-to-day basis have all gone mobile. And businesses are adapting. But the way of working of businesses—certainly in the SME space—is definitely operating on a lag. So whilst the customers I was meeting were doing all of these things personally, some of their business processes were still relatively traditional. They could see this contradiction and we were talking about how they were going to adapt. So it’s definitely coming through, but it tends to operate on a bit of a lag.
[10:07] Elizabeth Wood: Everywhere you look, emerging technologies like artificial intelligence are changing the stakes. Dan shares how data-driven experiences and AI are impacting business on a massive scale–and are positioned to do so for the foreseeable future.
[10:22] Dan Roberts: If you look at data and analytics overall, so as a bank, number one is the ability to manage risk, and that’s come on a huge amount in the last few years. So I, as I said at the beginning, I started my career in, in credit scoring. And in the mid 90s, the work I was doing was, you know, amongst the first banks, I think, in the world at the time to use large-scale data modeling to look at bank account behavior and use that as a way of predicting credit risk and credit, default—the risks that you would get your money back. And that’s, you know, 20 not far off 30 years ago now. You look now at the ability and the speed with which models can understand behavior and model risk. We’ve done some really exciting stuff using data to personalize offers to customers and personalize the responses—so much, much better at actually putting the right solution in front of a customer because we’ve got large data models sitting behind it that are much more able to predict a need or match a need and a solution.
[11:21] Dan Roberts: I think, the last few months it’s obviously these large language models. And so suddenly, you’re getting to a position where the AI can also interact in a much more natural language way with the person on the other end. And so I’m sure that there’s going to be when you start to combine some of those capabilities, there’s things that potentially could get really interesting in terms of the combination of that use of language with some of the sheer power of some of that kind of large data analytics, data science that we can see.
[11:56] Dan Roberts: If I think about in my life, you know, maybe the first time I saw a computer, or the first time I saw the internet, and it feels to me, like artificial intelligence, just the speed of adoption that we’ve seen, particularly in the last three to six months, and the speed of innovation, there haven’t been many times in the last 40 years where there’s been a technology that’s had such a breathtaking impact so rapidly. So if I was a betting person, I would say I think artificial intelligence, for sure is here to stay, and will have some absolutely profound implications on how society works and how business is done in society.
[12:29] Elizabeth Wood: We’re going to take a short break. When we return, Dan will share more on the future of invisible finance.
[12:37] Michael Zwiefler: Hi, I’m Michael Zwiefler, Vice President, Partner for Financial Services, Capgemini Invent—and the lead author of frog’s latest report, Banking on Invisibility. Featuring insights by industry experts from frog, Capgemini Invent, Deutsche Bank, Esusu, MIT and more, this report breaks down the big issues faced by innovative leaders in the financial services sector today. Together, we outline the rise of next-gen banking models and take a look at the wave of new products and services that are tailor-made for a world with dissolving boundaries between sectors. Read the report and find out how to unlock emerging opportunity areas in financial services—for institutions and consumers alike. Check this episode’s show notes for a link to download ‘Banking on Invisibility.’ Thank you.
[13:30] Elizabeth Wood: Now back to Dan Roberts, Global Head of Business Banking at HSBC.
[13:35] Dan Roberts: I think some elements of invisible banking are there actually today. So we’ve spent a lot of time, for example, connecting up banking capability with accounting software, for example. So, historically, one of the things our finance department would be if you’re paying invoices, you’d have a banking process where you actually probably in those days wrote the check, or however you’re going to settle the payment. And then an accounting department that would then process those, match them, post the ledger, get the cash postings and so forth. And then somebody would then have to reconcile the two things and make sure that everything matched. So that largely is invisible already in the sense of, actually, the settlement of the payment, the posting of the ledger and the reconciliation can actually all happen in one go as long as the bank and the accounting software are talking to each other digitally, which does happen. And we’ve spent a lot of time on that. So I think elements of that are already in existence and will continue to grow.
[14:37] Dan Roberts: When you think about the range of things that a company has to face, and therefore the things they turn to a bank for help on, it is still quite wide ranging. I think about the companies I’ve met in the last few months, and the sorts of conversations I’m having with them, and the sorts of questions they would put to me, and it can span so wide. Elements of it for sure will go more and more invisible. But there are things that they would turn to banks for that I think we’re a long way from saying they can be kind of fundamentally integrated.
[15:08] Dan Roberts: And even that fundamental integration question, at some point is a management decision that the company has to make, which is, which providers are they going to integrate with and why? And what’s in their best interests? And is it the most cost-effective? Is it efficient? Maybe they’ll switch in the future. So even those invisible decisions, there’s a management decision at some point that’s been made to do that. So all of those things, cause interactions with the bank, and give us an opportunity to engage with the customer, and hopefully provide them with a good solution and good advice. So, yes, I do think that invisible banking will, and invisible commerce, if you like, will become more and more prevalent. I think that’s something we just embrace because it’s just a better way of doing business. But there’s still an almost infinite variety of things that a company and a bank would interact about that gives us an opportunity to make sure that we stay very relevant to helping their business run itself and solve its issues.
[16:07] Dan Roberts: There’s definitely a trend for what people sometimes call embedded banking or connected banking: this idea that the actual banking thing, and it’s often moving money, but it’s not necessarily moving the money, is intrinsically linked into some other journey. So the obvious example is a shopping experience where the checkout bit is built into the shopping experience, and the money moves in the background. Rather than somebody having to actively click on there, that creates a challenge, because where’s the role of the brand in that journey? But actually, from my point of view, I think, the reality is that a lot of things have to happen to get that set up in the first place. And whilst a lot of the at-scale volume transactions might be done on a much more invisible basis, or might be much less brand aware, actually, particularly in my space in business banking, even relatively small businesses have complex needs. There’s a heterogeneity to the things that they might need from a bank. And therefore whilst some things will go invisible, I think we’re a very long way away from a point where everything goes invisible.
[17:16] Dan Roberts: And so, in my mind, it concentrates the customer relationship onto a few more important moments. So the way we were thinking about it is we obviously want to be leading in terms of being efficient and digital, and making that as easy as possible for customers. But we see that actually, the role of the trusted advisor, the relationship, in some respects has become more important. There’s more focus on it. And so you almost get this slight bifurcation whereby a lot of the day-to-day interactions will be digital, and will have relatively little opportunity for brand building. But there’ll be some moments where it really, really matters. And so as long as we invest in those and get them right, whether they’re digital journeys, or whether they’re journeys with people involved, and relationships and advice, we sort of made sure that we’re really, really there at those kind of moments that really matter.
[18:09] Dan Roberts: The other thing about brand is what you’ve got to get right in a digital context is about friction, resilience, cyber, so particularly with banking, unfortunately there are bad actors out there. So things like cyber risk are real. It is very frustrating when systems are not working as they’re intended, and so forth. And so investing in making sure that the system is resilient and safe and secure, is something we take really, really seriously. It’s very challenging in a fast evolving space where there’s lots of experimentation.
[18:44] Elizabeth Wood: Back in the day, it used to be that customers only sought out financial advice from their local bank branches. Today, financial institutions still provide expert guidance, but increasingly consumers are looking online for answers. Dan shares how this might be changing our relationships with banking.
[19:01] Dan Roberts: Like most things the internet has allowed for a level of improvement in financial literacy. So if I go and see my doctor these days, I’m likely to do a quick search and look at the thing I’m going to go and talk to the doctor about in advance. So it’s not different in banking, actually. So if you’re a business and you’re looking to do something, then you know, a quick search engine search, quickly look at some of the resources available, and you can rapidly establish a level of understanding of the different solutions, different issues, how different companies maybe have approached the problem. So I think that’s a good thing. But it definitely means that businesses can go into those conversations better informed. And just like any other industry on the receiving end, if you like, of that improved knowledge and awareness, you know, we as a banking industry have had to up our game in terms of making sure then that the clarity of the advice, the solutions are absolutely there. I think that’s just a general change we’re seeing across across the economy.
[20:06] Dan Roberts: One of the things in the research that we’ve seen very clearly is there’s a bit of a paradox in the data, which is, as we can see, more and more businesses tell us they want to do the vast majority of their banking digitally. And actually, they don’t need or don’t want to interact with people. We’ve seen that very, very clear trend over the last five years, particularly through the COVID pandemic, we really saw that pick up. But the paradox is that we’ve also seen a really strong rise in the number of businesses who tell us that they want to have a person that they can speak to as well. And so there certainly are parts of our customer base who are very happy with a digital-only relationship, But they’re still in the minority, actually. The majority of business customers that we talk to still want to have some recourse to people.
[20:51] Dan Roberts: Now, the next question then is: so, if they want recourse to people, how do we equip those people with the best knowledge? And to what extent might AI step in in between and actually be an alternative form of personalized advice in the future? So, we are starting to experiment internally with the use of AI-driven capabilities to actually help our relationship managers with quick answers to questions they may have. So rather than having to go and trawl through product catalog, if you like, and find out what products, they can ask an internal large language model and get an immediate response. And I think there’s some potentially really, really exciting stuff in that space. We’re beginning to experiment and look at things like using those capabilities to pre-fill answers to customers. So if they send us an email, we’ve got an automatically drafted response that our relationship manager might then review before they send it out—to save everyone time and give a good answer.
[21:53] Dan Roberts: I think with the hallucination risks still in AI, and with there being, for good reason, lots of regulations around things like explainability, and prejudice and bias, I think we’re someway away from getting to a position where we would be comfortable exposing an AI advisor straight to a customer. I think there’s a long way to go yet in terms of building confidence that the risk of, frankly, bad advice is sufficiently mitigated. However, what I would say is, even in the last three months, the rate of change and progress in this space has been absolutely immense.
[22:32] Elizabeth Wood: Across all industries, data is driving product and service innovation. Here, Dan shares why data is the key to unlocking the next generation of financial experiences, from risk mitigation to personalized content delivery.
[22:47] Dan Roberts: Banks have huge, huge amounts of data. They are some of the biggest holders of data out there in the economy and in business at-large. And what can that data be used for? And why would we use it? So I think firstly, as a banker, I suppose I might start with risks. So that data allows us to hopefully manage risk better and better over time. And that’s a good thing for everyone in the economy. So if we can manage risk better, then we can allocate capital better, we can build efficient solutions for the good actors, but we can keep the bad actors out of the banking system, and so forth.
[23:22] Dan Roberts: Number two data can help with businesses running their business more efficiently. So we can integrate data capabilities. And indeed, some of the products that we at HSBC have recently launched. I mentioned ecommerce in China earlier. So building data integrations that allows quite complex data to flow between the bank and the export departments in governments, for example. It just makes it more efficient and more slick for businesses to operate. But then the third area is how do you use data to provide value-added advice or value-added content? And I think this is definitely a frontier area for banking. At scale, can we be more relevant?
[24:02] Dan Roberts: If you think about banking even 50 or 100 years ago, and the sort of concept of the early merchant banks, they were ultimately about provision of value-added advice to businesses—using their network to help businesses connect with others and do things. You know, maybe data allows us to do some of those very old things of banking in a different way but at a huge scale. It’s certainly something we’re exploring. We’ve launched a platform in a number of markets, firstly, in Hong Kong, called HSBC Business Go. It’s effectively a marketplace of ideas. So our business customers can put content on to Business Go. We’ve got over 100,000 users who are using the Business Go network now. And we’re trying to use it to help provide advice and relevant content for customers. The feedback we get from customers, there’s definitely a need for it. In the long run, whether it’s a directly monetizable product, i.e., it’s a billable product, or whether it’s something that’s intrinsically part of what a bank needs to do, it’s something I think we’re testing, we’re experimenting.
[25:08] Dan Roberts: I’m an optimist for banks, I think banking has a strong future. And the reason I’m an optimist is actually the complexity of the combination of there’s a reason that banking is highly regulated. And there’s some very, very important core things that have to be done in a certain way for the sort of good operation and functioning of the economy. So that’s why there’s a lot of regulation around banking. And that’s why it’s important.
[25:38] Elizabeth Wood: That’s our show. The Design Mind frogcast was brought to you by frog, a leading global creative consultancy that is part of Capgemini Invent. Check today’s show notes for transcripts and more from our conversation.
[25:50] Elizabeth Wood: We really want to thank our guest Dan Roberts, Global Head of Business Banking at HSBC, for sharing his insights into the future of finance. If you want to really dig into the subject even more, you can also check today’s show notes to find the link to download ‘Banking on Invisibility,’ our latest Chief Challenges report. In it, you’ll find three strategies for navigating the new invisible banking landscape.
[26:13] Elizabeth Wood: We also want to thank you, dear listener. If you like what you heard, tell your friends. Rate and review to help others find us on Apple Podcasts and Spotify . And be sure to follow us wherever you listen to podcasts. Find lots more to think about from our global frog team at frog.co/designmind. That’s frog.co. Follow frog on Twitter at @frogdesign and @frog_design on Instagram. And if you have any thoughts about the show, we’d love to hear from you. Reach out at frog.co/contact. Thanks for listening. Now go make your mark.