Fintechs, retail banks can work together for the good of the customer: HSBC's Nuno Matos

Fintechs, retail banks can work together for the good of the customer: HSBC's Nuno Matos

In an exclusive interview with Business Today's Managing Editor Anand Adhikari, HSBC's Global Chief Executive of Wealth & Personal Banking, Nuno Matos discussed at the changing face of retail banking, and its relationship with fintechs.

Nuno Matos, Global Chief Executive of Wealth & Personal Banking, HSBC -- Image credit: Mandar Deodhar Nuno Matos, Global Chief Executive of Wealth & Personal Banking, HSBC -- Image credit: Mandar Deodhar

Globally, retail banking is going through a big transformation because of new technologies, the competition emerging from fintech firms, and the fact that millennials are tech-savvy. However, it is not that traditional banks are becoming obsolete. They are also catching up fast by digitising their processes, putting as many applications on the cloud as possible and also partnering with fintechs to offer customers a frictionless journey. In fact, the outbreak of the pandemic has further accelerated the digitisation journey of banks.

In an exclusive interview with Business Today's Managing Editor Anand Adhikari, HSBC's Global Chief Executive of Wealth & Personal Banking, Nuno Matos discussed the changing face of retail banking. Excerpts from an interview.

BT: Tell us the kind of transformation that is happening in retail banking, globally ?

NM: Most of the banks globally, and certainly HSBC, are already digital banks. Today, 93 per cent of our transactions globally in the retail and wealth space are done through digital channels. In fact, we are much more than a digital bank. That is the distinction. We believe in a model where we deliver the best of our advice combined with the best-in-class convenience of a digital experience. That is our model.

We believe that to be relevant to our customers, to be the most relevant financial service provider, we have to combine people and digital. It cannot just be digital. It also depends on the segments you serve. Some segments, naturally, are more digitally served. whereas other segments demand more bankers' and relationship managers' interaction. Our model is a hybrid model, which combines the best of human advice with the best of digital and technology. And it's very important to understand why that is.

We firmly believe that technology and digital platforms bring great convenience. It allows customers to bank on their terms, where they want, when they want, but trust, which is what we believe our business is all about. Trust is at a higher level. Trust is about human beings interacting face-to-face with our customers. It's a model that has the best of people and the best of technology. That's what we believe. It goes without saying that more and more transactions will be converted to digital. Our strategy in that regard is very simple. Anything that the customer can do, will be able to do it, in the mobile. We call it the mobile first approach.

BT: What kinds of behavioural changes have you observed amongst customers since the pandemic?

NM: Customers have certainly accelerated their digital adoption. That goes without saying. What we saw in two years was probably equivalent to the [digital adoption of] previous five years. In the last two years, we have significantly accelerated customer adoption, both in terms of how they open an account, more and more becoming digital, or part of our sales are coming now through digital platforms through mobile, or payments and consultation of balances, servicing transactions that go through digital. That was a tremendous acceleration.

There are other trends on the investment side. We are seeing customers being more sensitive to the sustainability investment theme. Customers associated the pandemic with a world that is not sustainable with a world that is not green. And the pandemic had the effect of calling out the need for a more sustainable world. We saw our wealth customers wanting to invest more and more in sustainable investment opportunities. They want to have an impact on the transition of the world to a greener economy. Customers also became more concerned with their wellness, with their health and well-being.

BT: Are there enough investment opportunities in sustainable themes?

NM: We are launching a number of funds that are basically invested in companies that are transitioning to a greener way of producing and into a greener way of managing their carbon footprint. We are offering green mortgages in some markets. We are offering electric vehicle financing. On the one hand, we are helping our customers to use their investments to finance the world's transition. And also, we are financing our customers to improve the quality and sustainability of their assets, such as their houses, cars, etc.

BT: Can you name some destinations or countries where the bank is offering sustainable investment themes?

NM: We are doing that in places like Hong Kong, the UAE, and Egypt. This is just to give you a sense of countries where we already have green lending products. In terms of investments, we are offering it all over the globe wherever we operate.

BT: What are the global trends you are seeing in branch expansion and people hiring? Digital is certainly going to reduce branch and people intensity in the retail business. Your comments?

NM: Globally, the trend is clear. In most of the markets, the branches are reducing their numbers. It is simply because customers are changing their behaviours, as simple as that. Customers are going less and less to two branches. As I said, for some very clear elements of their financial life, they still want face-to-face interaction or a human touch. There are many ways in which you can add the human element to the banking relationship. So globally, that's happening.  I'm sure that, over time, those trends will also come to a market like India. But again, we believe the combination of physical distribution and digital distribution is the key. We will continue to invest in having our branches well equipped to sell to our customers.

BT: How are Indian operations placed in terms of the digitisation journey and global support?

NM: In India,  we are on a very clear path of increasing and improving our services. It's one of our top four markets in Asia. HSBC is the global bank of Asia. We are very much committed to those four big markets, which are Hong Kong, China, India, and Singapore. India is one of our four top bets in Asia. And we have been investing a lot of resources in improving our digital capabilities, people capabilities, our platforms for customers, and in hiring people, especially on the wealth side. You can count on our services to continue to improve significantly.

BT: Are banks partnering with fintechs for new technological capabilities and reaching out to new sets of customers?

NM: Fintechs, in our opinion, are a force for good for customers. They are bringing a better customer experience. We like to partner with fintechs so they can add their journeys to our mobile app. And we are able to provide more efficient, more effective, faster, better customer journeys. We see them as competitors. We also see them as partners because, many times, by adding the two capabilities, we are actually serving customers much better. So, we see them as a force for good because competition is good for customers. And partnerships are good for customers. That's the way we see them. And that is, I think, how customers also see them.

BT: Does the bank have any unique fintech partnerships globally?

NM: We are constantly partnering with fintechs when we want to improve our journeys. I'm not going to quote any specific ones, but I'm going to tell you that, for example, for you to be able to manage your credit card on mobile, we have partnered with some fintechs in some markets, which allows us to capture multiple pieces of information from the customer and allows us to block or unblock his card on the mobile. There are also features such as blocking card usage in, say, bars. We are integrating a lot of journeys from fintechs in our mobile journeys to make a more robust offering to customers. That's how we see them as partners.

BT: We have also heard a lot of robo advisors in the wealth management space. Tell us about the adoption of robo advisors?

NM: We believe in robo advisory as a combination with human advisory again. Robo advisory is more adequate for the mass markets and emerging affluent spaces because it typically does not involve human advice. You profile yourself, answer some questions, and then the model will recommend the investment based on the profile. We also do that in some countries.  However, we supplement that with human advice. I would see robo advisory as one of the components of banks' advising their customers in terms of what they should invest in. But it's not the only one. And I would say in our model, it's just a component.

BT: How receptive is the regulatory regime to newer technologies like blockchain? Are regulators ahead of the curve?

NM: I think regulations have been very progressive in allowing the market to develop. We see a lot of great developments in the Indian market. I absolutely recognise that there has been a will to have a progressive approach to financial services.

BT: Do you see some fintech players scaling up and emerging as big players in the financial services market?

NM: We are extremely relevant to our customers. Why? And it's important to compare. We lend to their needs. We lend on mortgages, cards, personal loans, etc. We manage our customers' investments, which include savings and investments, mutual funds, equities, and bonds. We allow all of that. We also protect their families, their own lives, and their assets with insurance. We are extremely relevant to our customers. And we do that through human channels (people advice)  and digital channels. This is what makes us very relevant to the lives of our customers.

For a fintech to be relevant, they would need to expand their services in a similar way. I am sure they will do that. Some will be converted from mono line products to multi-line products. Others will not. There is space for many different models. We believe that our model is to be very relevant to being a 360-degree provider of our customers in a multi-channel approach. We are broad based in terms of products globally. That's our model.

BT: Tell us about HSBC's strategy in India.

NM: I think it's important to frame where HSBC wants to compete in India in the retail and wealth space because strategy then defines what you do, and our strategy is very clear. We want to be the leading international bank for the affluent and high-net-worth population in India. And when I say affluent, I'm talking about emerging affluent, mass affluent, affluent, and high net worth. That is our target. That is where we believe we have the right to win. We don't have the right to win in other segments. So that's where we want to compete. And tied with that opportunity, we also want to be very much present in bringing non-resident Indians (NRIs) back to India to invest in their home country. And for those segments, we deliver wealth lending and transactional services, which include payments, cards, etc. We want to be a full financial services provider in these segments.

BT: In India, foreign banks are exiting retail banking. Your comments?

NM: We are extremely committed to the Indian market. We have a very clear strategy. And this is the key. We know where we can win strategically [and] where we can deliver best-in-class services to our customers. And in India, being HSBC, that is an emerging affluent and high network, those are the three segments where we want to be the leading international bank.

We believe we can succeed. If we deliver best in class digital services, which are key in India. India has leapfrogged many markets in the world. And now it's one of the most advanced mobile players globally. We need to deliver to that standard. At the same time, we have best in class people's advice, best in class products, which are manufactured in many parts of the globe. So, we have all the elements that a global player can bring into the Indian market.