Costly legacy systems and physical branches will actually work in the favor of traditional global banks in new digital era, HSBC believes in a conversation with finews.asia.
«The way we look at it, there’s no such thing as a virtual banks per se,» said HSBC’s head of digital for wealth and personal banking, Hong Kong, Andrew Eldon to finews.asia. «Although we are mindful of the competition, we do not think they are inherently different from any other banks.»
Although virtual banks may pride themselves in alluring design and intuitive user experiences, Eldon believes not only that such capabilities can replicable – albeit at varying levels of efficiency and cost – but that the ability to provide effective financial services still sits at the very core of the business.
«They are subject to the same rules and regulations. They are also subject to the same macroeconomic and financial market conditions,» Eldon emphasizes, commenting on Hong Kong's newly licensed digital lenders. «What we have, effectively, are just eight new banks.»
Legacy Systems Work
One of the oft-cited disadvantages of traditional banks relative to digital banks is the issue of burdensome legacy systems. Outdated built-in processes have often led to very slow but expensive outcomes that are all the more magnified in a technological age that frequently demands immediacy.
Whilst Eldon agrees with the comments, he notes that legacy systems need to be reviewed more holistically to appreciate their full benefits. In addition to comprehensive proprietary product platforms – a much harder feature to replicate – they house rich pools of data that provide vast insights about clients and markets. And, perhaps more importantly, they are tried and tested.
«Legacy systems can be slow, inflexible and costly to run. Yes, this is all true but legacy systems also work,» Eldon said. «They are incredibly reliable and have been running for a very long time.»
Branches: Not a Binary Matter
Should banks keep or lose their branches? This question is posed by many that believe the brick-and-mortar banking era is over and that physical branches have little purpose but to execute low or zero-fee services while acting as a major cost drag with marketing benefits.
But Eldon believes the argument is not a «binary matter», adding that branches can in fact be enhanced by modern innovations such as the use of visual technology during in-person client meetings.
«Many comments suggest that branches are a thing of the past and online banking is the present,» Eldon said. «We do not view this as a binary matter. It depends on the different markets and in the case of Hong Kong, for example, many still prefer to visit branches for complex transactions and discussion.»
Innovation a Necessity for Survival
While maintaining the traditionally effective facets of its business. HSBC in the meantime has continued to invest digital innovations in the last four to five years especially with a focus on mobile banking capabilities. Recently, it has made new releases every month to enhance its mobile capabilities such as online-only account opening or low-cost portfolio solutions.
But Eldon stresses that this sense of urgency to innovate does not apply to the financial sector alone.
«This is not a matter of finance only. If you are in any industry right now and you are not innovating, you may want to rethink things,» he added. «The world is moving very quickly and customer expectations are rapidly changing.»
