06 December 2018

Digital Banking Evolution
Shifting Sands Spell Opportunity

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By Andrew Long, HSBC Oman, CEO

Countless edits have been made to banking norms since the world’s oldest bank was established more than half a century ago, in 1472. Today is no different. Are the world’s traditional banking systems changing? Of course – and such evolution is healthy. In the seventy years that HSBC has been in Oman and during its 129 years in the wider Middle East, the bank has witnessed operations transform from handwritten ledgers to high-volume transactions made via mobile applications. The only certainty we have is that this journey of change will continue and that those smart and speedy enough to leverage it will be the most successful.

HSBC has already made major progress. In Oman and in the wider Middle East, North Africa and Turkey, the bank uses a ‘Total Digital’ approach that puts customers at the center of process re-engineering and product development. Market-leading capabilities are delivered so that, in many ways, they are invisible to customers. The value of such seamless offerings will only grow in importance as Oman’s population – and therefore the potential customer base – grows. The half a million people living in the sultanate in 1950 has risen to 4.6 million today, according to the United Nations (UN). The number of residents will climb by 26% to 5.8 million by 2030 and 45% to 6.7 million by 2050.

The recent HSBC Navigator report estimates that more than a third of businesses believe greater use of technology will be their main driver for trade growth in the years ahead. Such sentiment will help accelerate the rate of investments in what is still a largely embryonic space. For example, the International Data Corporation expects the worldwide revenues on artificial intelligence and cognitive systems to climb from today’s $12.5 billion to $46 billion in 2020 – a compound annual growth rate of around 55%.

Banks and service providers must stay on their toes – today’s products may not suit customers’ needs tomorrow. For example, at the advent of broadband technology, HSBCnet was launched and has since been constantly updated to make it more user friendly and secure. And an ongoing program, the ‘Digital Transformation for Corporates Program’, is investing several billion dollars’ worth into HSBC’s digital platforms. This includes updates to the bank’s host platform, HSBC Connect.

Successful digital transformation strategy also means ensuring that a bank’s business and digital visions are aligned. There must be harmony and room for growth between the two – a marriage with longevity – for now they will forever be entwined. Variations in the internal goal posts would risk splintering customers’ morale and slowing progress, eventually dulling the bank’s competitive edge. Teams focused on technology, customers and risk especially must pinpoint a strategy that they collectively strive to achieve. Unity pays – literally.

This ethos extends to strengthening ties and learning from others, including the FinTech sector. Financial Institutions (FI) will increase internal efforts to innovate, according to 77% of respondents to a PwC survey last year that explored the new ties between FIs and FinTechs. Importantly, 82% of FIs expect to increase FinTech partnerships in the next three to five years. Such integration does not dilute the value of traditional banking; it will only enhance it.

Together, how can we leverage digital to spur growth? How can digital help organizations improve their optimization and help customers? And most importantly, how can these efforts help Oman achieve its national goals? The sultanate ranks 62nd, up from 66th year-on-year, in the latest Global Competitiveness Index, which covers 137 economies. National competitiveness is defined as the set of institutions, policies and factors that determine the level of productivity. How can the banking sector and all associated entities push Oman higher up ladder for the 2019 Index? Oman’s talent and ambition are aplenty; both just need to be repositioned for optimization in this digital era.

The International Labor Organization (ILO) estimates Oman’s unemployment was 17% in 2017, while youth unemployment is approximately 49% – a pressing challenge in a country where more than 40% of the population is under the age of 25. Against this backdrop, digital growth in the banking sector and beyond offers a huge opportunity. Global strategy consulting firm, ‘Strategy&’, estimates that digitization could add as much as $820 billion to GDP in the region and create 4.4 million new jobs by 2020. Fears that the number of jobs will slide are unwarranted. A global study of nearly 1,000 organizations with revenues over $500 million by Capgemini, a leader in consulting and technology services, found that 83% of respondents have created new jobs because of AI. Three-quarters of firms have seen a 10% uplift in sales directly tied to AI implementation and 63% said that AI has not destroyed any jobs in their organization.

Disruption breeds innovation, which in turn enhances ease, speed and protection. All these features are at the top of HSBC’s list of priorities; each highly coveted by customers. Digital innovations will continue to be a cornerstone of banking in the 21st century – one that HSBC absolutely embraces.

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