FStech meets: Stephen Bayly, CIO, Markets and Securities Services at HSBC

What does your role entail, and how does your part of the bank approach new technology?

My role involves ensuring that existing technology within Markets and Securities Services is fit for purpose from a regulatory, commercial and functional standpoint and meets the performance required to support the business. This means ensuring our platform is optimised to deliver the best outcomes for our business, while also managing the inherent technology related risks.

Another dimension of my role is helping to ensure that the bank is fit for the future. That involves looking at the evolution of technology trends in the banking industry. We are often horizon scanning for new technology and how it might impact financial services and we have a team identifying and exploring key trends. Following an initial exploratory stage, we will undertake a proof of concept. If that is successful and it is clear that the technology has the potential to transform some aspect of financial services, we will either integrate it into an existing offering or create a new service offering.

Can you give some details of tech innovation your team has been working on recently - and what else you've got in the works?

I would highlight two recent initiatives. HSBC has played a role in a ground-breaking deal demonstrating how digital technology could help businesses issue bonds securely, efficiently and quicker than ever. Since last year, the Bank has been working with the Singapore Exchange (SGX) and the sovereign wealth fund Temasek Holdings to explore the use of distributed ledger technology (DLT) in the country’s bond market. The partnership has just successfully trialled a fully digitalised bond issuance on a newly built SGX DLT-enabled platform. This is a first for both Singapore and for HSBC, with HSBC providing technology to bridge flow of information between the traditional way of issuing a bond and this new way. We continue to monitor and be involved in digital asset developments, from Central Bank Digital Currencies (CBDC) to tokenisation of assets and the use of smart contracts.

We have also launched a cloud hosted Data Mesh, which will consolidate data from over 200 systems into one and have the ability to make data recommendations to clients based on what they have looked at previously. It will enable HSBC to offer clients insights and new services by combining the clients’ data with data from third parties and applying artificial intelligence. These insights could include advice on corporate actions, the best operating model to use in a new market or the clients’ approach to pricing.

Separately, we are developing a chatbot that extracts information from chatrooms to speed up processes and provide data and analytics that would not have been possible before.

We have also recently announced our involvement in the European Next Applications of Quantum Computing Project, so that is another trend we have our eye on.

How does this fit into what the wider industry is doing - how does HSBC not just keep up with the competition, but try to lead on innovation?

We are always looking at technology trends that are emerging and looking at how to apply these to benefit the Bank and our clients. We are highly regulated and we need to work through the technology impacts of a trend as well as the regulatory and compliance implications and in that way we are slightly different from a technology company. We engage with the major exchanges, particularly in Asia, and with the whole financial market infrastructure both through industry forums and speaking with the key players.

And as a global organisation with a broad banking remit, how do you compete with more focused and flexible FinTech startups?

We are not always competing in the same landscape as FinTechs. A FinTech might produce a product for a focused group of customers, whereas our clients have a broad base of requirements. We bring a balance sheet that enables us to do far more for a client than a FinTech can. Banks also have more experience of protecting customer data and complying with regulations than FinTechs do.

We engage with FinTechs and see if they can be a part of a solution to clients’ needs. We selectively invest and partner with them to ensure they are fit for purpose. Both parties have things to bring to the table.

HSBC hasn't been immune to restructuring in recent years, so what's the strategy for automating more processes and moving away from legacy systems?

We are moving away from legacy architecture. We want to do that in a way that insulates clients from the impact. One way in which we are doing that is to wrap new technology around older technology so that we can gradually decommission it without affecting clients.

We are increasing investment in artificial intelligence and machine learning. A lot of manual activity on some of our platforms relates to knowledge in the minds of users. The more we can aggregate that knowledge the more we can automate that decision-making. There are also some parts of the Bank where we can build new digital services and migrate older systems to them.

How is the group preparing for whatever a post-COVID new normal looks like within banking?

Workplace technology is a big theme here – clearly we are never going back to the everyone in the office model. We have collaborative tools for people to work effectively at home and in the office with the right controls in place. We are communicating with employees in new ways, such as through virtual town hall meetings, and we have videoconferencing and other client collaboration tools. We are exploring new tools that are compatible with a variety of different ways of working. It is important to have a number of options so that we can respond to whatever the future holds.

We are also accelerating digital innovation against the backdrop of Covid-19. An example of this is our new SmartServe platform, which helps clients navigate the bank’s onboarding process and to maintain account information. The platform has been shortlisted in the Covid-19 Response category of the Banking Tech Awards.

In response to the COVID-19 pandemic, HSBC mobilised and deployed a digital solution that helps small businesses impacted by COVID-19 access financial relief through the US government Paycheck Protection Programme (PPP). So far SmartServe has helped HSBC administer over 4,000 US Government backed loans, directly supporting over 100,000 US jobs, many of which are now eligible for forgiveness as a part of the US CARES ACT stimulus package.

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