Singapore is the centre for global innovation at Standard Chartered Bank and the “place where most of the innovation takes place,” chief executive officer (CEO) Peter Sands said when the bank opened its new office premises in Singapore recently. Since many financial services professionals may not equate Singapore with leading edge innovation in their industry, gtnews met with global head of transaction banking client access, Neal Livingston, to find out more. Livingston’s insights about how the bank approaches innovation and examples of how the process works provide very useful insights on how to innovate successfully.
Three Themes for Innovation
Three broad themes in the bank’s approach to innovation stand out clearly. First, innovation needs to occur in a location where there are top-level bank staff and plenty of large corporate customers. This reality makes Singapore less of a surprise than it might seem at first glance.
“As a global financial institution [the bank needs] a superb location to attract talent, to put teams together in ways so that they can collaborate as well as to bring a broader ecosystem into that equation,” said Livingston. Moreover, the evolving model for innovation means that working with vendors, clients and even competitors is increasingly important. “There are a disproportionately large number of corporate clients with a presence in Singapore,” he said, and since innovation is increasingly dependent on client input, “that is exceptionally helpful.”
A fair amount of the innovation results from client demand, he said, and this demand is notably from Fortune 100 companies with “the budgets and the willingness and desire to make changes.” Even though they have operations in many countries, more and more global or regional headquarters are located in Singapore. “The lens we look through is multi-dimensional,” Livingston said, adding that working in Singapore enables the bank to leverage a client lens and a geographic lens as well as a product lens.
Second, Livingston said, innovation at the bank is all around the pain points for its customers. Innovations are designed to relieve the pain and make customers’ processes smoother.
One pain point that keeps coming up, said Livingston, is “dematerialising account management and the account opening process.” Another is the timeliness of what you’re doing in terms of the client’s processes. When clients have a 15-minute window for an authorisation to meet a clearing deadline or make a tax payment, for example, the ability to release the authorisation within a 15-20 minute window even when you’re attending a board meeting is critical. “Non-delivery is not an option,” advised Livingston.
Security is also critical, he said, and it is “a deep concern with our larger, more sophisticated clients,” who are more risk-averse. For example, he said, there were times in the past when the third-level authoriser for a transaction – often the chief financial officer (CFO) or treasurer – might call their PA and release the payment if they were travelling or in a board meeting. Although they felt they had no option, it undermined the security of their treasury. It’s innovating around these pain points and solving real customer problems that has led to success.
Third, and perhaps even more surprising than Singapore as an innovation hub, is that collaboration with vendors and even competitors is now a key part of innovation. Rather than conducting research in a secret laboratory or testing out a service on customers only once it’s almost finished, Livingston said that “collaborative innovation” is now critical. The bank needs a combination of “different perspectives, thought leadership and skills to come to the table,” he said, in order to be innovative in a way that is “commercially and economically impactful.”
Livingston said that “we see considerable focus and more interest around collaboration. Projects now involve multiple counterparties and multiple entities bringing different capabilities, different intellectual property to the discussion.” There are often 3-4 counterparties collaborating, he said, and believes the bank will see more of that.
Clients are also far more willing than in the past to contribute to the innovation process. As one example, Livingston said he recently talked with a number of treasurers and CFOs at large clients about resolving a key “pain point”. “My question was: ‘how willing are you to invest people time and money in collaborating to solve this issue’,” he said, and “every one of them said they would be willing to do so.” The pain point is so acute,” he said, that “the corporates are a partner at the table” and most of them understand they need to contribute resources to solve the problem.
One distinction to make, he said, is “collaborative innovation versus commercial competition. The two are not necessarily contradictory. There are scenarios where competitors come together,” he said, because “they each contribute something to the development process, and then separately commercialise that capability.”
Whether a financial institution sites its global innovation headquarters in Singapore, Sydney, New York or London, similar concepts seem likely to lead to successful innovation. Bringing in great people, resolving customers’ pain points and collaborating with more parties than ever before are keys to success.
The Innovation Process
Around those three broad themes, Standard Chartered Bank uses what Livingston calls a four-phase process for innovation. First, there is an ‘ideation phase’ with ‘blue-sky’ ideas where staff first consider a product. Then there is an ‘incubation phase’ where an idea has been established and it is researched, sponsored and assessed. Then there’s an ‘accelerate phase’, where the bank wants to bring something to market but it’s not ready for commercialisation. And finally, there’s ‘full commercialisation’. Livingston commented, “most of our energy is in the incubation phase, distilling down the few ideas that are worth really putting time and attention behind.”
While innovation isn’t all about technology, Livingston acknowledges that technology is a major enabler. “The new technologies that are available, in particular the mobile, are changing the way money can be transmitted and moved.”
Whether a financial institution uses this terminology or something else, the four-step process also provides a good example of what can work well.
Examples of Innovation
Livingston gave three vastly disparate examples of how innovation actually happens, in order to illustrate his points. The first one focuses almost entirely on the back office, another leverages the latest mobile technology, and the third shows how collaborating with competitors can bring unexpected benefits.
The first example is around improving the back office. Clients are making huge investments in putting enterprise resource planning (ERP) in place in order to enable financial and treasury goals around control, reconciliation and visibility. “We sat down with SAP and developed a solution for large clients,” explained Livingston. The next phase was to make it accessible to more clients and to make ERP packages faster, simpler and cheaper to connect. The new set of integration tools provide standardised connectivity so that implementation that used to take 12 weeks and cost US$70,000-US$80,000 now takes three or four weeks and costs US$5,000-US$10,000.
The bank didn’t stop there and recently introduced a service that reduced the cost as well as the timeframe meaning the service is of nominal cost to the client or the bank. “The innovative thing that’s happening here is that it’s a solution the client has never seen before,” Livingston said.
The second example, in mobile, was the launch of an application for authorising transactions. “The problem we’re solving is that most clients apply a three-level security system – an initiator, a person who reviews the input and someone who authorises the transaction,” Livingston explained. The person who authorises the transaction is frequently the CFO or treasurer, who is often travelling and may not have internet access. The new application puts the convenience of authorisation in the hands of the executive on the go while solving the security and interoperability issues so that clients get the same functionality and the same user experience whether they’re on the mobile, online or on the host.
A third example is in the trade finance area, where Livingston says the bank has started to think about how it could leverage that investment in standardising the back office. The first step was to empower relationship managers (RMs) by developing an app to put the portfolio on the iPhone. On the back of that initiative, one member of the innovation team asked ”how about we do that for our clients.” The clients in this case, however, were other financial institutions that might well be competing against them. The bank decided that it was worth doing and decided it would empower their RMs to handle their downstream clients, give the RM real-time access to information and empower that RM to drive value for their financial institution.
While Singapore might appear to be an unlikely spot for global financial industry innovation, the model that Standard Chartered has developed seems to work, and it provides valuable insights into successful innovation. By learning from the process for innovation as well as leveraging the three themes that make innovation successful, other companies too may well be able to drive their own innovation wherever their own innovation hub may be located.
Many banks around the world, large and small, continue to experience major security failures. Biometric systems such as pay-by-selfie, iris scanners and vein pattern authentication can help.
The implementation date of Europe's revised Markets in Financial Instruments Directive, aka MiFID II, is fast approaching. Yet evidence suggests that awareness about the impact of Brexit on MiFID II is, at best, only patchy and there are some alarming misconceptions.
Despite all the automation and improvements that digital banking has the potential to achieve, customers and their needs still form the very core of the banking sector.
Banks might feel justified in victim blaming when fraud occurs, but it does little for customer confidence.