Interview: Unicredit’s Sebastian Hölker on Innovation to Power Growth

While many people only look for the big innovations, Sebastian Hölker, head of global innovative trade products at UniCredit, says he looks differently at innovation in banking. His focus is not so much on the “next big thing”, he says, as on incremental innovation. “It may be considered to be tuning under the hood, but it is innovation and can lead to a complete reinvention.”

Hölker says that it’s not possible to compare innovation in banking with IT innovation. IT really makes a difference and puts a smile on people’s faces, he says. Innovation in banking, on the other hand, is more likely to involve slight changes to fit into multi-layered organisations, their regulatory and tax frameworks. “What looks minor is major from a banking perspective,” he argues.

And along with innovation itself, speed is also important. “Banks should bring innovations up to speed in a quick manner. If I have a revolutionary idea, it doesn’t help if I have to wait three years to discuss it with regulators. Banks should help customers in everyday life and be able to react fast.”

The key process for coming up with new ideas, Hölker says, involves staff meeting with customers. “We work together with relationship managers and some customers really value that.” These customers are more willing to take part in pilot phases. Staff arrange customer sessions to find out what to improve.

Another innovation method, he says, is to break things down into bite-sized pieces. For example, banks can take a part in the bank payment obligation (BPO) mechanism and yet each can use it in a different way.

His team also talks to people in other fields, such as car manufacturing and advertising, to observe their organisational structures and how to drill down to solve other problems. “These sessions are very inspiring,” Hölker says.

UniCredit has an experimental lab which it puts outside the usual controls and where it doesn’t calculate the business case up front.

The bank also makes sure that it does away with ideas that seemed excellent but prove not to be that good in reality. “Sometimes time is wasted because you don’t realise that the idea should be scrapped. Instead you try to change the environment so it fits with the idea. Because we sit with people from different areas, we can quickly do away with ideas that don’t work out.”

Once the UniCredit team decides to make a change, the product approval process is quite formal. The team’s work is checked by legal, compliance, process and accounting departments. Still, Hölker says, his team is connected early on with the legal department and it feels as if “some of the lawyers are almost on my team”.

Automation to Drive Efficiency

Along with innovation, automation provides another opportunity to improve the business. What is really important when looking at automating processes, Hölker says, is to understand that automation is not a goal in itself. Instead, automation should achieve specific targets.

Large clients are striving towards automation to achieve interoperability, dematerialisation and towards full integration. Their challenge is to analyse and put the pieces together in a consistent way. It’s the role of the bank to give a holistic solution, from beginning to end, and also from the upstream and downstream corporates they are connected with. Banks can see where to extract data that will link the physical supply chain to the financial supply chain, which is much more scattered.

Smaller clients often focus on specific areas like cost efficiency or the order-to-cash (O2C) cycle. Others focus on how to place orders and settle disputes all on one platform.

One area where Hölker has seen automation make a significant difference is in payables financing. “We have seen cases where invoices are matched against transportation contracts,” he says. “They are complicated to reconcile, so it takes time to approve the invoice.”

Solutions to automate the matching of the invoice against the agreements are important, and they are especially effective in cases where a large number of low volume invoices mean that manual matching would not make sense. Automation can reduce time by 15-20 days, he says, so there is more time to finance and for earlier payment to the supplier. Suppliers, in turn, can turn trade receivables into cash.

Supply chain finance (SCF) and payments data is much the same, Hölker says, so the bank uses the same infrastructure for both. UniCredit flags data on payments with a later payment date as eligible for SCF, which begins to break down silos and educate colleagues about where to interconnect, promoting a holistic approach.


One specific practice where there are opportunities for improvement, Hölker says, is around letters of credit (L/Cs). While BPOs are essentially an electronic form of L/Cs and there could be opportunities to increase efficiency, Hölker doesn’t think there is much call for it yet. People are used to using L/Cs for safety reasons, he says, and the safety concerns cannot yet be remedied with a BPO. Once uniform International Chamber of Commerce (ICC) rules are published, however, he expects that the bank can use BPOs as an integrated part of SCF. Suppliers won’t have to prepare so many documents, resulting in fewer errors. Buyers will enjoy benefits such as quicker delivery and faster bills of lading for customs clearing.

BPOs are more likely to be used for established relationships, Hölker says. Within the BPO framework, the parties can define the data sets they want to match. In the pre-shipment phase, for example, they can match the purchase order data or production start and end dates.

Corporates can also use BPO logic for physical supply chain triggers. He expects that the uptake will be higher as soon as ICC rules are published. BPO usage will not just copy L/Cs, however, and he expects that users of BPOs will be more innovative.



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