Brave New Bank
(Special thanks to 11FS team)
In this special guest blog, Deniz Güven, CEO and Executive Director, Virtual Bank by Standard Chartered, discusses innovation in Hong Kong and the development of a Brave New Bank.
When Aldous Huxley wrote ‘Brave New World’ in 1931, almost 90 years ago, he talked about Incubation Centre and Human Accelerators in the context of a futuristic dystopian society. Today those same words are still used in various industries, though with much different meanings. In today’s lexicon, they have cutting-edge implications.
I believe these phrases will again be re-defined by a new chapter of the ‘Brave New Bank’, referring to precise execution and results-driven outcomes in our digital transformation stories.
License to dream
Our particular story begins on October 17, 2017 with the Hong Kong Monetary Authority (HKMA)announcing ‘A New Era of Smart Banking’. When the regulatory body of one of the world’s largest financial markets makes such announcements, there was, naturally, immediate internal discussions.
The Smart Banking initiatives covered seven items though the one that stood out the most was the virtual banking license. What would a virtual bank license entail? What would be covered under such a license? As a licensed bank, what does it mean for us?
The many conversations we had centred around two questions:
If non-traditional players enter our biggest retail banking market, can we defend ourselves with our current model(s)?
How can we increase our customer base? Can we use our existing model(s)?
The answers became clearer; the time to build a ‘Future Operating Model` (instead of only a new interface) was now. With a new standalone Virtual Bank we could defend against potential disruptors and proactively take on incumbents to grow market share. From the start, our team consisted of only 10 people who worked days, nights, weekends and around the clock to finalise our banking application to the HKMA. Through blood, sweat and tears, we submitted the application on August 2018 after three months of intense work.
I strongly recommend one thing – try to cannibalise yourself, otherwise someone else will!
Virtual Bank or New Operating Model?
I am sure another buzz word-laden phrase is unnecessary, although allow me to explain what I mean by a ‘New Operating Model’. Since 2013, challenger banks have fallen into two broad categories 1) Digital Banks coming from Traditional Banks, 2) Real Digital Banks coming from nowhere. These were the first-generation challenger banks.
I’m putting banks like ING Direct or Metro Bank in the UK outside of this category, as they were the first of their kind. Let’s talk about real digital attackers. I believe there are 10 key characteristics of a New Operating Model for our Brave New Bank:
Building a new tech stack from scratch
Re-defining whole customer onboarding models
Re-visiting AML, FCC and Fraud systems from customer’s perspective
Being a real cloud-based bank
Re-writing the risk frameworks and policies for the new model
Building a marketing stack, not a branding engine
Creating a service not product-led bank
Creating a hiring culture with a Midas touch
Growing with Ecosystems, not alone
Setting New KPIs with a laser focus on `Heart Share` rather than `Market Share`
As always, these are easy to say, though much harder to execute. I will cover a couple of these. Moreover, there will always be push-backs based on what I believe are urban myths against this New Operating Model…
If you are coming from a traditional sector, the first myth you may have heard from day one is cannibalisation. Much can be said about this; however, I strongly recommend one thing – try to cannibalise yourself, otherwise someone else will! You can delay the deadline but don’t be too late to build a New Operating Model.
Second, cash is king. Yes, many markets still prefer physical cash and there will be a migration curve, but we need to start from somewhere. If you have first mover advantage and enough strength to carry on, that’s a great initial victory. In our Brave New Bank, I believe physical cash will be a form of nostalgia that one will only need to withdraw once a month.
Last but not the least, how are you going to differentiate from your competitors. One cannot just count on differentiating with digital or technology. There are many ways to stand apart, but the most important thing is to focus on and address customer pain points. If you can identify the real pain points, then when you bring something real to the table it sets you apart.
I believe Chris Anderson’s long tail hypothesis could not be truer. If you have the right tech and marketing mix, reaching millions is just a matter of time. Marketing is really becoming real-time and performance based. If it is not performance based, it is not marketing for our Brave New Bank. The new marketing stack is not only about implementing a couple of new tools, it is a new mindset, a new culture.
‘Midas Touch’ as a culture
Midas was a legendary king of Phrygia (in modern-day Turkey), known for turning anything and everything he touched into gold. Imagine the ability to have such a magical ability.
That’s what we look for in our people. Not the ability to create instant wealth, but the passion and desire to turn something ordinary into something extraordinary. We started this journey with two people in early 2018. Now we are over 100 people. We never prioritised talent selection based on schools or fields of study. We selected people who wanted to make a difference, to make this Midas Touch real. We believe with the right people onboard, the rest is not too difficult.
We have small targets and big dreams.
Ecosystem as a growth hacker
No one succeeds alone. I know you can think it is easy to find growth hackers but I’m talking about something else. Mobilising the ecosystem as a real growth hacker for your business is vital.
In our journey, we have decided to do this properly, not just to engage in campaign partnering. We established a strategic joint venture partnership (with total committed funding of over US$400m) with Hong Kong’s leading telecom, media and digital solutions providers – HKT and parent company PCCW Group, as well as one of the world’s most innovative travel companies, Ctrip.
The joint venture will draw on the partners’ respective strengths to reach a broader spectrum of customers and to redefine the digital banking experience in Hong Kong by:
Integrating virtual banking into the service offerings to PCCW’s, HKT’s and Ctrip’s established customer bases
Providing a suite of retail financial services and products, as well as unique telecom, entertainment and travel propositions from partners all in one place
Offering services that are personalised to customers’ circumstances, interests and needs
‘Heart Share’ as a KPI
After months of waiting, we received our banking license in March 2019. This was a high point for everyone involved and the most memorable moment in my life. At the same time, we announced our joint venture with the best partners.
While there will be no doubt be other virtual banks and Fintech or TechFin companies, I believe the main value of banking will always be customer trust, which is deeply rooted in our 160 years of history in Hong Kong.
We aim to be a game changer in this new era of smart banking. Our aim is to bring the best customer experience and digital banking services to Hong Kong. We have small targets and big dreams. Our target is to open this new operating model this year. Our goal is to gain the trust and ‘Heart Share’ of customers in Hong Kong instead of market share. When people start to talk, recommend, share news, and get excited about our services and offering – that will be the biggest prize for us.
Long live the Brave New Bank!