Most of the mainstream media attention has focused on the job cuts and the bank’s refocusing on the Asia markets - as well as its threats to move its headquarters out of the UK - but there’s a big technology and digital enterprise angle here.
The bank’s looking for up to $5 billion in transformational cost savings, some of which is expected to come from a $1 billion injection into its digital and automation programme.
The bank says that:
Now HSBC has globalised we can re-engineer the Global Businesses and Global Functions, particularly IT and Operations, to leverage our global scale.
What that translates to: increased digital and self-service capabilities will enable the bank to axe around 2000 existing service roles.
HSBC sees three main technology drivers that need addressing:
- Exponential digital / mobile adoption.
- Technology firms entering financial.
- Increasing opportunities and risks in data.
Its ‘mile high’ messaging on how to respond to this is:
- Continued investment in digital to make it easier for customers to do business with the bank.
- Implementing tools for front-line staff to make better use of their time.
- Automating more operations to get more out of high quality low cost service centres.
- Getting more for less from what the bank spends on technology.
What that actually means in practice remains to be seen, but already it’s clear that there will be:
- End-to-end digitization and optimization of its branch network.
- Enhanced online and mobile offerings
- Re-platforming of mainframes
- Data center consolidation.
- Reduce in-country data warehouses.
- Reduce the number of global instances for personal and business internet banking.
- Use of cloud platforms for non-business critical systems, with HR cited as an example.
- “Streamlining” of critical operations such as know-your-customer, onboarding and payments operations.
- Eliminate 750 legacy systems and applications from the current total of around 6,700.
- The introduction of new core banking system.
- Deliver IT projects more effectively, including more ‘off the shelf’ solutions.
- Increase use of Agile development.
- A goal of fully-automated data transfer between systems.
The bank also wants to shift a further 5000 operational roles to low cost/high quality locations, including software development roles. That would put 70% of HSBC’s operations staff in offshore locations and would generate up to $200 million in savings.
On the software development front, 50% is currently done in India and China. That percentage will rise to 75% under the new strategy.
Tech suppliers to HSBC will also come under scrutiny. At present, five major suppliers account for 50% of HSBC’s business with the remaining half covering around 4000 other providers. The goal is to hand over 80% of business to four key suppliers, with the remaining 20% going outside of that elite group.
TechMarketView’s financial services analyst Peter Roe said the whole plan is a major shift of approach to technology strategy at the banking group:
The IT budget is key in their quest for up to US$5 billion in transformational cost savings. This reorganisation will drive a substantial change in HSBC’s sourcing of its IT, opening the door to offshore suppliers and the longer term role of in-house IT will certainly change.
Cloud services will be used more extensively and there is a major opportunity for well-resourced suppliers with domain expertise as HSBC works out how to transform its legacy systems to fit with its new vision.
Inevitably there’s going to be trouble with the trades unions over the plans. In the UK, banking union Unite is seeking an urgent meeting with bosses. Unite national officer for finance Dominic Hook warned:
You can’t cut this many jobs and not effect customer service. There’s already people working extra hours who’ve picked up the work of other people – and this is just going to make it worse for them.”
After all the scandals of recent years, front line staff have suffered time and time again as they are forced to pay for the mistakes of others with their jobs, their terms and conditions and their reputation.
So many people have woken up with depressing news because they’ve been through so much change at HSBC already – so many people have already left their jobs and so our members have been working very, very hard since the financial crisis. And to wake up today and find so many people are going to be losing their jobs – it’s just a kick in the teeth.
CEO Stuart Gulliver says:
We recognise that the world has changed and we need to change with it.
The revamp of the technology strategy is certainly ambitious. With the emerging threat from pureplay digital rivals, we’ve seen plenty of examples of other banks around the world scrarnbling to get their technology houses in order, but few on such a scale.
How this rolls out will set something of a benchmark in the indsutry - in terms of either success or failure!