Wong: What do you envisage will be the next frontier of payments in the next three to five years?
Davis: While there is a lot of focus in the market on mobile payments and associated technologies, I think there is something of a revolution taking place in the more traditional payments space in two main ways.
Firstly, at a local level, the Australian Payments Clearing Association (APCA) has released a roadmap document which maps out the future of low value payments in Australia through to 2018. The Roadmap defines a payment user’s needs as Reliability, Security, Efficiency and Convenience, while the needs of payment providers are summarised as being Business Potential, Global Alignment and Risk Management. Ultimately, what is proposed is a solution path for the industry to follow which is expected to achieve all of these requirements and could very likely result in some degree of convergence between card-based payments and other low value payments.
Secondly, it was recently announced by the UK Payments Council that cheques will be phased out by October 2018, contingent on there being "no scenario" for using cheques by that time. Therefore the decision is partly a means to encourage the advancement of other forms of payment.
In reality, both the Australian and UK examples will achieve a similar outcome, that is, the demise of cheques. But more importantly, they should facilitate a major overhaul and revamp of the electronic payments landscape which in itself could see the adoption of new payment options and technologies.
Wong: You were part of the development of HSBC’s corporate customer platform, HSBCnet, and the banks host-to-host solution for treasury centres and shared service centres, HSBC Connect. What makes them so innovative; and what have been the business benefits thus far?
Davis: HSBCnet and HSBC Connect are both global platforms used by our commercial, corporate and institutional customers all around the world. Being global in nature, these platforms have been designed as a single window for a customer to view, manage and transact on accounts they have with HSBC, anywhere around the world.
Because many of these customers have their own backend systems and internal business processes which are configured for their business, they want to interact with a bank in a standardised and streamlined fashion. As a result, HSBC places a lot of emphasis on the adoption of global standards such as EDIFACT and XML, as well as offering a variety of connectivity and integration options, all with the intent of providing a world-class customer experience. Specifically for XML, HSBC has been an active global participant in both the development and deployment of the ISO 20022 standard and is now the global leader for the number of customers using this message set.
In terms of our web-based platform, HSBCnet, we are continually improving navigation and usability based on feedback from our customers, regular internal reviews and competitor benchmarking.
For a customer, this means a seamless experience, greater efficiency gains and lower risk due to the minimisation of manual processes.
Wong: How do you feel technology has changed your customer’s payments consumption habits?
Davis: The level of investment made by businesses in new technology and systems is growing year-by-year which means that it is even more important for our customers to leverage that investment. As a result, two key themes have emerged as being indicative of the changing habits of customers: Straight Through Processing (STP); and Increased Payment Visibility and Reconciliation.
STP allows a customer to generate a payment as part of their standard business process and have that payment instruction passed to and processed by the bank without any need for intervention or re-work. Processing in this fashion reduces cost, decreases risk and ensures faster turnaround times.
Increased Payment Visibility and Reconciliation is all about having enough information for a payment to know that it has either been successfully processed for outward payments, or successfully reconciled for inward payments. In both instances a business may use that information to automatically update their own accounts payable or accounts receivable system which also supports the STP goal.
For customers that are looking to centralise their payment processing by way of the establishment of a payment factory or shared service centre, these two themes would be considered a ‘must have’ requirement.
Wong: What are your top priorities for the next 12 to 18 months?
Davis: HSBC has a global transformation program underway known as oneHSBC, which continues to be a key priority for us in Australia. This program will touch almost every level of the business and span several years but we are already realising benefits with the recent rollout of a new Global Billing System for our corporate customers. This new capability will present customers with a single, consolidated, monthly statement of their HSBC fees and charges, delivered electronically, providing greater visibility and control over their banking relationship.
At the same time, we are working to broaden local capabilities in our cash management business, particularly in the area of card-based payments, which will deepen the support we provide our customers in Australia and offer them a more holistic set of capabilities.
Wong: How far in advance do you map out your IT strategy; and how responsive are such plans to market changes?
Davis: Firstly it’s important to highlight that HSBC’s IT strategy is centred on the needs of the business and always takes into account the requirements and priorities of the business.
At a global level, we have multiple planning streams in place which feed into the business strategy. Those streams span planning timelines that range from immediate through to more than two years resulting in a 3-tier strategy model defined as Tactical, Directional and Conceptual. The benefit of having a comprehensive approach to strategy is that it allows us to remain responsive to our customers’ needs while exploring new opportunities for innovation.
Wong: From a global perspective, which country and/or region is leading the charge in adopting next generation payments; and why?
Davis: We’re seeing a lot of traction in Africa and Asia for mobile payments, partly driven by the lack of traditional banking infrastructure, as well as having larger, unbanked populations. Whilst mobile payments are well suited for individuals and even small business, the level of usage in the commercial and corporate sectors is still very low due to concerns around security and lack of integration with common business processes. Realistically, the market has yet to determine what the mobile proposition for corporate customers actually is, so it will be interesting to see how this will emerge in the coming years.
There is also a groundswell of activity in more developed markets, such as the United Kingdom, New Zealand and Australia, to redefine or even phase out older, less efficient payment systems.
In time this may see a greater degree of convergence between the behaviours and solutions on offer.
Wong: How do you keep abreast of payments trends and disruptions?
Davis: Working in a global organisation means there is always a team somewhere world that is assessing a new technology, piloting a new service or undertaking customer research. Central to that is being able to leverage all that good work and make it appropriate to the Australian market.
As a product team, we rely a lot on what our frontline staff are telling us but we also ensure that we have our own view of the market which we achieve by dealing directly with customers, speaking with external partners and tracking competitors. At the end of the day, having a strong element of market engagement is vital to ensuring that our product proposition remains current whilst also anticipating new trends and direction.
Wong: What keeps you motivated about your job – is it the technology or the sector?
Davis: It’s very much a case of both – firstly because they tend to be tightly interlinked for the provision of cash management services and secondly, because dealing with customers and pre-identifying their future needs is an important element of any product function. Being able to overlay changes in technology, to map-out strategies and design specific solutions can give a very satisfying sense of achievement.
Bringing all of this together is the key challenge and working on a collaborative basis with other market leaders (such as what we have done with SWIFT and SAP) is, in my opinion, one of the best models to adopt going forward.
Wong: Every leader, particularly at your level, has a legacy they wish to be remembered for. What is yours?
Davis: I want to ensure that my team is continually refining and improving the methodologies they follow, as well as deepening their understanding of the markets in which they operate. The creation and management of the products we offer our customers needs to be done within the context of a structured approach and with proper external validation. By doing this, we are more likely to meet or even exceed the expectations of the customer and deliver a commercially sound outcome for HSBC.
So it’s not all about how soon the latest, cutting-edge technology can be adopted, but rather the effective use of proven technology solutions that provide tangible benefits to our customers. Our business continues to grow strongly and I see that as being testament to this approach.