StanChart aims to be a digital bank with a strong human touch

• Only international bank with harmonised core and no large home market
• Driving innovation with seconded teams, internal sandbox and SC Ventures

“WE EITHER work as a fintech, work with fintechs or create our own fintech,” said Standard Chartered group chief information officer Michael Gorriz (pic), who joined the bank in July 2015. Prior to that, he spent 29 years at the multinational automotive corporation, Daimler AG.

Responsible for the banking operations, system development and technology infrastructure underpinning the bank’s client services, Gorriz spoke to Digital News Asia about innovation in Standard Chartered and its digital transformation journey thus far.

Diving into the question of whether Standard Chartered hopes to one day become an entirely virtual bank or still maintain its brick and mortar presence throughout, Gorriz’s upfront response was: “We will have the day-to-day operations fully automated but the people in the bank stay aside and come in when help is needed.”

Acknowledging that the first banking touchpoint is quickly changing from human to digital and that customers have come to expect it, Standard Chartered’s vision is to become “a digital bank with a strong human touch” serving the mass affluent and to be the go-to bank for corporates.

Back in 2015, Standard Chartered announced US$3 billion for system and tech enhancements, with US$500 million catered towards retail banking. Shedding some light on some early investments to meet regulatory requirements, Gorriz said: "This was a whole book of work which absorbed almost half of our whole investment. This year, we see a lot of conclusion or roll outs of these projects.”

Although he declined to share numbers, Gorriz said a portion is also invested into improving cyber-security resilience and carrying out strategic investments.

“While in the beginning it was more of a catch-up, we do not have the funds to go into real exciting stuff like open banking API offerings and the digital banks.”

Digital bank vs digital services

In Hong Kong, the bank recently secured its virtual banking license from the Hong Kong Monetary Authority (HKMA) and announced its standalone virtual bank set to launch by year end.

As to drawing a clear distinction between a digital bank and the digital services offered by a bank, Gorriz said: “Essentially, on a very high level, there is no difference.”

However, he explained that license schemas differ from country to country. “In some countries, it’s possible already to provide a full mobile offering without a special license. The licensing depends on whether a physical Know Your Customer (KYC) is required or customers can be on-boarded fully electronically.”

Through its virtual bank, Standard Chartered’s target is to attract a specific audience of those within the 25 to 35 years of age bracket with “higher education and growing income”. Looking into its socio-demographic footprint, the bank found that it holds the lowest market share within that age bracket and therefore built an offer to capture this age group.

Standard Chartered’s strategy in introducing its Hong Kong digital bank was to team up with Hong Kong-based information and technology company, PCCW Limited; the largest telecommunications company in Hong Kong, HKT Limited; and Ctrip Finance to access a large customer pool.

One common perception banks face is that its innovations are often hampered by its lack of agility due to size and adding on digital as a layer upon old core banking systems. But in Standard Chartered’s case, the bank operates internationally and does not have a big home market. “We are the only international bank of size which has a harmonised core.”

Most of the bank’s competitors have one or two large home markets and an international business. Due to the growth of international banking, many have yet to come to grips with harmonising with their core market because of their scale. Standard Chartered’s core banking system, however, is identical in about 41 out of 45 countries.

“We have good market shares in a couple of markets, which means we have had the luxury from the beginning to have global systems for most of our functions. These global systems have been beefed up in the last couple of years to preserve its capability. Put APIs around them and now we have the presentation layer that is independent of our core,” explained Gorriz.

Standard Chartered is able to roll out features speedily country to country and one such instance is its recent set up of digital-only retail banks across four African markets. “We built a new ‘skin’ but because the core is 90% identical, we were able to roll out this ‘skin’ within 15 months.”

Tripartite effort in innovation

As trust in fintechs progressively grows, the convenience offered by banking products is also increasing simultaneously. “We have to work like a fintech in order to offer the same convenience and speed in the market. One of the main KPIs we are driving is the time taken from ideation to the live service.”

The bank tracks this duration and has since shortened time taken for retail projects from 22 weeks in the start of the year to 17 weeks today.

With one of its strategies being to work like a fintech, Gorriz explained: “We group our teams in journeys that are made up of roughly 100 to 200 people aiming to solve a particular customer problem. Organisationally, they are seconded from their departments into the team. They are co-located and have common targets.”

Each journey consists of people in charge of market research, UX and UI design, compliance aspects, risk management and developers. This way, Gorriz quips, the bank works not just like a fintech but 50 fintechs combined working on different aspects for the customer.

But for solutions that already exist in the market outside of the bank, Standard Chartered partners with fintechs to tap into their knowledge. “Typically, we use [fintechs] in an internal sandbox environment for about half a year.”

“Within two to three weeks, we are able to test their technology in a safe environment. If it then turns out to be viable and reasonable, we integrate them,” he said, adding that these fintechs have to then fulfil all the requirements that the bank also must comply to.

Once Standard Chartered tests out a fintech solution, the bank may opt to use its services or even take an investment stake in the company. Some investments to date are in blockchain startup, Ripple; information management company, Paxata; and cash distribution startup, soCash.

As for the role of Standard Chartered’s innovation, fintech investment and ventures unit, SC Ventures, it is focused on “rewiring the DNA in banking” to develop an innovation culture and mindset, deepen capabilities and experiment with new business models through an open platform and network of people and partnerships. 

It runs an eXellerator innovation lab network across Singapore, Hong Kong, London, Kenya and San Francisco: “There are a few areas where we have to be even bolder and think outside the box. The bank might be a little bit too slow to go there. So we put our separate team on it and let them run independently.”

In fact, this was the approach taken to build the virtual bank in Hong Kong. “We took deliberate decision, cut ties with the mothership and created a new team.”