Banking on transformation
Head of Standard Chartered says financial services industry has yet to tap even one percent of the potential that digital advances can offer
The rise of blockchain technology, quantum computing, artificial intelligence (AI) and digital currencies will completely transform how banks operate in the future, according to William Winters, group chief executive for Standard Chartered Bank.
"The ways that we make money today will be completely different from the ways that we will make money in 20 years, or even 10 years," Mr Winters told Bangkok Post in a recent interview.
Standard Chartered, like other international banks, has invested billions of dollars over the past several years to upgrade legacy technology and adopt new digital applications, processes and systems.
Mr Winters said that while such technologies have improved efficiency and service, banks have yet to achieve even one percent of the potential offered from digital transformation.
Standard Chartered uses AI and big data in a variety of functions, such as in screening transactions and monitoring accounts for compliance with anti-money laundering rules, analysing payment flows to help corporate clients better understand their supply chains, to identifying market trends for new product development.
Earlier this year, the bank launched its first digital-only bank in Côte d'Ivoire, a test that Standard Chartered hopes to replicate in other emerging markets across the world.
"It's been very well received. Clients can conduct pretty much any service that they could in a branch, other than the physical handling of cash," Mr Winters said.
Standard Chartered sold its Thai retail banking business to Tisco Bank last year but continues to serve corporate and institutional clients in the country. Photo: Pornprom Satrabhaya
"And it's great for financial inclusion. So people who had been unbanked, or underbanked, get access to the financial system beyond the payment capabilities that they had on their phone already in the form of electronic wallets and other things of that nature."
But Mr Winters said that while digital technologies will only grow in the future, there will continue to be a need for brick-and-mortar branches for years to come.
"People will appreciate advice from a human being long after it's clear that the machines are actually smarter, because the machines will never have the emotional quotient of a human being," he said.
"At least that's my conjecture … as a human being. I like to have access to a human from time to time to make important decisions," Mr Winters said drily.
For Standard Chartered, while technology has helped automate back-office functions and has led to a reduction in physical branches, headcount has remained unchanged, with increases in staff for regulatory compliance and technology development, as well as relationship managers.
"Clients want more human interaction for the difficult decisions they are taking, and less interaction for the more manual processes. So we have more relationship managers, more wealth advisers, more product developers and more people who understand customer trends," Mr Winters said.
Standard Chartered, which opened its first branch in Thailand in 1894, last year sold its retail banking business to Tisco Bank as part of a global restructuring to improve returns.
Mr Winters said the bank's Thai retail operations were "underprofitable", and that the investments required to achieve scale and a technological edge to achieve sustainable profitability in the local market were deemed unviable.
"It's a very competitive market where scale is important. We were not a scale player, so the options were either invest really substantially to achieve the scale necessary, with questionable outcomes given the competitiveness of the local market. Or sell to somebody who's prepared to play that scale game themselves," he said.
"It's completely different in the corporate market, where we are a scale player with a leading share in global trade finance, financial markets, foreign exchange and other segments. … We are completely committed to Thailand."
Mr Winters said 2019 was shaping up to be a more difficult year for the global economy, particularly with the trading system under pressure and the US-China trade dispute.
While the rhetoric from Washington has yet to affect trade flows, investment has been affected, he said, with US companies shifting investment in China to other markets in Asia to diversify supply chain risk. Slowing economic growth in China will also affect growth in Asia and the world.
The narrative has taken a toll on the bank's share price, despite pre-tax profit growth of over 30% year-on-year in the third quarter to US$1.1 billion. The bank's stock on the London Stock Exchange is off 23% for the year, compared with an 8% decline in the FTSE 100 index.
"Our share price is terrible," Mr Winters said plainly. "To be a European bank has been an unfortunate sector to be in, even though our business is substantially Asian. To be a European bank with a China nexus during the rhetoric about trade wars hasn't been helpful at all."
Mr Winters, who joined Standard Chartered as CEO in 2015, said the bank has maintained strong income growth over the past 18 months while continuing to exercise discipline in costs and investing heavily in new technology.
Standard Chartered this year also announced that it would stop financing new coal-fired power plants worldwide as part of a commitment to support the Paris Agreement on climate change, joining other large international banks such as Deutsche Bank and HSBC.
Mr Winters said Standard Chartered was also looking to track not just the emissions of the bank's worldwide operations, but also those of the clients it finances in industries such as steel, aviation and real estate.
Once a benchmark is identified, the bank can then work with clients to help them reduce emission levels through technology investments.
Addressing climate change is an economic obligation as well as a moral one, said the 57-year-old American executive, who was head of investment banking at JPMorgan Chase and later founded a hedge fund before joining Standard Chartered.
"Our colleagues in Standard Chartered don't want to work for a company that is contributing to the destruction of the planet. So in the war for talent, it's extremely important," he said.
"Our clients care very much that their bank is behaving responsibly. And our shareholders care. When we have meetings with shareholders and talk about governance, this is often the most discussed matter. 'What are you doing concretely?'"