WORKWEEK

Silicon Valley Bank’s crash in Europe led to HSBC scooping up the UK side of SVB (in under a weekend) and First Citizens Bank jumping in (later in March) to acquire the US arm. 

It was a weekend that shook up the world of fintech across the globe. 

Now that things have started to settle, Ian Stuart, the HSBC UK CEO, had a few things to say about the future of Silicon Valley Bank UK, its relationship to US fintech, the global expansion plan, and top trends such as artificial intelligence and sustainability that the industry is facing while on stage at Money 20/20 Europe earlier this month. 

Here’s what you need to know. 

Since taking over SVB UK in March, HSBC UK has been working tirelessly to migrate the existing systems and processes of SVB to those of HSBC UK. 

With the hope of completing this transition by the end of August, Stuart has his sights set on the next phase of the SVB business: a rebrand and global expansion. 

With this transition, you may have wondered if HSBC’s more traditional stance on financial risk will lead to a more risk-averse approach to the startup tech space (I know I’ve been curious). 

However, Stuart reassured the audience that while the name changes, SVB will continue to operate with its own board and risk policies. He said, “We are going to protect what SVBs’s got to do.” 

With this commitment, it’s clear that HSBC UK is looking to move forward with the best of both worlds: the traditional finance of HSBC and the innovative spirit of SVB UK. So, the bank’s got a strategy and plan in place: 

• SVB UK will fund startups from seed funding through IPO. “Customers will never have to go outside that network to meet all the funding requirements,” Stuart said. “The plus side is you’ll get all the extra HSBC products and support.”
• From there, the plan is to take it global. “And when I say the plan, that’s not a long-term plan,” Stuart said. “We want to be global very, very quickly. Setting up infrastructure in the US, the UK, Israel, Middle East, and Asia.” 

With the SVB acquisition plan in place, what else is top of mind for the bank CEO? 

1. AI: Let machines do the ordinary and let humans do the extraordinary. AI should be used to manage routine tasks, freeing up human capital for more exciting and complex tasks.
2. Digital currencies are rising, and central banks are actively working on them. However, the question remains of how they will be used.
3. Collaboration is crucial in the banking industry, particularly in sustainability and the innovation economy. Government investment in the innovation economy is also essential. Sustainability is the future of fintech and banking and financial institutions must play a role as more businesses and consumers value sustainability.

Let’s dive into these trends a little further. 

AI can revolutionize banking.

And HSBC is embracing that AI can automate mundane manual tasks, like the annual review of the bank’s 400,000 – 500,000 UK business accounts, freeing relationship managers for work more suited to their valuable human capital. 

The potential benefits of AI in banking go beyond just automating manual processes. AI can also help banks offer their customers better products and services. For example, AI could analyze customer data and provide personalized investment advice based on individual needs and risk profiles. This could help to make investment products more accessible and affordable for a broader range of customers.

Another area where AI could be valuable is in fraud prevention. Banks constantly seek ways to improve their fraud detection and prevention capabilities. By analyzing large amounts of data and identifying patterns and anomalies, AI could help banks to detect and prevent fraud more effectively.

Of course, there are also potential risks and challenges associated with using AI in banking. One concern is that AI could be used to make biased or discriminatory decisions, either intentionally or unintentionally. Banks will need to be careful to ensure that their AI systems are designed and implemented fairly and transparently.

(Read more about Responsible AI from Rumman Chowdhury here). 

Digital currencies are coming.

Digital currencies are becoming increasingly relevant in the financial industry, with central banks actively working on developing them. While there is still some uncertainty around how they will be used, it is clear that they are coming and that traditional financial institutions need to be prepared for their arrival.

One of the industry’s main challenges is the need for more understanding of the differences between crypto and digital currencies. While crypto may be more volatile and speculative, central banks are developing digital currencies that are likely to be more stable and widely accepted. However, the question remains about what they will be used for and how they will be integrated into our daily lives.

China is currently leading the way in developing digital currencies, and other countries are likely to follow suit. While it is still unclear how they will be used, it is clear that they are coming and that traditional financial institutions need to be prepared for their arrival.

In the UK, the tech scene has faced several challenges since Brexit, including a harsh listing environment for technology companies. However, the recent acquisition of SVB by the government has shown a commitment to the innovation economy, and more investment will likely be made in this sector in the coming years.

Challenger banks drove innovation forward.

One of the catalysts for innovation has been the rise of challenger banks. These new entrants to the financial industry have disrupted the traditional banking model by offering innovative products and services that are more customer-centric and technology-driven.

In the past, conferences and discussions focused on how challenger banks and fintechs would kill the big banks. (LOL). Luckily, the conversation has shifted to partnership, with traditional financial institutions learning from their new competitors.

Stuart admits that challenger banks have made traditional banks better. 

They have given them a wake-up call, forcing them to re-evaluate their business models and embrace new technologies. 

True. Without the competition from challenger banks, traditional banks would have continued with their old ways, and innovation would have been slower.

Still, one of the biggest threats to traditional banks is the rapid pace of technological change. 

With the rise of digital currencies and other fintech innovations, banks must be prepared to adapt quickly or risk becoming irrelevant. 

However, this also allows banks to embrace new technologies and work with fintechs to develop innovative products and services. By working together, banks and fintechs can create a more innovative and customer-centric financial industry.

Sustainability and innovation are the industry’s future. 

We can only imagine what the future of fintech and banking will bring over the next two decades. Still, Stuart’s two significant focus areas are crystal clear: the innovation economy and sustainability. 

We are entering an unprecedented period of technological advancement, with the potential to revolutionize how we transact and interact with our finances. At the same time, sustainability is becoming a top priority for companies and consumers alike, and banks have a critical role in financing and supporting sustainable initiatives. 

Together, these two forces will shape the future of fintech and banking for years to come, and it’s an exciting prospect, especially as we look forward to a more inclusive economy.