HSBC India has launched digital banking solutions for its corporate customers.
“HSBC SmartServe and HSBC IntelliSign are first-of-its-kind digital solutions aimed at ensuring a quick, secure and seamless on-boarding process for corporate clients,” it said in a statement on Wednesday.
The API-enabled solutions provide an accelerated on-boarding experience, replacing the documentation process with a digital platform, including the use of electronic signatures, as well as leveraging existing data assets to complete account opening requirements, it further said.
“HSBC SmartServe is a newly digitised account on-boarding and life cycle management solution,” the statement said, adding that a single interface of the platform provides clients with a fully automated on-boarding solution, where they can submit data and documents directly and securely, in addition to receiving confirmations and alerts.
HSBC IntelliSign enables corporate clients to execute product on-boarding and lending documents digitally. It also offers an E-stamp duty feature and E-signature solutions based on Aadhaar e-verification and DSC signing as per legal provisions in India.
Global banks are feeling the coronavirus heat in India.
With several employees or their kin down with Covid, Wall Street banks with centres in top metros including Bengaluru, Mumbai, Pune and Gurgaon, are moving some work to overseas locations.
About 200 employees at HSBC’s tech centre in Bengaluru are affected due to Covid, and its centres in China and Krakow have picked up work from Bengaluru.
Deutsche Bank, with 4,000 employees in Bengaluru and Pune, said it does not expect the pandemic to disrupt its operations as it has all the contingency plans in place.
Standard Chartered said last week that about 800 of its 20,000 staffers in India were infected. As many as 25% of employees in some teams at UBS are absent.
Wells Fargo
At Wells Fargo & Co’s offices in Bangalore and Hyderabad, work on co-branded cards, balance transfers and reward programs is running behind schedule. Some work is getting transferred to the Philippines, where staff is working overnight shifts to pick up the slack. The San Francisco-based bank employs about 35,000 workers in India to help process car, home and personal loans, make collections, and assist customers who need to open, update or close their bank accounts.
Wall Street giant Morgan Stanley, which has 6,000 employees in Mumbai and Bengaluru, said a small percentage of its staff
have been impacted due to the pandemic, though it is operating in a business-as-usual mode.
Goldman Sachs
Goldman Sachs’s Bengaluru centre which has over 6,000 employees across all the businesses, had close to a 48-hour impact as some of its employees were affected by Covid.
But the work was picked up by Salt Lake City in Utah that makes up the second-largest presence in North America. Work from India moved to London too in those 48 hours.
At UBS, with many of the bank’s 8,000 staff in Mumbai, Pune and Hyderabad absent, work is being shipped to centres such as Poland. The Swiss bank’s workers in India handle trade settlement, transaction reporting, investment banking support and wealth management. Many of the tasks require same-day or next-day turnarounds.
Barclays Plc is shifting some functions were shifted to the UK from India.
Citigroup Inc said there’s currently no significant disruption, while Deutsche Bank AG said employees were working seamlessly from home.
Dire predictions
Nasscom, the key lobby group for India’s $194 billion outsourcing industry and its almost 5 million employees, has downplayed the threat to operations.
Experts have warned the crisis has the potential to worsen in the coming weeks, with one model predicting as many as 1,018,879 deaths by the end of July, quadrupling from the current official count of 230,168. A model prepared by government advisers suggests the wave could peak in the coming days, but the group’s projections have been changing and were wrong last month.
Citi‘s decision to exit 10 Asia-Pacific markets including India was an impact of the accelerated disruption caused by the Covid 19 pandemic which has forced large banks to refocus management bandwidth and capital across the globe.
The disruption caused by Covid has forced all banks to realign their strategy as building a localised retail model especially in India where phyigital is emerging, is tough. Also, there is competition from new lenders like Bandhan and IDFC First and small finance banks.
“We believe our capital, investment dollars, and other resources are better deployed against higher returning opportunities in wealth management and our institutional businesses in Asia,” said Jane Fraser, CEO at Citi, while announcing the shutdown of consumer banking business in Asia including in India.
With consumer business being very competitive with the lender having to invest in people, technology and process.
India consumer business
Macquarie Research has valued Citibank’s India retail business at around $2 billion, based on their Basel III disclosures in the country. This makes India the most valuable business among the 10 markets in the Asia-Pacific where Citi plans to exit consumer business. These 10 markets
are collectively valued between $6.3 billion and $8 billion by Macquarie.
According to a report by the Australian bank, going by SBI Card’s valuation, Citi’s 2.7 million cards would imply a figure of $2.7 billion. “This is above the top end of our valuation… To the extent that a single buyer is able to purchase multiple businesses at once, we would expect some sort of valuation discount in order to expedite Citi’s exit,” the report said.
“As the deal does not come with bank licences nor distribution, the sale is likely to take place in fragments. Across the region, there are very few banks who have the requisite footprint to bolt-on all of Citi’s various retail businesses,” the report had said.
The report identifies DBS, OCBC and StanChart as possible cross-border buyers, but is uncertain about HSBC. Besides the 10 Asia-Pacific markets, Citi announced its plans to exit consumer banking from three other markets — the Philippines, Poland and Russia. A Bloomberg report quoted a Citi official stating that the bank was looking to sell its entire operations in India in one go.
“We have always been open to exploring sensible bolt-on opportunities in markets where we have a consumer banking franchise and where we can overlay our digital capabilities to serve our customers better,” a representative for DBS told Bloomberg.
The reasons for exit
Also, due to regulations, Citibank was not able to build scale in consumer banking. To be sure, RBI has allowed foreign banks to set up branches or acquisitions if they shift from the current branch model to wholly-owned subsidiary model. DBS India shifted to the subsidiary model and has expanded hugely with the acquisition of Lakshmi Vilas Bank.
Citi has expanded its retail business in the early 2000s and was among the pioneers of corporate sector salary business with its Suvidha accounts, but was hit after the 2008 financial crisis globally, which saw the break up of the bank. It was then steered out of the crisis by Indian born CEO Vikram Pandit.
Citi India, which operates as a branch of the global giant, has a balance sheet size of Rs 2.18 lakh crore. HSBC with a balance sheet size of Rs 2.11 lakh crore and Standard Chartered with Rs 1.84 lakh crore in 2019-20.
The Reserve Bank of India has set up a Regulations Review Authority (RRA 2.0) initially for a period of one year from May 01, 2021. The RRA will review the regulatory prescriptions internally and seek suggestions for simplification and ease of implementation from RBI controlled entities and other stakeholders.
The RRA has formed an Advisory Group made up of representatives from regulatory entities, including compliance officers, to help the RRA achieve the objectives set out in RRA 2.0’s terms of reference. The Group will assist by finding areas/regulations/guidelines/returns that can be rationalised and submitting reports to RRA with recommendations/suggestions on a regular basis. The composition of the Group is as under:
Abadaan Viccaji, Chief Compliance Officer, HSBC India
Member
The Group has decided to invite feedback and suggestions from all regulated entities, industry bodies, and other stakeholders to undertake its preparatory work. Suggestions and feedback should be emailed latest by June 15, 2021, with the subject line Suggestions to the Advisory Group of RRA.
Jetting off at a moment’s notice to visit clients was second nature for many investment bankers before the pandemic struck. After more than a year of lockdowns and remote working, plenty of executives are now saying the days of regular globe trotting are gone for good.
There “will definitely be much less travelling,” Nordea Bank Apb Chief Executive Officer Frank Vang-Jensen said Thursday, while Standard Chartered Plc’s finance boss Andy Halford told Bloomberg Television he expects travel costs to reduce sharply: “We see a step change down in the level of travel once we normalise out of this.”
Earlier this week, HSBC Holdings Plc Chief Financial Officer Ewen Stevenson said his bank was budgeting for travel costs to fall by half, with greater reliance on “video technology and having people go on fewer, longer trips when they do travel.”
The changes — once unthinkable — are the latest adjustments to office life staples now the pandemic has proved the case for remote working. Banks are shrinking their real estate footprints as outfits including Deutsche Bank AG and UBS Group AG say they are open to making flexible working the norm, although some Wall Street firms have been more skeptical of the shift. Goldman Sachs Group Inc. CEO David Solomon has said work-from-home is an “aberration.”
Cutting back on flights could mean big savings, as well as environmental kudos.
HSBC has said travel costs were down $300 million in 2020, suggesting an annual saving of $150 million going forward if behavioral changes stick. JPMorgan Chase & Co. spent about $800 million on global travel and expenses in 2019, according to a Business Travel News ranking.
A fall in that revenue spells trouble for airlines, which count business passengers as their most lucrative market. The route between London’s Heathrow and New York’s JFK airports generated about $1.2 billion in revenue for British Airways alone in the year through March 2019, according to estimates by data company OAG.
Still, Airbus SE CEO Guillaume Faury said on Thursday in a Bloomberg TV interview that he expects business travel to come back eventually, though it will lag behind the recovery for other parts of the market such as leisure and family trips.
Some bankers agree. JPMorgan CEO Jamie Dimon said in November he doesn’t think business travel will slip as much as expected because firms may see a competitive advantage in visiting clients in person.
“If I’m the gung-ho person, I want to get the business, taking that trip may be much different than saying I’ll meet you in a Zoom,” Dimon said. “I think people like me will travel as much and Zoom more.”
MUMBAI: HSBC has retained its growth forecasts for India despite the second wave of Covid and has said that it intends to grow its business in the country. The bank, which has around 39,000 employees here, gets a big chunk of revenue from the country and sees it as the third-largest economy by 2030.
Speaking to TOI, HSBC India CEO Surendra Rosha said, “We do not see short-term challenges with regard to things related to Covid dislocating our strategy.” Even as multinational rivals like Citi have announced their exit from the consumer business in India amid the pandemic, HSBC has said that it is going the other way.
While the bank did rationalise its branch operations in India a few years earlier, which gave an impression of shrinking, the customer base in India has grown. This is because of the shift to digital channels. “A positive development is that adoption of digital has increased and the payoff for investment in digital is much better than it was a few years ago,” Rosha added.
Rosha pointed out that HSBC’s number of customers has increased 37% since December 2017 to 10.5 lakh in December 2020. The bank’s pre-tax profits from India have been over $1 billion for 2019 and 2020. He added that India was among the top three markets for HSBC in 2020 and has always been part of the top five.
HSBC has the advantage of having a strong presence in countries where the Indian diaspora is predominant. This includes the UK, Middle East, Southeast Asia, Australia, Canada and the US. As a result, it has been able to target persons of Indian origin as well as Indians looking to invest in these markets or move there for studies.
While the overall economy has shrunk due to Covid, for a multinational bank like HSBC the opportunities have increased in the last 18 months. This is because of some government measures, which include a reduction in the corporate tax rate, production-linked incentives and the disinvestment plan. All of these provide an opportunity to facilitate inward investment. “Covid is a damper, but India is not an unknown quantity to global corporations. It is about telling them the opportunity in the next few years. So, Covid is not going to be a showstopper for foreign investment,” said Rosha.
Despite the second wave, HSBC research has retained its growth forecast of 11.2% for FY22. “We feel that if there is an impact in the first half of the fiscal, it will be made up in the second half. While the situation is evolving, what we have seen is that with the decline in cases there was a strong pick-up in economic activity,” said Rosha. “So, while we feel that growth will be similar to what the projections are, there will be some adjustment between the first half and the second half,” he added.
As part of its strategy of targeting Indians with an international connection, HSBC provides borderless banking services that allow customers to have a consolidated view of accounts across countries and lets them move money across markets.
HSBC India on Thursday announced that it has collaborated with Google Pay (GPay) and VISA to enable secured tokenisation on its credit cards.
“This new feature will enable HSBC Credit Card customers to link their card to GPay and use it as a payment option to securely and digitally transact using their mobile phones – online and at merchant stores,” it said in a statement, adding that the feature is free but optional for its credit card users.
The move is in line with the bank’s ongoing endeavour towards enhanced security and convenience for its card holders, it further said.
Tokenisation is the process of replacing a card’s sensitive information like card number, expiration date, security code with a device-specific alternate code, or ‘Token’.
“We believe that our partnership with Google Pay through tokenisation will be critical in ensuring that the security of our customers’ credit card details is not compromised. We are the first international Bank in the country to go live with this capability,” said Ramakrishnan S, Head-Wealth and Personal Banking, HSBC India.
The live trade finance transaction involved export of steel by Tata Steel to Universal Tube & Plastic Industries, UAE.
The Letter of Credit was issued by HSBC UAE for Universal Tube & Plastic Industries, UAE (importer), with HSBC India as the advising and negotiating bank for Tata Steel, India (exporter).
Tata Steel plans to explore similar opportunities in other export markets in future.
Peeyush Gupta, VP (Steel Marketing & Sales), Tata Steel, said adoption of this platform enables a faceless yet trustworthy all-time interface for better customer experience. This initiative, executed in collaboration with HSBC, demonstrates Tata Steel’s effort to lead technology-led disruptions by challenging the status quo and reimagining the global trade set-up, he said.
Hitendra Dave, Head-Global Banking & Markets, HSBC India, said having pioneered Blockchain technology deployment in trade finance, the bank is focused on enhancing its utilisation across a wider spectrum of trade finance transactions.
The transaction is a significant step towards mass commercialisation and adoption for a transformative impact on trade finance, he added.
Contour, which has been built on blockchain technology, enables the underlying LC trade transaction to be fully digitised from the LC issuance to presentation of documents. It also enables parties to transfer, manage and present electronic Bills of Lading and supporting documents within its platform via the interface with essDOCS’ CargoDocs platform.
Corporates can reduce the costs associated with handling paper-based documents, its reconciliation and streamline their processing flow.
It also helps to reduce the document negotiation and banking transaction cycle from weeks to a few days, thereby aiding in unlocking of working capital for businesses.
Citi has decided to shut its India retail banking business, which includes credit cards, savings bank accounts and personal loans, as part of a global decision to exit 13 markets as the US-based lender focuses on a few wealthy regions around the world.
But why did the lender, which is profitable and has the biggest balance sheet among foreign banks which operate on a branch model in India, shut shop abruptly.
“We believe our capital, investment dollars, and other resources are better deployed against higher returning opportunities in wealth management and our institutional businesses in Asia,” said Jane Fraser, CEO at Citi, while announcing the shutdown decision.
The reasons
Citi’s decision to exit the market is an impact of the accelerated disruption caused by the Covid 19 pandemic which has forced large banks to refocus management bandwidth and capital across the globe, according to experts.
The disruption caused by Covid has forced all banks to realign their strategy as building a localised retail model especially in India where phyigital is emerging, is tough. Also, there is competition from new lenders like Bandhan and IDFC First and small finance banks.
Also, due to regulations, the bank was not able to build scale in consumer banking. To be sure, RBI has allowed foreign banks to set up branches or acquisitions if they shift from the current branch model to wholly-owned subsidiary model. DBS India shifted to the subsidiary model and has expanded hugely with the acquisition of Lakshmi Vilas Bank.
Citi has expanded its retail business in the early 2000s and was among the pioneers of corporate sector salary business with its Suvidha accounts, but was hit after the 2008 financial crisis globally, which saw the break up of the bank. It was then steered out of the crisis by Indian born CEO Vikram Pandit.
Citi India, which operates as a branch of the global giant, has a balance sheet size of Rs 2.18 lakh crore. HSBC with a balance sheet size of Rs 2.11 lakh crore and Standard Chartered with Rs 1.84 lakh crore in 2019-20.
Global focus on a wealthy few
“As a result of the ongoing refresh of our strategy, we have decided that we are going to double down on wealth,” Fraser said. The move to focus on the remaining markets “positions us to capture the strong growth and attractive returns the wealth management business offers through these important hubs.”
Under the new CEO Jane Fraser, who took charge a month ago, Citigroup’s equities desks, undersized among Wall Street’s giants, are proving strong enough to lift the firm to a record quarterly profit just as a new chief executive officer takes the helm.
SPACs all the way
The bank reaped the most revenue from stock trading in the first quarter since 2009, while fees from underwriting shares quadrupled, helped by the firm’s dominance in taking blank-check companies known as SPACs to public markets. That offset a slump in revenue from Citigroup’s massive fixed-income trading division.
“It’s been a better-than-expected start to the year,” Fraser said as she credited the “strong performance” of the company’s Wall Street operations and said the firm is optimistic about its outlook for the economy.
Citigroup has raised more than any other bank for special-purpose acquisition companies this year, as managers of the vehicles set out to hunt unspecified takeover targets. That helped the firm reap $876 million in fees from equity underwriting. Quarterly stock-trading revenue, typically less than $1 billion at Citigroup, surged to $1.48 billion.
Surendra Rosha, Group general manager & CEO, HSBC India
By Malini Bhupta
HSBC group will invest $6 billion in India, a key market for the group, over the next five years. Surendra Rosha, Group general manager & CEO, HSBC India, tells Malini Bhupta the bank offers a unique proposition to its international customers in India, as also Indian businesses on their needs overseas. Edited excerpts:
The pandemic has been a big disruptor. How has it impacted banking globally? The global economy suffered a severe contraction on account of the pandemic and the banking sector was obviously not immune to it. Of the many things the pandemic led to, most significant was that it forced businesses to think differently and work around constraints to find the way forward. It helped to build up a certain degree of flexibility and resilience in a short span, which might have been difficult in regular times. It also accelerated the move towards all things digital. Our clients across segments increasingly transitioned towards digital adoption. This ensured that our servicing abilities were not compromised on account of the lockdown and social distancing. I believe that a substantial part of our banking activities could eventually move towards digital, self-serve models.
The pandemic also resulted in a greater focus on global supply chains and supply chain resilience became a key metric for many management teams and boards. The reshaping of global supply chains also brought into sharp focus India’s role in global manufacturing. Even prior to the pandemic, we had been actively engaging with the Government of India on the reform initiatives, as also to understand how ecosystems and supply chains are evolving. This has helped unearth sectors with growth potential, where we can help nurture the ecosystem. We aim to play a pivotal role in supporting anchor corporates and their suppliers’ ecosystem to strengthen their supply chains, including exploring (and executing) the transition to India.
India is an important market for most global banks with a presence in India. What is your plan for India over the next few years? India is a key component of the HSBC Group’s growth story. In the Group’s annual financial results announced recently, HSBC India recorded a PBT of over $1 billion, that too in a challenging year. HSBC India is currently the third largest contributor to the Group’s profits. Our global network is the core strength of the bank. We aim to continue strengthening the linkages between our global customers and their India needs, just as we seek to serve Indian customers on their global needs. Transaction banking, covering cash management, custody, trade and foreign exchange, is a focus area for us. While the pandemic disrupted global trade, we believe the trade is poised to grow, with India deepening its trade linkages post the pandemic. On the retail side, India has one of the largest diaspora of all and many of its members have banking needs in India. Our ability to connect those who live, work or study across our other markets, back to India makes for quite a unique proposition. Also very important is India’s increasing capital needs and its growing share in global investor portfolios. We serve these investor clients, be they pension funds, sovereign wealth funds, or insurance companies across many markets and will continue to meet their India needs.
Fintechs are set to challenge banks like never before, resulting in many banks partnering with them and even investing in them. How do you see the role of banks changing in times to come? The emergence of fintechs over the last few years has been good for the banking sector. They have brought a sense of urgency to the digital agenda in financial services. Innovation has become a central area of focus for us and many of our peers. We believe there is a tremendous opportunity for banks to partner with fintechs in specific segments. Such a collaborative approach will be good for the larger banking ecosystem. We have worked with fintech partners in the recent past, in the areas of transaction banking and retail banking. We will continue to do so in the coming years, collaborating in segments where we see opportunities to work together.
Digitisation is the new buzzword, with the pandemic accelerating the pace of the phenomenon. How is HSBC responding to the new normal? What about the challenges posed by digitisation, like the rising number of cyber-attacks? The pandemic certainly helped in greater adoption of digital banking channels. At HSBC, however, digital evolution has been an ongoing endeavour. We have been at the forefront of the digital payments ecosystem as well as trade finance, pioneering the adoption of blockchain technology. While digitisation has led to a greater number of online frauds and cyber-attacks, we have been constantly testing our systems and capabilities against malware and cyber-attacks. We are investing in security systems and periodically upgrading our offerings to ensure our customers are secure against cyber-attacks and malware.
Which segments in India are you most excited about as a global bank? And what are you doing to grow in them? We have three lines of business – global banking and markets, commercial banking and wealth and personal banking. Our growth imperatives for all the three lines of business are well articulated. As an international bank, our global network straddles key economic corridors. This means we are uniquely placed to support the needs of our clients and help bolster international trade.
One of the areas I’m most excited about is the emergence of sustainable financing and the growth in renewables. We believe businesses have a great opportunity to help address ecological concerns and areas like climate change need solid strategy, expertise and fast delivery. Globally, the HSBC Group is committing between $750 bn to $1 trn over the next nine years to help businesses reduce their carbon footprint. We will thus be keen to support Indian businesses in this journey.
With globalisation having come under a cloud, do you see the movement of capital being impacted? The pandemic certainly had an impact on globalisation and international trade. It changed the contours of international trade as supply chains were severely disrupted. However, from a long-term perspective, I’m confident international trade will continue to thrive; we’re already seeing the first signs of revival. This will throw up new opportunities as well as challenges for different countries. But the undertying reasons for international trade, for movement of capital, and the larger need for an integrated global economy will certainly not diminish.
From an India standpoint, as the reforms of the last 18 months take hold and it makes a serious push for privatisation, I see India’s share of global trade in goods and services increasing materially over the next five to seven years. Similarly, international capital will play a key role in funding India’s ambitions to build infrastructure and manufacturing capacity.
HSBC is stepping up investments in Asia. What is the plan for India? Asia has always been a core engine of growth for the Group. In its financial results announced recently, the Group has outlined investing around $6 bn over the next five years in its Asian operations, including India. India continues to be attractive from a long-term perspective, given its growth rate, demographics and overall digital framework. We believe it will continue to perform well and its international requirements, whether of capital or trade, will grow. We will keep investing in our capabilities to serve our international clients in India, as well as the overseas needs of our Indian customers. Our unique ability to connect across economic corridors is key to our growth ambitions, and makes us positive about our prospects in India.
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