On 13 January 2018, UK banks will undergo their biggest transformation in decades. The nine biggest banks in the country will for the first time allow competitors direct access to customer data. This will open the floodgates to limitless competition from banking startups offering new ways of saving, instant account updates and other digital features. To stay in pole position, the big banks are going to have to compete at the cutting edge.
One of the incumbents claims to be further ahead than the rest. Two years ago, HSBC started to build a team of 35 developers, marketing executives and financial services professionals under the leadership of head of personal banking Becky Moffat.
Moffat’s team has built an app capable of showing HSBC customers up-to-the-minute account information, including their non-HSBC accounts, alongside a set of digital tools that will make it easier than ever for customers to manage their money. The plan is not just to provide a new product that will hook millennials, but to change the way HSBC does business by putting the customer at the heart of the development of the app.
“We’re trying to change our approach to digital design and ground it in customer insight,” Moffat says. She has spent a career helping companies get ahead of the game in digital operations.
Born in Cambridge and raised in Sheffield, Moffat started in the global economics team on the Barclays graduate scheme, but quickly realised economics wasn’t for her. Instead she moved into what was called PC banking, or banking via the computer, a prospect even Moffat finds quaint in retrospect: “We sent off floppy disks to customers and charged them to do their own banking!’
After a brief stint helping a regional publisher go digital, Moffat returned to financial services as head of digital engagement at Barclaycard. “I keep coming back to financial services,” she says. “Because it’s where I feel I can make the most difference.”
Smishing scams can trick you into giving out personal banking info. Have a look at these tips so you know what to look out for. pic.twitter.com/ALVk1hNsFD— HSBC UK (@HSBC_UK) November 1, 2017
Moffat joined HSBC in January 2016 from Boots, where she worked as head of digital experience. “The challenge for me was making HSBC relevant to a new generation,” she says. “Rather than being a big remote bank, we want HSBC to be part of their lives.”
Moffat says HSBC is “uniquely” positioned to break new ground in digital banking for millennials. While other banks could have also dreamed up an app like this, Moffat says that because HSBC is not one of the biggest banks in the country, it can act more like a challenger bank. HSBC ranks sixth in the UK based on the amount it lends in mortgages, after Lloyds, Nationwide, RBS, Santander and Barclays.
But HSBC certainly looks like the old guard in comparison to banking startups like Starling, which opened applications for current accounts in May 2017, or Monzo, which has offered a current account since April 2016. Both give real-time updates on spending and cash withdrawals plus other benefits, like saving pots at Monzo and free cash withdrawals abroad at Starling. Then there are saving apps like Chip, which uses a smart algorithm to work out how much customers can afford to save each month, and Plum, which does a similar thing through Facebook Messenger.
These kind of startups are likely to benefit most from the onset of open banking in January, when they are able to offer customers a smooth transition away from the big UK banks. But Moffat is confident that HSBC can stay on top. “We have a very interesting position,” she says. “We have a phenomenally well recognised global brand. People have a lot of residual trust in the brand that we are trying to manage very carefully.”
HSBC will have to avoid data breaches that are the kryptonite of digital companies if it is to maintain that trust. Moffat says HSBC follows the data security requirements set out by law: “We are comfortable that we are following the highest level of security around customer data.” It is testing the app using screen-scraping technology, but plans to switch to API, a set of standardised specifications that smooth data sharing, when this becomes more prevalent.
Beginning in November, HSBC welcomed a small number of customers to the beta version of the app, which is not intended to replace the existing banking app, but act as a companion. Moffat’s team is working closely with these customers to test new functions, such as micro-savings, which allows a customer to put away a little every time they spend, to nudge banking, which sends messages to the customer when they are close to going into their overdraft, for example.
The app was shaped around demand from customers to see all their accounts in one place regardless of the bank. It includes a function called “balance after bills”, which shows the current account balance minus the amount needed for regular payments, so customers can see their disposable income at a glance.
The team also trialled a function they called “guilty pleasures”, where the app learns what a customer splurges on and “fines” them an amount that goes to their savings if they buy one too many macchiatos in Starbucks, for example. This wasn’t as popular as micro-savings in the savings category, so HSBC is holding off on adding it to the app for now. But that might change. “We will continue to work with the control group,” Moffat says. “In the world of open banking we want to be much more open about people’s needs.”
HSBC plan to open up the app to 2,000 customers by the end of 2017 and have it on the app store for all HSBC customers to download in the first three months of next year. It won’t initially be available for customers of other banks who don’t also bank with HSBC, though the plan is to allow that soon. Moffat says: “We would like to bring other customers onto the app.”
HSBC is also trying different methods for customers to access their accounts to keep up with the latest trends in biometric security. On a new version of the HSBC UK app, customers can log in with their fingerprint, making keypads and confusing passwords a thing of the past. When a customer phones up for assistance, the HSBC help lines now inform them that their voice will be recorded so that eventually, after the system has gathered enough data, customers will be able to unlock their account details on the phone through voice recognition, rather than a set of passcodes.
First Direct, a division of HSBC that offers telephone and internet banking, was ready on the launch day of the iPhone X with account technology that allows customers to unlock their account using facial recognition.
In the coming year, HSBC and the other new banks will learn whether they have done enough to stay ahead in the brave new world of open banking. But Moffat is hopeful: “We’re seeing a lot of change at HSBC,” she says. “I am very excited about what open banking will bring to HSBC – and to see customers benefitting.”