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Bank technology
BankThink


TO COMPETE WITH FINTECHS, BANKS NEED TO RADICALLY REIMAGINE THEMSELVES

By   Yerbol Orynbayev February 06, 2024, 10:00 a.m. EST 4 Min Read
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Digital offerings should be the sole focus of the retail banking sector in the
years to come, writes Yerbol Orynbayev.
Who is Danny - stock.adobe.com

For the last few years, smaller, more agile and, admittedly, more innovative
players — like Monzo, Revolut and Starling — have taken the banking sector by
storm. Retail banking giants have struggled to square up to these new
challengers and continue to be bogged down by their brick-and-mortar legacy.



But with its new multicurrency app, Zing, HSBC has opened the door for other
banks to evolve — and muscle their way into the payments sector.



Zing is HSBC's answer to the foreign exchange (FX) dominance of Revolut and
Wise. But, from an initial view, it doesn't look like it will be a more
appealing service. After all, Zing only holds 10 currencies, compared to
Revolut's 36 and Wise's count of over 40. And, more than that, Zing's conversion
fee — of 0.6-0.75% — isn't markedly competitive, either.

But Zing has not been developed to provide a better, slicker and more efficient
service, and I'd like to imagine that HSBC knows that they haven't developed the
best FX platform on the market. Nonetheless, its launch signals a significant
change in attitude from the bank. HSBC clearly wants to digitize and expand
their services.



Zing is the bank's leap of faith. As an attempt to compete with the FX titans
currently dominating the market, Zing is simply there to put an end to their run
of dominance. Unlike HSBC's other foray into international payments, their
Global Money service, the app is open for all and will — I think — serve to
usher new faces toward HSBC's doors. After all, you don't need to be an HSBC
customer to use the app.

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That's exactly its purpose. The app is a gateway drug for more of HSBC's
financial services, like mortgages and other loans. More banks should take a
leaf out of its book.

To compete with modern fintech innovation, retail banks need to expand their
services — and make them as convenient as possible. Banks are no longer just
lenders and balance updaters, and the recent flurry of branch closures — over
1,500 bank branches across the U.S. closed in 2023 — proves that point entirely.

Banks need to prioritize their digitization. Face-to-face services are clearly
not in demand as they once were, and customers would rather bank from the warmth
and comfort of their own homes. Digital offerings should be the sole focus of
the retail banking sector in the years to come.

Fintech
Podcast How challenger bank Upgrade grew during a dismal 2023

The neobank doubled its membership to five million consumers and hired 200
people last year. Founder and CEO Renaud Laplanche explains how it fared during
a time when many fintechs struggled.

By Penny Crosman
January 30


But they need to develop their digital services quickly, or else they'll risk
gifting a greater market share to the neo- and challenger banks. In 2021, the
neo- and challenger bank market was worth USD $45 billion and is projected to
grow by 48.3% annually until 2030. The power dynamic of the banking sector has
shifted — and will only continue on that trend.

Banks need to pivot toward what makes neobanks and fintechs — like Monzo and
Revolut — so appealing to their users. The seamless, easily navigable
interfaces; targeted budgeting tools; demystified investment options. These
aspects are hyper-geared toward the customer — and, while banks have made good
headway in developing their mobile banking apps, there's still so much more they
can do.

To compete, large banks need to build out their ecosystems. Like HSBC, they need
to step into areas that they haven't previously explored, expand their customer
services and open their doors to new potential customers. Beyond developing
payments apps, for example, banks could even explore hosting telecommunications
offers, entertainment discounts and travel services. They could explore
completely unknown territories — and, as shown through the successes of WeChat
in China, that's not totally beyond the realms of possibility.

But, for all banks, the business of payments is the first obvious port of call.
Banks already have experience facilitating transactions, and FX services are
only a small leap from that. Payments apps — like Zing — still rest firmly in a
bank's comfort zone.

If other banks follow HSBC's footsteps, they will have firmly moved beyond their
physical branches — and transitioned toward a new era of retail banking. Banking
will be offering so much more than it used to, and they will have become
multifaceted, hyper-convenient entities. This will surely drive up their
customer bases and — following a measly quarter for profits across JPMorgan
Chase, Bank of America and Citi— that's definitely appealing for many firms in
the sector.

At the end of the day, a retail bank's success is dictated by its customer base
— and, through Zing, HSBC has clearly understood that. Like I said, Zing's true
purpose is to incentivize people to join HSBC — and explore more of the services
they have to offer.

Of course, as it is only initially going to be available in the U.K., Zing's
true potential won't be realized until its global rollout. But it's certainly an
interesting strategic move from the global banking giant and one that other
banks need to copy.


Yerbol Orynbayev
Consultant and former deputy prime minister, Kazakhstan
For reprint and licensing requests for this article, click here.
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