Big data

Big opportunities Chuck Teixeira,

for banks
Chief Administrative
Officer and Head
of Transformation,
Global Banking
and Markets.

Data analytics is Looking beyond retail, video streaming Google, Facebook, Amazon, Apple and
revolutionising global giant Netflix is drawing on users’ Alipay rapidly challenging the traditional
business across a diverse preferences and histories to provide banking model, it’s in the best interests
tailored viewing experiences. Data of banking organisations to evolve in
range of industries.
analytics is also changing the way the line with changing consumer habits
Take retail for example. Amazon, Tesco healthcare, education, insurance and and technological advancements.
and others are pioneering the use of energy industries work. Importantly, it is the duty of the banking
customer data to identify behavioural industry to lead the way in protecting
Banks are now presented with an
trends and deliver individualised customers by ensuring that data is
opportunity to leverage the power of big
services and product offerings. In other handled responsibly and in line with
data to deliver the highly customised
words, they’re using data analytics to data protection legislation.
and bespoke services that clients
give customers what they want, when
expect. In fact, with disruptors like
they want it.

AI IS HEATING UP ACROSS INDUSTRY

EQUITY DEALS, 2013-2017
AI SEES 141% FUNDING JUMP IN 2017
Q4’12

Q1’13

Q2’13

Q3’13

Q4’13

Q1’14

Q2’14

Q3’14

Q4’14

Q1’15

Q2’15

Q3’15

Q4’15

Q1’16

Q2’16

Q3’16

Q4’16

Q1’17

Q2’17

Q3’17

Q4’17

Category
EQUITY DEALS, 2013–2017
Healthcare
(EXCLUDING HARDWARE-FOCUSED ROBOTICS STARTUPS)
Cross Industry Applications
Cybersecurity
Commerce
Disclosed deals
Ad & Marketing
Fintech & Insurance
Enterprise AI
Disclosed funding ($M)
IOT/IIOT
Sales & CRM
Auto Tech 1349
HR Tech
Personal Assistants
News, Media & Entertainment
Education
888
Agriculture
Travel
Hardware for AI 635
Legal
482
Regtech
Social 310
Physical Security
IT, Dev Ops & Cloud Services
Real Estate
$1,739 $3,477 $4,569 $6,255 $15,242
Sports
Software Dev & Debugging
Misc
2013 2014 2015 2016 2017
Source: CB Insights 2018 Source: IDC, 2017
So what can this mean
for customers?
By accessing and analysing
large volumes of client data,
forward-thinking banks like
HSBC can identify customer
patterns and behaviours.
Finding the right tech…
Data analytics on its own is
not enough. It needs to be
complemented by leading-
edge technology: artificial
intelligence (AI) for example.
In this area alone, major
strides have been made
by financial services
over the last few years,
particularly in robotic
process automation (RPA),
chatbots and deep learning.
This gives us the power to
truly understand how different
organisations operate across a
variety of market conditions and
scenarios. We can then create
in-depth profiles and provide
highly customised solutions
that deliver real value and
enhance the client experience.
Banks are increasingly using RPA
to turn unstructured information
into valuable business intelligence
for customers, which can include
highly detailed, real-time analytics
around geographical trends, risks
and commercial opportunities –
always managed in line with our
responsibilities. This helps clients
to optimise their business
strategies and trading portfolios –
or isolate emerging risks – far more
quickly than they would have done
otherwise, leading to value creation
and greater returns.
But to stay at the forefront of data
mining and analytics, banks need to
source, aggregate and consolidate
ever-more detailed information.
Achieving that demands the right
technology – and the right people.
If corporate clients have access
to real-time data on sales
numbers, inventory figures
or market-specific information,
they can react almost instantly to
market trends – implementing finely
tuned FX and interest rate hedging
strategies accordingly, for example.
Pattern analysis or predictive analysis
tools also help corporates develop
forward-thinking simulation exercises
or stress tests, which in themselves
present excellent risk mitigation tools.
PROJECTED WORLDWIDE FINANCIAL IMPROVEMENT
AND JOBS FROM AI-ASSISTED CRM, 2017–2021

Projected net increase in jobs

…and the
right people
Projected net increase in financials ($B)

1,200 2,500,000
Net increase in financials ($B)

2,000,000
While investing in technology is key,
Net increase in jobs

900

1,500,000 banks also need to make sure that they

600
have the high-calibre people they need
1,000,000
to create and deliver industry-leading
300
500,000 solutions. That means strengthening
the talent pool and hiring the tech-savvy
0 0 recruits who can help them achieve
2017 2018 2019 2020 2021
their commercial goals.
Source: IDC, 2017
Banks are now rethinking conventional hiring
practices. Rather than seeking individuals
from the more traditional disciplines, they are
focusing more on attracting talented recruits
SECTORS LEADING IN AI ADOPTION TODAY ALSO INTEND with backgrounds or degrees in STEM (science,
TO GROW THEIR INVESTMENT THE MOST technology, engineering, mathematics) subjects1.

To engage these people though, banks need

Future AI demand trajectory1 to think creatively and use imaginative new
Average estimated % change in AI spending,
next 3 years, weighted by firm size2 approaches like Hackathons or Kaggles. It’s
14 LEADING SECTORS
also worth looking at the working environment
itself: perhaps creating an open-plan space that
12
Financial services encourages collaboration between people and
High tech &
10 telecommunications teams. Don’t forget that these individuals don’t
8 Transportation & logistics want to come to work dressed in a suit and tie
Travel & tourism Health care Automotive
either! For them, casual clothing and an informal,
6 Professional services
Retail Energy & resources
& assembly non-corporate and non-hierarchical approach is
4 Consumer packaged goods Media & entertainment the norm.
Education

2
Construction It’s interesting to note that applications for
FALLING BEHIND
traditional MBA courses are falling, in contrast
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32
to data analytics related courses; in the United
Current AI adoption
% of firms adopting one or more AI technology at scale States, these recorded a staggering 74% increase
or in a core part of their business, weighted by firm size2 in demand in 20172.
1 Based on the midpoint of the range selected by the survey respondent.
2 Results are weighted by firm size. See Appendix B for an explanation of the
weighting methodology.
Source: McKinsey Global Institute AI adoption and use survey;
McKinsey Global Institute analysis
Looking to the future
There’s no doubt that data analytics offers new
and exciting opportunities for banks to provide
their clients with more tailored, personalized
solutions. This comes at a time when increasing
regulations such as Basel III capital requirements
and low interest rates have taken their toll on
the industry.
Banks with broad client bases and those that work
in multiple markets have a natural advantage, as they
have a larger data footprint which can be leveraged.
But data management is not without controversy.
As businesses drive new innovations in product
development and client engagement, they need
to put customer data protection and effective risk
management at the forefront of everything they do.
Banks also need to ensure that the data they manage
is used responsibly. This is a highly sensitive area, with
clients and consumers demanding more transparency
and control over where their data is stored and how
it is used.
There’s legislation to consider too, including the recent
EU General Data Protection Regulation (GDPR), not
to mention the need to protect data against new and
emerging threats like cyber crime. By ensuring that the
processes underpinning data analytics are effectively
risk managed, banks will minimise the possibility of
regulatory censure or importantly the loss of client trust.

For more information about our

INDUSTRY SPENDING ON COGNITIVE/AI SYSTEMS SOARS open positions globally email:
Matthew.j.sattler@hsbc.com
By 2021
Global cognitive/AI systems spending
is projected to reach

$52.2 BILLION
Top Three Industries Investing in Cognitive/AI Systems in 2018:

£3.4 £3.3 £2.0

BILLION BILLION BILLION
Retail Banking Manufacturing

Source: https://www.idc.com/getdoc.jsp?containerId=prUS43662418

Key points
• Banks are increasingly developing data analytic capabilities to drive efficiencies
and deliver the best possible client experience.
• The opportunities that data analytics present can offset the costs associated with
regulation and the challenging macroeconomic headwinds currently facing banks.
• To enable a truly effective data analytics strategy, banks need to ensure they don’t
just have the right technology, but the right people too.
• Data analytics opens up new regulatory and other risks, which banks must be
fully aware of and manage accordingly.

1. The future of talent in banking: workforce evolution in the digital era - EY April 2018
2. Financial Times (April 16, 2018) Data science is the big draw in business schools
Issued by HSBC Bank plc 8 Canada Square, London E14 5HQ.