No stranger to innovative and potentially disruptive technology implementation, Kaushalya Somasundaram heads up HSBC’s Fintech Partnerships & Strategy division, leading the partnership and corporate venturing for HSBC’s core businesses.
Kaushalya will be joining us in London this November at LendIt Fintech Europe, where she will be giving a keynote presentation alongside Kirsty Rutter from Barclays on the topic, ‘Remaking Banking Technology & Culture from Within.’
We asked Kaushalya to share some of her experiences of working at the intersection of fintech and banking. Read on to learn what she has to say about the changing definition of a bank, open banking and its effect on the bank/ fintech partnership, and more. We hope this whets your appetite for her presentation this November.
Do you see the traditional definition of a bank changing?
The definition of a bank has always been evolving. There was a time when a “bank” was a secure physical location where one would go for all financial needs. Trust and reliability were paramount in the choice of a banking partner. The internet has transformed that and we interact with banks most often through digital channels. User experience has become a critical factor alongside trust.
In the long term, I believe that the services provided by banks today will continue to be essential as they have been through history. However, there is no reason why banks need to exist in their current form. We have been seeing various iterations of this in the market with services that unbundle the bank, and we are now starting to see re-bundling in the space around intelligent packages that may be quite different from the traditional banks.
One example of what the future could hold can be seen today in China where Ant Financial and WeChat have completely transformed financial services by integrating it seamlessly with lifestyle activities.
Has open banking had an effect on the bank/ fintech partnership yet? Is it still too early?
I think we are yet to see any major impact of open banking regulations on partnerships and a major factor here is the cautious approach undertaken by the banks. It is important to keep in mind that data exchange and interoperability standards are only one of many important enablers driving partnership strategies. The other factors holding banks back include impact on client relationships, reputational risk, and the business model impact. The challenger banks, although not covered under the open banking regulations, have embraced it and are starting to drive collaboration and partnerships with Fintechs.
Where open banking has had a noticeable impact already is on the internal system architectures within banks. It has been a major factor in the growth of APIs and micro services oriented architecture which is driving a shift from the monolithic systems of the past to a more modular structure.
What innovative technology—AI & machine learning, biometrics or blockchain, for example—holds the biggest potential for banks?
Although each of those is very interesting in their own regard, the biggest opportunities exist at the intersection of these emerging technologies. For example, machine learning could transform a high percentage of activities carried out by the bank today ranging from pricing to risk management to operations to client service. But, we need vast amounts of clean, reliable, and auditable data powering those models. That can be powered by intelligent application of blockchain and distributed ledgers. Similarly, AI and biometrics are intersecting around behavioural authentication for identity.
When it comes to emerging technology, I believe it is important not to get caught up in the tech fever and think in terms of propositions and solutions. This entails delivering tangible value whether internally in our operations or externally to our clients by leveraging one or a combination of these emerging technologies.
Are banks becoming technology companies or do they need to become technology companies?
Financial services has always been one of the first adopters of new technology across industries historically. As the speed of innovation in technology is increasing, especially impacting user experience, banks are having a hard time managing the transition from legacy technology.
The solution to this is not necessarily in banks becoming “technology companies” but they certainly have to become much more comfortable with and nimble when it comes to adopting technology. For example, banks don’t necessarily have to set the standards when it comes to cutting edge R&D in cryptography or cybersecurity but it is critical that they are able to understand the latest breakthroughs and incorporate them into their solutions.
Helping banks adopt the latest technology has become a very lucrative space for startups and I think this is a blessing for banks. Banks have to adapt their strategy to be a lot more engaged with the technology ecosystem, improve their ability to identify the best new technologies and companies, and be able to rapidly iterate their products & solutions.
As a woman in an innovation position at a major bank is there enough being done to promote diversity in banking and fintech?
The short answer is no, at least not yet. Banks fare pretty well when it comes to pure numbers in diversity and inclusion. For example, there are many high street banks where women make up more than 50% of the workforce. However, there is a severe shortage of women in senior positions. It is a similar story in Fintechs and startups. A study published very recently demonstrated that women hold only c.9% of equity in startups.
I do see a serious effort being made to improve diversity in financial services. Just reporting these numbers and tracking improvement is a significant development. The most impactful of these initiatives in financial services are targeting promoting women and minorities to leadership position within institutions. In my view, we can only achieve these objectives if the change starts from the top. I encourage startups that I meet to start thinking of diversity from a very early stage. It is important that they make an active effort to hire women and minorities from a very early stage as it gets much harder to remedy once you are more mature.
What advice or lessons can you talk about that has helped you in your career.
It is very important to choose the right track whether it is in your career or beyond. I have had the most success in pursuing opportunities at the intersection of what I am good at, what I am passionate about, and what is needed by the society. There is no shortcut to hard work but working hard is easier when you are pursuing something that is engaging and rewarding. I constantly seek feedback and mentorship from a variety of individuals that I admire for their qualities. This goes beyond career as there are many facets of life that are important to me and I strike to be better at them, like motherhood for example. I have been fortunate in receiving immense support and guidance from a variety of mentors, and I am now actively trying to give back through volunteering my time.
Want to hear more from Kaushalya and 150+ other thought leaders? Register today for LendIt Fintech Europe, Europe’s leading event for innovation in financial services.