HSBC’s innovation lead for global markets, Dr Patrick Mang, talks to Joy Macknight about developing an innovation roadmap for the bank’s capital markets group, and how the democratisation of innovation is changing the way it operates.  

Patrick Mang

All of HSBC is thinking about new technology and how it can be leveraged to improve the business, according to Dr Patrick Mang, innovation lead for global markets at HSBC. The banking group’s success at spreading the innovation spirit makes oversight more difficult, but that is a good problem to have, according to Mr Mang. “Innovation is messy. When we started, it was a centralised, top-down process and today it exists everywhere. Everyone wants to understand what it means for them,” he says.

To manage internal engagement, HSBC promotes communication across business units. Mr Mang says: “Communication is a challenge, given our size, scale and complexity – but it is an open environment and the bank encourages collaboration. And we will need even greater collaboration in future, as innovation becomes increasingly democratised.”

Previously, the main innovation priority at group level was retail and small business banking, seen as the most affected by the fintech start-up wave. However, as part of the democratisation trend, Mr Mang left central strategy and planning at the beginning of 2017 and now looks at what innovation means for the markets trading business. His main job is articulating the bank’s digital strategy for institutional clients.

Connecting departments

In addition, Mr Mang wants to help global markets become better connected to the rest of the group. “Markets has traditionally been an island; people don’t tend to move around but stay on the same trading desk for their career. So it is helpful to have an advocate liaising across the group,” he says. For example, a colleague recently asked for a tool that could identify all the regulations related to a specific financial instrument.

“The amount of regulation is a crushing burden in markets. Although I have seen a few developments in the regulatory technology space [that could address this issue], none are mature – but I feel that it is a solvable problem because regulations are codified and published online,” he adds.

“Today, someone must read everything and build a knowledge graph in their head, but technology could help surface that information and make it more accessible.” He subsequently raised this challenge with the bank’s applied innovations lab team.

Fintech engagement

Mr Mang is no stranger to the capital markets. Formerly a structured equity derivatives trader, he moved into corporate strategy in 2013, originally for HSBC's investment bank before joining the central innovation team under group head of innovation, Christophe Chazot, who also comes from a markets background.

In his previous role as innovation strategy lead, Mr Mang articulated HSBC’s innovation activities and engaged with the UK government’s fintech initiatives. For example, he was part of the Open Banking Working Group, a HM Treasury-sponsored forum that developed most of the recommendations in the Competition and Markets Authority’s report that was published in August 2016.

He was also involved in the Financial Conduct Authority’s (FCA’s) Project Innovate and had a hand in drafting responses to the FCA’s regulatory sandbox consultation. “I am proud that HSBC was one of two incumbent institutions to be in the first cohort [chosen in July 2016],” he says.

HSBC is currently testing a product called SmartSave with about 2000 clients. The app, which helps customers better manage their finances, was developed in partnership with fintech start-up Pariti Technologies.

Exploring blockchain and cloud

Mr Mang says that it is almost impossible to have a discussion today without mentioning blockchain, or distributed ledger technology (DLT). HSBC is a member of distributed ledger consortium R3 and is working with six other banks in Europe on a project called Digital Trade Chain, which uses DLT for small business trade finance.

Trade finance is ripe for DLT adoption, mainly because it is a bilateral process, according to Mr Mang. “Market clearing, on the other hand, is more of an all-or-nothing approach – no one wants to run two clearing infrastructures,” he says. “Utility players, such as the Depository Trust & Clearing Corporation or NEX, are in a better position to drive adoption of DLT in this space.”

In addition to blockchain, HSBC is exploring cloud technology. For example, the bank has moved its learning and development systems to SAP SuccessFactors, which is a human resources (HR) application suite. “There will be long-term benefits from being on the latest version, as well as standardising HR processes globally,” says Mr Mang. “There will be other things we do in the cloud, but there will be some things we keep on premise.”

Even if the activity is done on premise today, he acknowledges that might not be the case in five years’ time. “Therefore, it is important to think what can be done now to make it cloud-ready for the future,” he says. “Blockchain is similar. Most things today aren’t on blockchain, but we need to plan now for a blockchain future.”

He points to Calypso, another R3 member, which is developing capital markets applications on its Corda DLT-based smart contract platform. “Blockchain is in Calypso’s roadmap for derivatives processing, not in this iteration of the product but in the future,” he says. “We too are thinking about where blockchain makes sense in the capital markets business.”

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