By Tim Pemberton
Why trust is key to money’s digital future
From shells to coins, from pieces of plastic to an app on your mobile phone, money has gone through many transformations. And with digital technology growing fast, the way we bank and use money continues to change rapidly. But one thing will remain central to monetary systems: trust.
Money is nothing without trust. People have to trust that their money has value and that others will accept it. They also need to be confident that organisations, such as banks, that handle and look after their money won’t lose it and will keep their data secure. That’s particularly important as these organisations evolve and adapt to new technologies.
As HSBC’s Chief Information Officer, I believe that technology will ultimately make it much simpler and faster for people to use money. But securing people’s trust in new forms of money is a vital part of enabling a smooth transition to the era of digital banking.
As we continue to develop new technologies, we must ensure they are underpinned by the confidence our customers have in us
It is natural for people to be nervous of change. But you only have to look at HSBC’s 153-year history to see that banking has always involved innovation. Before the bank was established in 1865, it would take a business in Hong Kong more than 50 days to get approval for a loan, as they waited for ships to sail to Europe and back with paperwork to approve credit from a bank there. By setting up HSBC as a local bank in Hong Kong, our founder, Thomas Sutherland, reduced this wait from months to days.
Further major developments followed. HSBC began issuing its own banknotes. It launched bonds, to raise capital. It started offering bills of exchange, guaranteeing that merchants would be paid for large quantities of goods in transit. Such moves stimulated trade and enabled Hong Kong to thrive and develop, with people and businesses confident that their money was in safe hands.
Fast-forward nearly 100 years to the 1960s and the arrival of computers, databases and branches connected to each other via networks further simplified and sped up processes for customers.
Today, the old handwritten ledger has been replaced by a digital blockchain. Instead of visiting your local branch to manage your accounts, you may use an app. Paper currency has in many cases been replaced by lines of computer code. But despite all these changes, the one thing that cannot be replaced is trust.
As we continue to develop and use new technologies, we must ensure they are underpinned by the confidence that our customers have in us. They need to know that we will safeguard their money, use their data responsibly and, when we choose to collaborate with financial technology businesses (fintechs), do so wisely. Above all, they need to know that we will only support and invest in technologies that help them manage their finances more effectively and solve their problems.
That’s why we continue to strengthen our cybersecurity, looking at everything from data protection to threat detection. We are harnessing artificial intelligence to spot suspicious transactions more effectively, helping us prevent and report financial crime. There are many ways we are using technology to make banking simpler, faster and – crucially – safer, often through partnerships with trusted fintechs. Some recent examples stand out:
- In China, we have developed an ‘omni-channel’ collections service, allowing retailers to collect customer payments made using different digital payment apps. This technology plugs into a number of different apps, saving the companies from having to invest significant resources into connecting with them individually
- Our social payments app, PayMe, allows people living in Hong Kong to send money to other users of the app instantly, securely and for free via their mobile phone, without needing to ask for bank account details
- Earlier this year, HSBC helped to carry out the first trade finance transaction completed using blockchain technology – a form of shared digital database. A Letter of Credit, guaranteeing that the seller would be paid when a shipment of soybeans from Argentina to Malaysia arrived, was agreed and completed in 24 hours. A typical paper-based transaction would take 5-10 days. The deal was carried out on a blockchain platform developed with the backing of a consortium of 12 banks, including HSBC
These and other developments clearly demonstrate that the future of money is digital. But for the monetary system to continue to thrive, it is vital that banks continue to win and sustain the trust of their customers.