Executive Insights – Niccolo Polli, CEO at HSBC Luxembourg

Executive Insights are a series of discussions with c-suite executives from a range of industries, to learn about their roles and the part that digital transformation plays within their large organisations.

As the CEO of HSBC in Luxembourg, Niccolo Polli has a number of differing priorities; not only is his time split between the four business lines, asset management, private banking, security services and wholesale banking, but Niccolo is also required to take the lead on structural changes to the business. In the time we spent chatting, Niccolo explains the bank’s approach to scaleup technology vs the larger incumbents, the necessity of building a positive company culture, and the disruption we’re seeing in the sector brought about by challenger banks.

Could you explain a little about your role at HSBC?

I’ve had a number of different roles. I first engaged with swiftscale when I was Head of Strategy and Chief of Staff to the CEO in the UK. I am currently the CEO of HSBC in Luxembourg, where we have four lines of businesses: asset management, private banking, security services, and wholesale banking. So pretty much everything except retail banking.

What is it that you’ve been focusing on recently?

We’ve got big growth plans in Luxembourg on all fronts. On the asset management side, we’re centralising the management of our European funds into Luxembourg. Regarding private banking, we are changing the purpose of the private bank in Luxembourg to become more of a centre of excellence and booking hub for the Group. On the securities services side, we have plans to double revenue in the next three to four years. We’re building out a Global Transfer Agency platform, which essentially means that once you’re on-boarded in Luxembourg you will be on-boarded globally and have access to products and services in Hong Kong, Ireland or Singapore. On the wholesale side, we have an amazing roster of clients, including some of the biggest names in tech coming from Asia and America that are using Luxembourg as an entry point into Europe. We serve their global cash and liquidity needs but we’ve also adapted to do other things for them. For example, one of them asked us if we could provide real-time payments 24/7. Sometimes they move billions of dollars at a time. So we’ve been building up that capability, as well as next generation virtual accounts, all in an effort to make the B2B experience better.

In all these different lines of business, we are making quite a big investment, typically in technology. This is a key priority for us. We recognise our legacy systems are robust but don’t allow us to be as agile as others so we started a programme called ‘Digitise at Scale’. We want to harness the power of technology to develop better customer experiences across the businesses, but also internally for our people. We’re seeing a lot of changes regarding the way we manage our HR systems, our collaboration tools and just how we operate as a firm. For several of these developments we are adopting what is a new approach for us because we’re not building the platforms ourselves. We want to take the best in class off the shelf and work with that provider to then develop something specific to HSBC.

You mentioned you’re investing a lot in tech and systems, does that include scaleup technology as well? What’s your experience of engaging with scaleups to drive that digital agenda?

I categorise our involvement with tech companies in two different ways. We have partnerships with some very large providers, like Google, which is obviously hardly a scaleup. These are the more global relationships for anything that we’re doing on an international scale, such as our cloud-first strategy and our AI strategy.

The second kind of involvement is for the more specific pieces of tech or for the client experience, and this is where scale-ups can come into play. So an example would be in the UK, where we use services like Bud, where the scaleups come in to transform the client experience of onboarding, or they help simplify ID recognition or the credit piece. We’re also looking at others that could help simplify ESG reporting, as well as in the RegTech space and monitoring usage across different channels of some of our trading teams. 

So I think where the scaleups come in is more for the specific pain points or client experience within a country, a geography or line of business / function.

You mentioned earlier that you’re also investing in tech on the HR side of things. I saw an article recently about your commitment to create an inclusive environment for LGBTQ+ colleagues in the workplace. I wondered whether you think that diversity and inclusion within the workplace impacts an organisation’s ability to remain at the top of its game and to remain competitive?

100%. I really have no doubts about that. We’re not trying to create a basketball team here, just looking for a few attributes that are clearly advantageous. We need diversity of thought and perspective and to reflect the societies in which we serve. It’s about really talented people with a diverse background that are able to solve problems, that are curious, and that have the EQ to work with others to get the best out of one another. 

We’re doing a lot around diversity and inclusion. In fact, we’re moving more towards the inclusion aspect because I think we’ve done a decent amount on diversity. It’s not to say it’s not important and we will of course continue to do it, but we need to focus even more on the inclusion part so that our employees can really bring their best selves to work.

That’s also across generations. We need to be getting the younger generation in and they should want to come and work at HSBC and not think we’re just some big old-fashioned bank. We want to be an attractive proposition and then get the best out of them and not mould them into just someone else. 

The other thing we have to acknowledge is we have ~250,000 employees. So we can’t just focus on attracting new talent; we’ve got to help equip everyone who’s already here. We have a ‘Future Skills’ programme that is looking at which skills will be required in the future, around leadership, team collaboration, curiosity, digital, coding, engineering, data science and so on, and looking at how we can train our people much more actively so that they can tackle the challenges of the next decade.

In regards to implementing a digital transformation strategy and investing in new technology, what do you know to be the most crucial aspects for an organisation like HSBC that’s both B2B and B2C?

Being a universal and a global bank, operating in more than 60 countries, we’re one of the most complicated organisations you can get. There are different rules and regulations in every country. As a result, our starting point is not homogenous in terms of systems and platforms. So for a long time now we’ve been investing a lot in homogenising that and ensuring that we’re on the same system for the same business and across countries. 

We also have regulatory issues and data privacy issues in terms of where we can send the data and how it can be used. We need to build out hubs so that we don’t have one global hub, but perhaps a couple of regional hubs. Once we’ve done that, there needs to be clarity on what our focus is, what our strengths are, and what we are going to do internally versus externally. 

Some things like our global wholesale operating platform will be an internal project, but many parts of improving our customer experience could be better done by working with external providers. We used to build most things internally, but now we’re considering more and more whether we really are the best at doing this or is someone else better and we should invest in adopting and adapting their solution? 

So that’s how we’re looking at digital transformation; we’re first homogenising our systems, we’re then understanding the hubs in terms of where the data can be and what kind of hub would manage which kind of countries. We then look at what we want to improve and establish whether it is important for us to be doing it ourselves and whether we should be outsourcing to others or building with others.

You mentioned that you’re engaging with FinTechs a lot more on the customer experience side. How do you think Challenger Banks fit into a banking ecosystem that has essentially been built by traditional banks such as HSBC? Have they spurred you on to investigate new ways of interacting with your customers?

I think they’re a force for the positive in general. They focus on customer experience and getting more value to the customer, which we can, and do, learn from. But we need to recognise that we have a different shareholder base. Our shareholders often invest in us for stability of earnings and the dividend, so they need us to remain stable and make profits, meaning we’re slightly limited in that we can’t obviously operate at a loss. So there are some things that FinTechs or challenger banks can do that are not part of our toolkit, because we must remain profitable, which is why it takes us longer and we don’t perhaps take as many risks. But we are always learning from them and trying to understand how they do things differently.

I know that retail banking is not a business line in Luxembourg, but I’m curious to get your opinion on how you think this side of HSBC will be evolving over the coming five years in terms of customer experience, the changing demands from customers and the new ways of banking.

It’s a fascinating question. I think Currencycloud was one of the first real FinTechs, who were then quickly followed by TransferWise (now Wise). FX in general, was one of the first areas that was tackled by FinTech. Then there was quite a bit around lending and then payments. If I look back at what it was that made these attractive, I think they were standalone customer offerings that were very profitable. Where it becomes more difficult is the likes of current accounts or mortgages, and everything that goes along with that. Current accounts, because you pay for it through the interest as opposed to a distinct fee. It becomes more tricky in mortgages because it’s a high lending amount, very thin margins and you benefit from having a track record and cost of funding becomes very important. 

So, I think we’ve seen a lot of disruption happening. But now, many of the FinTechs are looking at the next profit stream and realising they want to become fully fledged banks. This can be the right thing for them, but then the question is, will customers use them for all their financial needs? Can you transition from the niche of a trading account or a card account, or an FX account, into a broader bank? Because it all started with customers being able to disintermediate their financial needs and go to a certain place for an account, another place for their loan, another for their FX, and so on. So it’ll be interesting to see how their proposition evolves into a more universal offering. But essentially, it’s somewhat unclear at the moment where all this is heading, but there’s a lot of very interesting stuff happening with smart people around the globe finding their way as they go.