HSBC's IT spend reaps rich rewards

Analysis: The development of a series of single platforms and systems that can be localised for regional markets has cut HSBC's day-to-day operations costs dramatically

Three years of technology expenditure is beginning to pay off for HSBC, with reduced per-transaction costs across the bank's international operations.

Two years ago HSBC, which spends more than £2.5bn a year on IT systems and in-house application development, set itself a target of cutting per-unit processing costs by 10% every year. It expects to make an 11% saving on transaction processing this year after cutting 8.8% off costs in 2005, as reported in Computer Weekly, 3 October.

Ken Harvey, chief information officer at HSBC Group, said savings were feeding through after 370 successful system deployments in the past three years, and the continued expansion of its pool of global platforms.

At the last count, the bank had 80 "group" systems available for local deployment.

The bank has also set up a single, self-managed global network and consolidated on four global datacentres and two regional datacentres.

Moving application development work to low-cost centres such as India is another key part of HSBC's strategy. The bank estimates that 42% of its technology development work takes place in low-cost locations, with a large proportion going to India.

Harvey also said that HSBC's offshore IT operations enjoyed higher staff retention rates than those run by major outsourcing suppliers. He added that lower staff turnover had brought greater continuity and efficiency to projects.

On the direct banking side of the business, HSBC.com's chief executive Tracy Redies painted a similar picture of development with a global focus.

HSBC.com has a single global centre of excellence for e-commerce IT, made up of co-located businesses and staff. The main offices are in New Jersey and Chicago in the US, with functional reporting units in Canada, Hong Kong and London, plus a 740-strong team of application developers in Canada and India.

HSBCnet is the key global platform developed by HSBC.com. Designed for commercial customers, the platform spans 60 countries and offers some account functionality across 115 countries.

HSBCnet includes services for global markets, global cash management and investment banking. The bank said 89% of its corporate customers are regular users. A single sign-on gives customers access to more than 100 applications, many of which overlap intuitively for the end-user.

To run a system with such global reach and extended functionality, Redies said that security was fundamental. The bank has recently put in place two-factor authentication security where appropriate, including password generators and smartcards that are available to all business customers.

The other key plank of HSBC .com's IT strategy is the development of second-generation internet technologies. The online bank said this was already exposing customers to intelligent, personalised content and better targeted marketing.

The bank said that developing and deploying targeted online technologies has allowed HSBC.com to develop a sales campaign management tool to test the effectiveness of its web marketing strategies. The real-time tool allows the bank to react to customer preferences and change content on the site within two hours. Before the application was rolled out, the process took several weeks.

The bank also has high expectations of its use of intelligent, personalised content for customers, which it said had helped to boost online sales in the US by 25% in the past 11 months.

"We can recognise and talk to different people in different ways online," said Redies.

"It can provide relevance through intelligent targeted content and thereby save time for customers by showing what they want to see. It can also avoid repetition of tasks by pre-filling in application forms, making customers that much more likely to come back to a product offer and get to the end of an application process."

One of HSBC's most successful global technology roll-outs is its Whirl/eChamps credit card authorisation and accounting platform.

Acquired three years ago when HSBC bought US Household International (now branded HSBC Finance), the platform consists of 17 linked applications, including credit assessment, risk-based pricing, card ordering and transaction processing and reporting.

Under its "build once, deploy many" programme, HSBC has successfully installed localised versions of the system in 26 countries, including Mexico, the US, Canada, the UK, Australia and the Middle East. A further 11 migrations are under way.

The IP-based system's multi-language interface is allowing deployments to be completed increasingly quickly, as is the system's ability to initiate functionality and security upgrades uniformly.

HSBC said that customisation of the software was kept to less than 5% for each roll-out, with 70% of development work being undertaken by HSBC in India.

So far, 89% of HSBC credit card accounts support Whirl and eChamps. The platform performs 440 million authorisations a year, all of which are processed by the bank's UK datacentre.

HSBC's use of Whirl has reduced transaction processing costs, generating an estimated annualised saving of £23m. It has also allowed the bank to handle a 25% growth in credit cards at no incremental cost.

CIO Ken Harvey said Whirl had played a big part in HSBC cutting transaction processing costs by another 11% this year.

'Build once, deploy many' whirl pays its way

One of HSBC’s most successful global technology roll-outs is its Whirl/eChamps credit card authorisation and accounting platform.

Acquired three years ago when HSBC bought US Household International (now branded HSBC Finance), the platform consists of 17 linked applications, including credit assessment, risk-based pricing, card ordering and transaction processing and reporting.

Under its "build once, deploy many" programme, HSBC has successfully installed localised versions of the system in 26 countries, including Mexico, the US, Canada, the UK, Australia and the Middle East. A further 11 migrations are under way.

The IP-based system’s multi-language interface is allowing deployments to be completed increasingly quickly, as is the system’s ability to initiate functionality and security upgrades uniformly.

HSBC said that customisation of the software was kept to less than 5% for each roll-out, with 70% of development work being undertaken by HSBC in India.

So far, 89% of HSBC credit card accounts support Whirl and eChamps. The platform performs 440 million authorisations a year, all of which are processed by the bank’s UK datacentre.

HSBC’s use of Whirl has reduced transaction processing costs, generating an estimated annualised saving of £23m. It has also allowed the bank to handle a 25% growth in credit cards at no incremental cost.

CIO Ken Harvey said Whirl had played a big part in HSBC cutting transaction processing costs by another 11% this year.

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