Digital transformation is no longer a ‘nice to have’ for the Channel Islands’ financial services community – it’s a prerequisite for earning a place in the global financial ecosystem. Ben Sykes, Head of Global Liquidity and Cash Management, Commercial Banking, at HSBC Channel Islands and Isle of Man, explains
With geopolitical uncertainty growing in Europe, across the Atlantic and in Asia, it has never been more important for international finance centres such as the Channel Islands to demonstrate their ability to adapt and to highlight their positive role in mitigating disruption within the global financial ecosystem.
Guernsey and Jersey have excellent track records in enabling internationally mobile businesses to trade and invest across borders, thanks to their strong regulatory and legal frameworks, good structures and wealth of experience.
Digital innovation is frequently cited as a key factor in helping firms on the islands to maintain their leading position. But digital is not just an enabler to help them do things better; looking at digital as a strategic priority is absolutely fundamental if the islands want to continue to be seen as relevant centres providing real value to international businesses.
While the islands have invested in their digital infrastructure, and firms are continuing to roll out platforms to support their day-to-day activities, progress in terms of how they fundamentally manage their payments and cash flow has been in the context of their requirements today.
Businesses must now be looking to the future, however, and considering what needs to be in place if they are to adapt.
The benefits of digital solutions
Managing cash digitally reduces complexity, improves visibility and enables immediate transfers. The quicker that businesses are able to move large funds, the better the returns possible.
The digitisation of cash flow also offers businesses greater transparency of their overall cash position, helping firms to make decisions proactively and more accurately, based on real-time high-quality data.
As distributed ledger technology becomes increasingly mainstream too, digital tools, integrated well, will enable businesses to embrace the benefits it offers.
There are also security benefits – digital payments are more traceable than cash, and biometrics that provide secure authentication are becoming increasingly sophisticated.
Combined, this all means that a digital approach offers the potential for better productivity, with artificial intelligence removing the need for humans to carry out process-driven tasks, freeing up their time to focus on strategic thinking.
How to make the digital transition
It’s not just a case of tinkering around the edges – it involves a root and branch review of how a business does its banking.
It is telling that, according to HSBC’s Navigator survey, for businesses in Europe anticipating growth, the top internal contributor to their positive outlook is investment in technology (30%), while transformative technology in their sector (25%) is the second most important external factor.
In addition, in terms of supply chain evolution over the next three years, increasing the use of digital and technology is the top change that businesses are planning to make, on a par with entering new markets (both 26%).
Of course, change is always difficult, but businesses are clearly waking up to the idea that the benefits of doing so are long term – and that the risks of not doing so are serious.
A key question for businesses today, for example, is whether they need as many ‘traditional’ bank accounts or whether they should explore ‘virtual accounts’, which are more flexible and can be partitioned for different purposes, currencies and users.
Ultimately, the movement is towards a more modular and bespoke approach, where application programming interfaces can be integrated into a firm’s infrastructure to suit its needs – and those of its clients and suppliers.
That sort of thinking might seem revolutionary for businesses, but other regions are already adopting this mindset.
On a positive note, there are signs that businesses on the islands are looking to embrace this approach. And for those firms, we are launching virtual accounts here – although there’s clearly some way to go.
Over decades, Guernsey and Jersey have established themselves as facilitators of trade and investment. However, with uncertainty in global markets set to persist well into this year, globally active firms will be asking increasingly how they can trade across borders efficiently and securely to meet their growth objectives.
If Channel Islands firms want to continue to be part of the global financial ecosystem, a fundamental rethink of how digital can transform their business needs to be a priority.