HSBC and Mastercard lead COVID-accelerated city digitisation drive

In the second episode of the HSBC Mastercard Power of Partnership Webinar Series, experts from both sides discussed the benefits of digitising cities and unlocking the value of new technologies.

HSBC Group and Mastercard recently partnered on the City Possible initiative, which will co-create frameworks for cities through collective resources and expertise, as well as innovative and sustainable urban development solutions.

The COVID-19 pandemic has accelerated the digitisation drive, helping cities provide contactless services to home-bound residents and use data to tailor policy responses to revive their struggling economies.

“COVID created the right opportunity and right environment for lots of those who were sitting on the fence – including the public sector – to embrace technology and digitisation because there was no other option,” says Noor Adhami, regional head of global liquidity and cash management, MENAT at HSBC.

“We are very glad as a bank that we were able to support those needs during this tough period,” she says.

Advocates of digitisation

The pandemic highlighted the role of HSBC and Mastercard as advocates of digitisation, as they worked globally with governments, cities and the private sector to deliver efficient solutions to hard-hit communities.

Before the onset of COVID-19, cheques were a widely used payment tool in the Gulf region. All the cheque books issued in one year stacked on top of one another would be 44 times the height of the Burj Khalifa, according to an HSBC study.

But HSBC data showed that the use of cheques dropped by 24 percent in the region, while manual payments dived by 62 percent. In contrast, HSBCnet digital platform enablements soared by 134 percent and mobile transactions by a staggering 1,037 percent from the previous year.

Public sector transformation

Like the private sector, public institutions must digitise in order to enhance efficiencies and speed up their services, as well as to be socially responsible.

“Digitisation makes a difference across all functions and especially when it comes to tax payments,” Adhami told the webinar.

“We are seeing more and more entities in the public sector that are approaching banks. We have published several good cases of transformation in the public domain such as the government of Sharjah and we are working on a number of other exciting projects,” she says.

Despite the digital drive, most global payments are still made in cash, with over 90 percent of such transactions in the Middle East, according to Mastercard. This increases the risk of inefficiencies, financial exclusion and corruption, and raises payment costs for businesses and residents.

“Digital channels for payments help reduce inefficiencies and drive economic growth. We believe that cash parallels increase gross domestic product by 1 to 3 percent,” says Selim Ergoz, vice president of business development, government, MEA at Mastercard.

Efficient cities

With about half of the world's population living in urban areas, a number that is expected to increase by 70 percent over the next 10 years, there is a growing burden on cities to make their services more efficient.

Before the pandemic, nearly 2 billion visitors flocked to global cities, putting additional pressure on officials to move away from outdated legacy systems in order to reduce their transit infrastructure overloads.

In London, new solutions are making significant savings for its transit systems. The city offloaded some transactions to open loop cards, resulting in fare collection costs dropping from 14 percent to 9 percent.

With U.S.$1.5 trillion spent globally on logistics costs, ports would also benefit from digitisation. At present, exporters and importers may need up to 50 steps to complete a single trade transaction.

Embracing emerging technologies

Leading the technology drive, HSBC is focusing on digital solutions to enhance transaction efficiency, embracing emerging technologies such as artificial intelligence (AI) and machine learning to connect all platforms in a seamless, instant way.

“Data is the new gold in this age. Public sector entities sit on lots of data that is not being utilised in the best way,” says Adhami.

HSBC is now able to onboard clients instantly through a simple application programming interface (API) call, a process which used to take up to seven weeks on legacy platforms.

Another example is sanctions screening to fight financial crime, which used to be a very tedious manual process. Now, with the help of AI and machine learning, HSBC can utilise the data in a smarter way, boosting turnaround time and reducing the number of false positives.

Finding digital solutions

“Our approach to digitisation has always been about solving pain points for our clients. It is never about pushing products,” Adhami says.

HSBC recently partnered with Oman’s Public Authority for Social Insurance (PASI) to simplify the pension fund channel for 20,000 companies employing Omani nationals across the GCC region.

The bank, which started with 2,000 employers in the first stage, issued unique virtual accounts to each company, removing a tedious process of reconciling statements that used to come through 14 accounts.

“Stage one was a great success. We have the capability to produce thousands of virtual accounts,” says Adhami.

“When the payment is out from an employer into the party's account, they no longer need to spend time trying to figure out where the payment came from. This saves a huge amount of time,” she concludes.