Standard Chartered doubles down on its composable digital banking model

The Situation: Traditional banks can either revamp their existing stack and offerings or launch a new digital brand. Standard Chartered opted for the latter when it launched digital-only Mox Bank in Hong Kong in 2020. It will soon launch Trust Bank in Singapore with essentially the same tech stack. Witness the rise of composable digital banks.

For the better part of two decades, banks have been in hot pursuit of “digital.” It started with digital banking and the advent of account aggregation and online bill pay. Then it blossomed into the first digital-only banks, emboldened by the success of internet banking and the adoption of SaaS technologies with a vision of providing less expensive and “better” versions of the same deposit and lending services its brick-and-mortar competitors offered. Through the financial crisis, major trust issues, the rise of cloud technologies, and API-enabled open banking, banks of all stripes have realized that the shiny digital interaction layer must be enabled by nimble and responsive core banking systems.

Welcome to the new world of banking

Whether you are a 100-year-old bank or a 2-week-old bank, the future of banking is increasingly built on digital customer experience plus a composable core tech stack that allows for API-enabled integrations of best-of-breed tools and rapid configuration of personalized and flexible offerings. Banks are pursuing this next generation of digital transformation through the four models in Exhibit 1: facelift, speedboating, net new, and BFS adjacent.

Exhibit 1: Four models for digital transformation in BFS firms—all with distinct needs

1. “Speedboating” terminology borrowed with appreciation from Mambu
Source: HFS Research, 2022

Standard Chartered took the route less traveled and is now “speedboating” its way to market share

HFS spoke to Deniz Güven, former CEO of Mox Bank, about his journey building Mox from the ground up. Güven joined Standard Chartered as the Global Head of Digital in 2017, the year the Hong Kong Monetary Authority (HKMA) announced seven initiatives designed to usher in a new era of smart banking, including the introduction of digital banks. Back then, with nine different core banking systems and six credit card systems, Hong Kong was and still is the most profitable and successful franchise of Standard Chartered, amassing over $2B (HK$18B) in net profit in 2018. Nonetheless, Standard Chartered felt that holding the fort against digitally born players in the back garden of China was going to be an uphill task.

Güven posed two questions to the Standard Chartered board:

1. If non-traditional players entered their biggest retail banking market, could they defend themselves with their current models?
2. Could they increase their customer base with their existing models?

The answers to these questions helped the Board agree it was time to get serious about digital. It approved plans for a standalone digital bank, its first-ever digital retail bank, built from scratch outside Standard Chartered’s existing tech stack.

Building Mox—heart share, cloud-native tech, and joint ventures

Güven was appointed as Mox’s CEO and commenced the design and build of what would become Mox. As Güven and his team began to build Mox’s tech stack from the ground up, they ensured the bank was cloud native and ran on AWS with no servers. It leveraged Thought Machine for core banking, and the services firm GFT helped build it.

The Mox team also decided to consider JV partnerships to help with customer acquisition. It partnered with HKT, PCCW (the city’s telecom and lifestyle leader), and Trip.com (Asia’s largest online travel agency) to develop embedded finance offerings that would help Mox reach more customers and deliver value and ease to their mutual customers. Güven was very intent on ensuring Mox would deliver “heart share” to its clients, not just market share.
The HKMA granted the venture a license in March 2019. In September 2020, cloud-native Mox Bank was unveiled. According to Güven

The bank took 523 days to build, created from an interconnected ecosystem of more than 50 technology vendors, and more than 60% of it is portable.

—Deniz Güven, former CEO of Mox by Standard Chartered

Standard Chartered created Mox, providing its entirely digital retail banking services suite via an app. It aimed to bring the best customer experience and digital banking services to Hong Kong. As of June 2022, Mox had more than 350,000 customers and is consistently rated as the most-trusted virtual bank in Hong Kong.

Portability and composability are Standard Chartered’s future operating model for banking

Riding on the success of Mox, in September 2021, Standard Chartered announced its partnership with the National Trades Union Congress (NTUC) of Singapore. NTUC is home to trade unions and associations, professional guilds and associations, SME partners, freelancers, and self-employed professionals, making it a solid choice for reaching a wide spectrum of customers in Singapore. Having obtained a full banking license from the Monetary Authority of Singapore in December 2020, the venture will launch the digital-only Trust Bank in Singapore. This is portability at work, with what HFS suspects will be a much lower capital outlay than was needed for Mox.

This portability was something Standard Chartered baked into the creation of Mox with the intention that it could port the model elsewhere as needed. According to Güven, this is possible because they could port the tech stack, move more swiftly to testing functional features on the backbone and the frontend, and launch. He argues that we are in a new era of portable, composable, plug-and-play digital banks. The key to speed and replicability has been a composable core tech stack that allows for API-enabled integrations of best-of-breed tools and rapid configuration of personalized and flexible offerings. This new pace of development and flexibility afforded by the portability and composability of the digital bank era enables traditional banks to respond much faster to customer needs, often with plug-and-play solutions

The Bottom Line: Traditional banks can equal digital rivals’ tech and customer focus, and they can win by playing their scale advantage and employing a composable plug-and-play model.

Traditional banks can now access the digital tech advantages that pure digital start-ups once could out-compete them with. To compete against born-digital rivals, the traditional banks must now equal their rivals’ laser focus on customers and solving customer problems. But to win, they must use their killer advantage—scale. Standard Chartered used its scale advantage to help it make multi-territory deals, repeating and reusing the fruits of its digital investments and making each new iteration even more cost effective.