This decade has been a reality check for the retail banking sector. Innovative players – neobanks, payments specialists, fintech whizzes and the like – have disrupted the market, making the ‘traditional’ banks seem like they’re behind the times.

That’s until HSBC launched its new multi-currency payments app, Zing. More banks should follow in their footsteps.

Currently exclusive to the UK, Zing will allow users to hold up to 10 currencies, spend in more than 200 countries, and send money internationally across more than 30 currencies. And, unlike HSBC’s competitive Global Money account – which actually holds more currencies than Zing and doesn’t require a conversion fee (Zing’s ranges between 0.6-0.75%) – you don’t have to be an HSBC customer. That’s its real appeal.

Zing marks a pivotal step forward in the modern era of retail banking; however, its release doesn’t come as a surprise. The signs the sector has been evolving have been evident for a long time.

More and more brick-and-mortar branches have shut shop. In fact, since January 2015, nearly 6,000 UK bank branches and building societies have closed their doors. Of course, how that affects local communities and the customer-bank relationship is a separate debate, but these closures certainly show banks care less about their physical presence.

Incumbent banks cannot rest on their laurels

Their digital offerings, their apps, mean everything to them, and especially so now that new players – like Monzo, Revolut and Wise – have been swiping some of their once loyal customers.

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By GlobalData

Large banks – like HSBC – have realised they can no longer rest on their laurels. They can no longer just provide balance updates and facilitate basic transactions. Their customers want more.

That’s exactly why HSBC have developed Zing. Their executives saw the staggering user statistics of fintechs like Revolut, namely that they boast over 30 million retail customers worldwide and facilitate over 400 million transactions per month and thought one thing. Let’s compete.

And, as an FX payments app, Zing will definitely crash the payments party. It will serve to provide the same USPs – the appealing FX rates, the seamless, easily navigable interfaces, and hyper-convenient transaction processes – as the neobanks and fintechs currently dominating digital banking.

But, besides that, it also shows HSBC wants to expand its reach across financial services.

Surprisingly, you don’t need to be an HSBC customer to use Zing. It’s almost like it’s its own entity. But Zing is there to proselytise, convert the users of Monzo, Revolut and Wise, and be a gateway drug for these people to join HSBC. The more people that use Zing, the more that will be enticed into HSBC’s wider financial offerings.

This is clever. Admirably clever. And I’m surprised the rest of the “big four” (Barclays, Lloyds and NatWest) haven’t caught up.

But they need to.

Customers now demand a one-stop financial shop

HSBC is one of the first banking titans to dust off its ‘traditional’ cobwebs, supercharge its digitisation, and square up to the challengers now taking over the sector. But the others are still clutching onto their names and reputations.

To compete with modern fintech innovation, all retail banks need to follow suit, develop their own payments apps, and build out their ecosystems. If they don’t, challenger banks and fintechs will only gain greater market share, and leave the larger players for dust.

Customers now want everything in one place. One-stop shops. And, if banks start to meet these consumer expectations, pivot themselves completely towards convenience, they’ll be able to put up a good fight against the fintechs running away with the sector.

Of course, retail banks have made a good start at digitisation. But they’ve had to. After all, a recent survey by YouGov found that 81% of adults will determine who they bank with on the back of the quality of the online experience. Like I said, digital offerings mean everything.

But now they need to do more. They need to offer more. They need to be more user-friendly.

Investments are still enshrouded in an impenetrable air of mystery, fee structures are still overly turgid, and, sadly, onboarding processes are still hampered by never-ending paperwork.

But, if they prioritise digitisation, these banks could take a leaf out of the challengers’ books and provide innovative features that speak to the customer. Personalised financial advice. Targeted budgeting tools. Seamless cross-border payments without the faff.

The hyper-convenience of payments

This will come with costs. And, as we come out of the tough macroeconomic climate that defined 2023 – which, as the FT recently reported, even hit investment giants like Morgan Stanley and Goldman Sachs with their lowest profits in four years – that might be challenging. But it’ll all be worth it in the long run.

The hyper-convenience of payments services like HSBC’s Zing show exactly how retail banks can expand their customer bases. And, if you are a retail bank, your customer base dictates your success.

So, as HSBC have pioneered beyond their role as a lender, facilitator and balance updater, their banking peers should follow in their path – and develop the exact same FX services.

This is the future of retail banking: multi-faceted ecosystems that provide diversified services that merge both traditional banking and payments. So, as we seem to be leaving the era of the brick-and-mortar branch, HSBC’s Zing neatly predicts the next part of the tale.

Retail banking is now so much more than what it was; and, now that smaller, more innovative challengers left their mark on the sector, the traditional titans need to be agile and adapt. They need to counter with their own competing FX services.

Yerbol Orynbayev is an independent financial services consultant and former Deputy Prime Minister of Kazakhstan, and is now based in Washington DC. He advises leading financial services and technology companies and has held a number of senior positions in private financial, research, and technology companies.

Prior to his consultancy career, Orynbayev served as the Deputy Prime Minister from 2007-2013 and aide to the President on economic policy from 2013-2015. He also worked as the Governor of the World Bank on behalf of Kazakhstan, and helped to steer the nation out of the financial crisis in 2008. He was Chairman of First Heartland Securities and held a number of board-level roles at the National Bank of Kazakhstan and Agency for Regulations of Financial Markets.