NURFS CEO Jim Aramanda sits down with Irene Dorner, President and CEO of HSBC U.S.A., to discuss the future of banking and payments, the impact of global banking regulations, and her thoughts on how banks can rebuild trust in the industry.

Irene, thank you so much for taking the time. Obviously, HSBC has a substantial global footprint and is one of the most globally integrated banks. How would you describe the benefits of global banks for corporate clients and for consumers? And what unique challenges do you face by having this global footprint?

First off, the global scope of our operations is totally determined by customers and customer behavior. HSBC currently operates in 75 countries and territories and so the unique service proposition, if you like, of HSBC is we go where our customers want to go and we go where our customers need to be. If you go back 150 years, you discover that HSBC was set up to finance trade—in India, China, the U.K., Europe—and that’s really what it was about. Now, the benefit of that for the customer is that if you’re looking for growth for your business, you are very likely looking outwards and at global growth strategies, and we can be a partner with you on that.

And I would also say that it isn’t just about corporate America. This is about individuals and families, too. There are something like 20 million people in urban metropolitan centers here in the United States who are genuinely international in their focus, either because they’ve been overseas to work, have an external focus, or because in fact they work for multinational companies. The reality is: the global train has left the station, and it’s not coming back. It’s about growth, it’s about trade, it’s about satisfying customer need.

And challenges?

Internally, being spread across the globe brings with it cultural and management challenges. But then the real issues for a bank such as ours come from external forces. If you do what we do, you are bound to have a range of regulatory issues, and it is very complicated to have that many regulators around the world, particularly when the regulators are not necessarily in agreement on some fundamental issues.

For example, capital allocation has become very, very important. We are a subsidiarized structure, which means that we have to be separately capitalized and satisfy separate liquidity rules, among other things. The net effect is that whenever there is uncertainty or conflict in the international regulations as to how capital should be stressed or allocated, it makes life more challenging for us around the world. If banks have a role in promoting economic growth, being uncertain as to capital requirements is not going to help.

Thanks, Irene. Next, I’ve noticed in dealing with the CEOs on the National Unrecovered Financial Services Board that they’re all commenting about how their board meetings have changed in terms of the issues they’re addressing. Would you say the same has happened at HSBC? If so, what are the topics dominating the attention of the board these days and how has that really changed over the last five years since the crisis?

The board is now necessarily engaged in regulation of one form or another. So there are these constant gap analyses being conducted around the new things that are coming out on the regulatory front, whether it’s fighting financial crime and improving our systems and processes and having to know more than anybody ever might have thought possible about the movement of funds. Or whether it’s OCC “heightened expectations,” remediation plans, capital requirements, the recent CCAR exercise, cyber, or customer-focused services and customer information. All in all, it’s a constant focus to stay on top of the critical issues.

The difficulty for non-executive directors is that when you read the regulations, they present a problem of how far they require you to go without crossing the line into executive management. I think we as an industry are in the middle of a learning curve at the moment of understanding how much information and what sort of information in the banking environment non-executive directors actually need to execute their responsibilities without pulling them across the line and into the office.

You know, when you started off by saying it’s the customers that drive your business model, it just resonates. Large banks don’t have a business model because it’s the model they “want.” They have it because that’s what customers demand.

You’re completely right. We’re not in 75 countries because we fancied being in 75 countries. We’re in 75 countries because that’s where the customers go and intend to grow.

In thinking about customer needs, how do you think you’re going to be doing things differently to satisfy customer needs five years from now? What are the trends you see?

I think the trends that we see are the same trends that most everyone is seeing: customers are after clear products with more transparency, so they can understand what’s going on. They’re after mobile. They’re after technology. They’re after digital. The conversation we are having now in 2014 is the same conversation I was having in 1992 at Midland Bank in the U.K.: thinking through the right combination of digital, mobile, and branches, and how big branches should be and what sort of business you should conduct in them.

I think the next generation, they want mobile and digital for things that they understand and for which they see no reason for human interaction—that’s how they want to conduct their banking transactions. The question is: how do they want to conduct the rest of their financial needs? And that’s where human interaction and branches come in. But then if you look at the branches, you look at the size and square footage of the branches that most of the banks have got here, it is simply too big for what needs to go on.

The methodology of conducting simple transactions is going to change exponentially over the next few years. If we’re not careful or if we don’t provide it, others will. And while I’m not saying these providers are unsafe, the fact is that they all aren’t necessarily safe or subject to the same scrutiny as banks. Over the next few years, however, banks themselves need to improve their security techniques. Most of the rest of the world has got Chip and PIN firmly embedded with its cards, and we don’t do that here really.

While we’re on the topic of cybersecurity, any suggestions on what the banks could do collaboratively with the public sector to try to help the industry be more secure?

I think it’s not just about actual systems and cyber security. In the money laundering space, I do think that the world would be a safer place if there was more information sharing because at the moment we’re all operating in silos and the banks are investigating millions and millions of units of payment that go through them every day, but they are looking for needles in haystacks. Whereas, for example, the U.S. government knows exactly which names it doesn’t like, so if there was a mechanism of sharing, it would be tremendously beneficial. Now, in addition, if we could have some sort of clearinghouse for basic customer information for due diligence purposes and we could pool it, it would become more effective, more cost effective, and safer as well.

Last question. Do you have any suggestions for what we can do as an industry to help improve banks’ image and improve the public’s perception of big banks?

I don’t have a silver bullet, and I wish I did, because I think this is going to take time. To me this all comes down to trust. And the reason I’m saying that is because this is one area where all of the regulation that has come through on capital and improving the safety and soundness of banks since the crisis, while certainly necessary, has not helped because it’s all very factual and numeric and doesn’t get to the emotional component of trust.

Similarly, I think it would help if somebody other than the banks actually said “the banks are safer” because, the law of unintended consequences being what it is, if people don’t think the banks are safe it’s going to encourage them to migrate into exactly the less safe environment that you don’t want them in.

I think that improvement in the economic environment will help, but I fundamentally think that trust is very difficult to build. I think we absolutely need culturally, inside our banks, to engender not just a risk and compliance culture so that we don’t get things wrong, but actually get people on board with the purpose and vision of the organization, so that they’re proud to work for you. We need to conduct our business with values, back our purpose and vision, and get our own employees acting as advocates in the market spreading the message that “this is what your bank is about.” •