HSBC grows SME segment; incubates high-growth startups

HSBC is expanding its reach in the small and medium-sized enterprise (SME) segment at a time where banks elsewhere remain cautious of lending, with brisk business seen even as Covid-19 wreaked havoc on companies big and small last year.

The bank is now serving SMEs with revenue of S$5-100 million, but is now also looking to incubate high-growth startups that may not meet that criteria yet, said HSBC Singapore's business banking head Ng Li Lian in an interview.

This comes as HSBC recognises that many smaller, fast-growing businesses have non-traditional business models - start-ups, for example - which the bank does not want to lose out on.

"We're talking about trying to find the next unicorn," she said.

"We need to start when they are smaller, rather than keeping to the upper end of the SME space."

She added: "We are definitely keen to get in early to know them, because these are not the companies that are growing by 10, 15 per cent - they are probably growing by multiples of over a hundred times."

Even as the pandemic roils many smaller businesses, HSBC managed to grow its SME segment on several counts.

Not only has it increased its market penetration to 15 per cent this year, a goal earlier declared in 2019, the bank also had customer growth of 15 per cent in the past two years. Client assets have also jumped 83 per cent, while deposits are up by 54 per cent.

The bank is seeing even more promising growth this year.

Ms Ng pointed out that in the first quarter alone, HSBC has attracted almost half of new-to-bank business banking clients that the bank onboarded in all of FY2020.

She declined to comment on the percentage of SME clients still under moratorium, but said that businesses are managing their cash flows and liquidity "quite well", except for a few sectors such as travel, retail, construction.

While relief measures will not fully unwind until later in the year, HSBC is already focused on its expansion plans, with digitalisation among its key priorities.

This comes as the bank saw an acceleration in digital adoption among its SMEs over the course of the pandemic.

The bank's digital platform for clients HSBCnet had an increase in digital uptake, going up from 88 per cent in January 2020 to 93 per cent in January 2021.

SMEs no longer need to visit a branch for their day-to-day banking needs, with "substantial investment" pumped into its platform to improve product capabilities and client experience, said Ms Ng.

It also recently launched a global wallet, which aims to simplify international payments in seven currencies - a move that was first suggested by its SME clients.

With the focus shifting to sustainability, HSBC also launched its SME green loan last year, said to be a first in Singapore.

Ms Ng said that while the take-up rate has "not been very high" due to SMEs' more pressing concerns during Covid-19, this is likely to change as the bank is embarking on initiatives to educate SMEs and encourage smaller businesses to move in that direction.

As HSBC pushes ahead with its growth ambitions here in Singapore, it is also adding headcount to better support SMEs. The bank is on track to grow its number of SME relationship managers (RMs) by 70 per cent at the end of 2021 from two years ago, said Ms Ng.

This comes as HSBC is sticking to its strategy of having assigning a dedicated relationship manager for each SME client - a phenomenon that is rare in banking circles as it adds to cost.

With digital banks coming onboard by early next year, Ms Ng is confident that HSBC's offerings such as its digital capabilities, a dedicated RM and its global network will give the bank an edge over its digital-only rivals.

"It's really about listening to your customers and providing them with support, and that is why we have never gone into the model of serving them via a call centre," she said.

"We believe the SME segment is highly worth investing in if you get the strategy right."

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