Saurabh Gupta — President, HFS Research[00:21]
Welcome everyone to HFS Unfiltered. Today, we’re going to deep dive into the rapidly evolving world of commercial banking. And I have a very special guest joining me today, Deepak Arora, who’s the SVP for Financial Services at HCLTech. Deepak, great to have you.
Deepak Arora — SVP, Financial Services, HCLTech[00:40]
Pleasure, pleasure being with you and looking forward to the conversation.
Saurabh Gupta — President, HFS Research[00:44]
So, look, Deepak, you guys have been placed as a Horizon 3 leader in our commercial banking report. So congratulations on that. But as we were doing this research, there were really three things that stood out to me as I looked at the market. One is, you know, the geopolitics and the macroeconomics is a mixed bag, and keeps everybody on their toes right now. I think also we talk a lot about customer experience, but customer experience in commercial banking is a very different animal than a beast by itself, right? It’s complex, it’s high touch. And then, you know, while we’ve modernized a lot of retail banking, commercial banking is still lagging, and I think now they’re facing this challenge of let’s do it fast, and let’s modernize fast. So, as you’ve been placed as a Horizon 3 leader, you know, as you guys at HCLTech have deep engineering, deep infrastructure, IP, partnerships, you know, what have you, what’s your reaction to this recognition, and how do you think it aligns to your vision of helping banks, commercial banks evolve?
Deepak Arora — SVP, Financial Services, HCLTech[01:54]
Look, we are genuinely excited to be recognized as a market leader in the HFS commercial banking report. We truly believe that the foundation of our success is built on years of creating long-term value for our clients. Our financial services division has been growing steadily at, what, about 4.5% over the last eight quarters, and the commercial banking division within HCLTech has been a big driver for that. In this space, we’re seeing significant growth. Specifically over the last two or three years, we are almost adding now $1.5 billion to our revenue each year. In fact, we now work with 6 of the top 10 commercial banks globally. We’ve got around 28,000 employees, whom we call entrepreneurs, who are playing a key role in this success. So, what sets HCLTech apart in the commercial banking space? I would say four key success factors. First one, end-to-end value chain expertise. We truly believe in being a partner for life for our clients, providing comprehensive services across strategy, operations, technology, client life cycle management, selecting products, implementing products. We want to be that one partner whom the commercial banks can really rely on. Second, driving technology leadership for our clients. Technology is in the DNA of HCLTech, and we love to bring this expertise to our banks. We truly believe we can help turn complexity into clarity with the help of technology, and we want to help our clients become a tech-driven organization. I love the quote from the former HP CEO Carly Fiorina, who said, where technology meets purpose, progress follows. And in a way, it embodies everything HCLTech stands for. The third success factor, it’s all about innovation. It’s about bringing in AI, data, analytics, all intrinsically woven into what we are providing for our customers. Innovation is at the core of everything we do, and for us it’s not just offering solutions, but how can we co-create and co-innovate with our clients so that every solution is a tailor-made solution, but also it stands the test of time. It is designed to be future-proof. This is where we are working extensively with our clients to bring in the power of AI, agentic AI, data and analytics so that banks can really focus on data-driven decisions, enhancing revenue, customer retention, and driving cost reduction initiatives. The fourth success factor, this is all about ecosystems. In today’s connected world, we believe partnerships accelerate progress, and it is in this space where we bring in our entire friends in this market, be it fintechs, regtechs, product partners, enabling commercial banks to innovate faster and become more effective. Let me try even giving an example, because that will really explain how HCLTech is really working in depth with a lot of our customers. So, I’ll take an example of a large European bank. They had this ambition of becoming the best digital commercial bank in Europe. They selected HCLTech as a strategic partner, and their task to us was, dear HCLTech, can you help us to transform and digitize the core of the bank? We picked up almost 150 different customer journeys which were across various markets and product lines, and we started off with creating a joint transformation office with the customer, and the idea was let’s relook at every customer journey, redesign it to make it front-to-back automated and also try to see how we can intrinsically add the power of technology and AI into these customer journeys. At the same time, as part of this transformation office, we said let’s also relook at every aspect of how we are set up. Let’s look at the ways of working. Let’s look at culture. Let’s look at governance structures. We want to make sure that we have the right ingredients for success. Now, from a commercial banking point of view, one of the most important programs under this was something called a working capital modernization program, and the idea of this was to optimize the bank’s ability to deploy capital quickly and efficiently so that they can increase the ROE and generate more fee income. We helped the bank to integrate various systems of record, various product engines, and this really helped them lower their cost and provide real-time visibility into their capital requirements, in turn helping them improve their entire financial supply chain. We worked on strengthening various product offerings for them, including SME lending, business lending, payments, financial markets, all focusing on driving self-service, straight-through capabilities, and at the end of the day, improving the customer experience of all their commercial clients.
Saurabh Gupta — President, HFS Research[08:09]
So, Deepak, I think that was fantastic, and I think the case study that you talked about really brought it to life, and I think it sort of validates why HCL is a market leader in this space. But, you know, there’s so much that needs to be done, you know, in commercial banking, right? I was just looking at, I was trying to take notes while you were saying, and you mentioned at least 10 things, even in the two minutes that you took. But, you know, as you look at clients and all these banks, what’s sort of the greatest need? What’s the one or two or three things that they need to do to really start moving the needle? Because if we give a list of 20 things, you know, it’s sort of mind-boggling. So how do you make it simple?
Deepak Arora — SVP, Financial Services, HCLTech[08:51]
Fair question, and I think this is a question we get a lot from the CEOs and CIOs of where should we focus on. The reality is that the commercial banking industry has shown remarkable resilience in 2024, bouncing back with liquidity levels nearing those what we saw, you know, before the financial crisis in the late 2000s. However, as we are midway into 2025, this year has really thrown a lot of challenges, with the ongoing tariff wars, the economic uncertainty which has been brought forth. The volatility is a sign of something bigger, and we all know that if the global economy struggles, the banking system also takes a hit. Now, in such a scenario, we anticipate a significant rise in credit costs, which is going to put pressure on the banks’ provisioning and will ultimately hurt their profitability. In a way, it is a critical moment for the commercial banks, and from an HCLTech point of view, we really believe there should be three focus areas for our clients to weather these challenges. So, first and foremost, the macroeconomic pressures force one to really focus on operational resilience. It’s the ability of the bank to adapt and respond to any operational disruptions which may come up. At the same time, it goes hand in hand with driving cost efficiency so that you reduce your cost base and you are ready for any uncertainty which comes in the mid to near term. So for commercial banks, it’s not just about surviving disruption. It’s about how can they lay the foundation for thriving in it. We always believe that the one to win the war of attrition will be the one who is most prepared to spot newer opportunities for growth. So, in short, operational resilience is where we in HCLTech are helping commercial banks to really provide them the tools, technology, and expertise to become more resilient. It could be via modernized infrastructure, cybersecurity solutions, automation, AI, or at the end of the day, just creating digital twins for core systems to manage disruptions. So that’s the first one. In continuation to it, or I like calling it separately as a second key focus area, is all about regulatory compliance and KYC. All along over the last decade, being secure and compliant has always been a top priority for banks, but in these volatile times, we only think the regulatory demands are going to increase, which means commercial banks need to now start focusing a lot more on automated and digital processes for KYC, AFC, and so on and so forth. Just meeting regulatory commitments is not going to be good enough. They need to be proactive in terms of collaborating with regulators and continuously evaluating their models. This is where HCLTech is also helping our customers to achieve zero-touch, end-to-end customer experience on KYC and regulatory compliance, bringing in the power of technology and Gen AI to drive fraud detection, to drive digital KYC for our customers to stay one step ahead of threats. The third one, this is all about digitization and modernization. More and more we see commercial banks are facing mounting pressure from fintechs, big techs, alternate financial institutions, and these competitors have really set up crazy standards for digital convenience. And for commercial banks, it is no longer about having a digital presence. They need to now start offering personalized front-to-back digital products, which pretty much every commercial client is now expecting. You can look at finance or treasury managers now expecting the same convenience and personalization from commercial banks as from retail banks, and this is again where HCLTech is working with commercial banks to bring in the power of digitization, modernization, data and analytics to drive personalization, product recommendations, and more importantly, front-to-back product offerings for our clients.
Saurabh Gupta — President, HFS Research[14:01]
So, Deepak, I think your three points around operational resiliency, compliance, and modernization really resonated with me. But can you bring it to life with an example? HCLTech has actually worked with a bank; maybe talk a little bit about digitization and modernization.
Deepak Arora — SVP, Financial Services, HCLTech[14:01]
Absolutely, would love to do that. Let me pick up an example of a European-headquartered bank with a global commercial banking footprint. Over the last few years, they identified SME lending and business lending in general as their focus growth areas, and to drive digitization and transformation in these growth areas, they selected HCLTech as the transformation partner. The plan was to jointly transform end-to-end business lending capabilities by digitizing and personalizing customer interactions. They also wanted to develop alternate distribution channels to acquire new customers and reduce the cost to serve in the lending space in general. So how did we help the bank? We worked with the bank to develop a next-gen lending platform. The bank had also identified a fintech which specialized in a lending platform to enable SME lending via alternate distribution channels. So, HCLTech helped integrate the fintech into the customer’s complex landscape, integrating the platform with risk, KYC and CRM systems. We used our innovation labs which are based in Amsterdam and Berlin to experiment and work along with the fintech partner on new potential value propositions and technology adoption feasibilities for the bank. At the end of 12 months, when we went live with the new lending platform, the client was able to gain an enormous 2% of market share just within 12 months of the rollout of the new platform. More importantly, it helped them to achieve 50% efficiency due to faster credit decisioning. Now this is an example of creating a new platform. Maybe let me also give you an example of a legacy platform. This is another example where one of the largest commercial banks globally, we’ve been working with them for more than a decade, and what we do is that, being a strategic partner, we do monthly innovation and tech days with them where we jointly have their IT and business leads, tribe leads, joining us for these innovation days, and in one of these sessions, the head of trade finance was there. And the head of trade finance was continuously complaining about the increase in the paperwork and the pressure it was putting on cost, because every quarter they were just adding new and new operational analysts. The business was booming, but it only meant to service their business, they were just throwing in more and more people. Problem statement, pretty simple. The bank was dealing with a large volume of paper-based products like bill discounting, bill of lading, commercial invoices, certificate of origin, insurance certificates, you name it. They had almost 1,800 client operational analysts, and they estimated that they were almost handling $4 billion worth of documents every year. They had a plethora of OCR solutions, Kofax, Datacap, you name it, it was all under the hood, but it was so much manual. There was so much inefficiency and manual touch points across the whole setup. We took up the challenge, we said, great, what we would like to do is let’s start with just relooking at the entire customer journey of trade finance and let’s see if we can create a unified, cost-effective solution. We will also look from a lens of technology and see if we can build AI intrinsically into the solution. So we really thought, OK, AI is good. Can we really bring AI and cutting-edge technology into this process? So we started off with using tools like Doc AI, Gen AI, created custom AI/ML models to automate data extraction from multiple sets of documents, invoices, contracts, and really created template-based document extractions. We then used Gemini Pro and the likes for signature verification, for validating signatures on key trade documents. At the end of the day, what we wanted to do and what we achieved is: can AI help these operational analysts to drive document completeness and accuracy even before they can be the human in the loop and they can do their final reviews. We ended up completely, within 18 months, redesigning the platform, and the end result was 70% automation of the entire workflow, 30% reduction in operations staff, improved efficiency of nearly 25 to 30%, purely on document handling and analysis. And the entire transaction process of trade finance, which was taking 15 days, we were able to cut it down to almost 24 to 48 hours. This was one of the biggest successes of bringing AI into life, into core business processes, and helping the bank drive both customer satisfaction as well as cost efficiencies.
Saurabh Gupta — President, HFS Research[20:06]
That’s fantastic, Deepak. I think the example really brings to life how HCL has been able to use its domain expertise on one hand, your partnerships, but also cutting-edge technologies, generative AI, agentic AI, and all the rest to really drive business outcomes. So, I really enjoyed this conversation, Deepak. I’m sure people who are listening into this enjoyed it. Thanks a lot for sharing your insights, Deepak, and congratulations once again for being recognized as a market leader in this space.
Deepak Arora — SVP, Financial Services, HCLTech[20:43]
Sort of really had fun on the side as well. Thanks for the opportunity and look forward to more fruitful conversations. Thanks.
