Collaboration and innovation shape financial landscape
A roundup of key insights from Sibos 2023, Swift’s annual conference held in September in Toronto, Canada, that brought together industry leaders to explore the trends shaping the world of finance
The opening plenary of Sibos 2023 provided Swift’s board and management with an opportunity to deliver critical insights into the financial industry.
Swift’s chair of the board, Graeme Munro, highlighted significant trends, including artificial intelligence (AI), tokenisation, central bank digital currencies (CBDC), and the importance of environmental, social, and governance (ESG) considerations. He acknowledged the industry’s dynamic changes, saying: “We must recognise the transformative forces at play.”
Samantha Emery, deputy chair, emphasised Swift’s pivotal role in addressing ESG goals. She stressed the importance of diversity and skillsets within the organisation, remarking: “Our diverse talent pool is a potent asset in driving ESG goals.”
Swift CEO, Javier Perez-Tasso, discussed Swift’s commitment to innovation and operational excellence. He highlighted the transition to ISO 20022 and its role in enhancing interoperability, and Swift’s focus on seamlessly integrating new technologies like CBDC and tokenisation, stating: “Our journey is towards frictionless transactions.”
Economic insights and AI in banking
Brian Moynihan, chair of the board and CEO of Bank of America, shared economic insights, predicting a robust US recovery by 2025. He attributed this optimism to “strategic fiscal stimulus measures and monetary accommodation efforts”.
Shekhar Bhandari, president of global transaction banking at Kotak Mahindra Bank, one of India’s leading transaction banks, expressed optimism about the global economy, particularly India’s emergence as a strong economic growth engine, supported by the Middle East and Southeast Asia. He commented: “Our collective efforts in fostering global growth are poised for success, with India at the forefront of this positive transformation.”
Moynihan also discussed the significance of generative AI, introducing Erica, Bank of America’s AI tool, noting: “Erica has transformed customer engagement.”
Hari Janakiraman, ANZ Group’s head of industry and innovation, observed a range of remodelling across transaction banking, payment infrastructure, and CBDC. With regard to the increased adoption of technologies discussed at last year’s Sibos and their commercial implementation this year, he observed: “We are witnessing these technologies going live, albeit at a modest scale.”
Moynihan underscored the enduring importance of payments in the banking sector. He emphasised the need for continual investment in payment technology to enhance security, speed, simplicity, and cost-efficiency, stating: “Payments are the lifeblood of financial services.”
Collaboration and Swift Go in Asia Pacific
Collaboration emerged as a recurring theme throughout the plenary. Speakers stressed the critical role of cooperation among financial institutions in improving payment systems, connecting various economies, and addressing cyber security concerns. Moynihan also emphasised the significance of organisations like Swift in fostering collaboration, commenting: “Collaboration is the cornerstone of a resilient financial ecosystem.”
Julie Bolan, Swift’s head of payments for APAC, discussed the adoption of Swift Go and payment pre-validation in Asia Pacific. She elaborated on the enhancement in customer experience in cross-border payments and the role that Swift Go plays in delivering low-cost and transparent cross-border payments, stating: “Swift Go revolutionises cross-border payments.”
Global expansion of cross-border payments
Steve Naudé, managing director for Wise, the global digital wallet and payments platform, and Stephen Grainger, Swift’s chief executive for the Americas and the UK, talked about the global expansion of cross-border payment options through strategic partnerships.
Naudé highlighted how Wise integrates its infrastructure into the systems of banks and financial institutions, enabling real-time payments and access to various payment methods. He commented: “Collaboration with established financial institutions like Swift is pivotal in expanding global cross-border payment options.”
Grainger echoed the importance of such partnerships in aligning with Swift’s future direction and facilitating cross-network payments. He saw it as a positive development for both organisations, saying: “Cross-industry collaboration is essential to meet the evolving demands of cross-border payments and enhance the global financial ecosystem.”
Innovations in sustainable finance
Kai Fehr, Standard Chartered Bank’s global head of trade and working capital, shared details of the bank’s sustainable trade loan for financial institutions. He likened the product to a sustainable version of the Swift trade loan issued to financial institutions. StanChart requires eligible institutions to meet sustainable-frameworks evaluations in order to qualify for the loan.
Fehr expressed satisfaction with the loan’s reception at its launch, and discussed the potential for tokenising trade assets on its initial token offering platform, stating: “Tokenisation opens new possibilities in sustainable finance.”
The bank has piloted an initial token offering platform to tokenise real-world assets like trade loans. The program received strong interest from institutional investors, with plans for tokens to be traded on exchanges. StanChart is also undertaking supply chain finance initiatives, leveraging blockchain technology in partnerships with fintechs.
Modernising payments and ISO 20022 transition
Philip Panaino, StanChart’s global head of cash management, and David Rego, global head of payments, provided a detailed explanation on payments transformation. They highlighted the rise of domestic instant payments and the need for richer data as a means to unlock further intelligence and opportunities, saying: “Richer data enhances operational efficiency.”
Ole Matthiessen, Deutsche Bank’s head of corporate banking for Asia Pacific and global head of cash payments, underscored the critical importance of industry-wide adoption of the ISO 20022 rich data messaging standards, stating: “ISO 20022 is the future of cross-border transactions.”
He emphasised the need for financial institutions to adopt a more consistent approach to achieve the industry’s collective timelines. Matthiessen observed that some markets in Asia are leading the way in adopting the new standards, while others have fallen behind, calling to mind the European markets’ experience of implementing Cross-border Payments and Reporting Plus (CBPR+) and the TARGET2 real-time gross settlement system that are harmonised with ISO 20022.
Reiterating ISO 20022’s more coherent, richer, and traceable data structure, Matthiessen said it will benefit the payment value chain by mitigating non-financial risks and improving cost-efficiency in cross-border transactions for end users. However, he noted, global adoption is trailing expectations; only 15% of payment flows on CBPR+ are on the new MX standards.
Digitalisation of trade and supply chains
Samuel Mathew, StanChart’s group head of flow and financial institution trade, shared a comprehensive overview of the bank’s digitalisation initiatives. He highlighted that the journey was accelerated by COVID-19 but emphasised that there’s still much progress to be made.
The bank is working on various digital trade initiatives, including improving client interactions, providing transaction status transparency, and exploring blockchain and crypto technologies to tokenise real-world assets. One example is Track-It, an open portal that has reduced client service inquiries by more than 20%.
Geoff Brady, Bank of America’s head of global trade and supply chain, described its CashPro solutions as the initial steps of the bank’s trade and supply chain transformation. The goal was to simplify as much of the ‘mechanical issues’ in the processing of trade and supply chain transactions as possible, to further streamline receivables and payables between counterparties, despite the wide range of traditional document-based products already available.
The bank sees the ‘mechanical issues’ as a key challenge, not just a technological or credit problem, and aimed to create an ecosystem of fintechs and platform players to digitalise and automate workflow, leveraging application programming interfaces, blockchain, and cloud technologies.
The approach centred on addressing the resource-intensive and paper-heavy aspects of trade, aligning with the broader industry trend towards digitalisation. Ultimately, the goal is to establish digital connections between buyers and sellers to make the process more efficient and eliminate the need for paper altogether.
Vinay Mendonca, HSBC’s chief growth officer for global trade and receivables financing, described how clients are adapting to changes in consumer behaviour, technology adoption and disruptions in technology. In this melee, they are also mitigating ESG transitions, sustainability, the pandemic’s impact, and geopolitical tensions. Clients are exploring solutions like business-to-business marketplaces, sales portals, and digital tools to support their new business models.
HSBC aims to provide solutions such as receivable finance to enhance liquidity and extend payment terms, supply chain finance to expedite supplier payments, and inventory finance for contingency management. The Electronic Trade Document Act recently passed in the UK, stemming from the United Nations model, is facilitating the digitalisation of key trade documents, improving speed, reducing fraud, and increasing efficiency in global trade.
Enhanced security and corporate customer experience
Bhandari emphasised the importance of security and risk management. He highlighted the integration of advanced technologies like AI and machine learning to enhance risk management and data security, observing: “Security is non-negotiable in our rapidly-evolving financial landscape.”
He also discussed elevating the corporate banking customer experience, stressing the need for a unified view of customer accounts, encompassing cash, payments, collections, account services and loans. Kotak Mahindra Bank introduced the FYN platform to provide efficient working capital solutions tailored to individual customer requirements. Bhandari explained: “A seamless and comprehensive customer experience is the cornerstone of our approach.”
Rachel Whelan, Deutsche Bank’s head of corporate cash management, and global head of payments and transactional foreign exchange (FX) product management, addressed the impact of tightening cash cycles on corporate cash and liquidity management. She emphasised the demand for integrated workflow solutions, including liquidity, FX, and payments.
Institution: Swift, Bank Of America, Kotak Mahindra Bank, ANZ Group, Wise, Standard Chartered Bank, Deutsche Bank, HSBC
Guest: Graeme Munro, Samantha Emery, Javier Perez-Tasso, Brian Moynihan, Shekhar Bhandari, Hari Janakiraman, Julie Bolan, Steve Naudé, Stephen Grainger, Kai Fehr, Philip Panaino, David Rego, Ole Matthiessen, Samuel Mathew, Geoff Brady, Vinay Mendonca, Rachel Whelan