Friday, 14 June 2024

SWIFT focuses on real-time payment at Sibos 2018

5 min read

By Siddharth Chandani

This year, conversations at SIBOS centred on customer experience, co-creation, security, and technology resonating deeply with the event theme. As consumers and businesses migrate to the digital channels, financial services providers are mapping their own transformational journeys to drive service innovation

More than 7,000 delegates including transaction bankers and technologists attended SIBOS 2018 at the International Convention Centre Sydney, to explore forces that are reshaping the financial services industry today. The primary challenge being simply the ‘pace of change’, this year’s conference theme- Enabling the Digital Economy, was populated with topical discussions on making payments an enriching experience, new technologies to tackle organised financial crimes, data and information sharing from wider adoption of open banking and application programming interface (APIs) to enhance overall transaction experience for end customers. Preparedness in the face of geo-political uncertainties and regulatory priorities also contributed their fair share to the discussions during the four-day event from October 22nd to 25th, 2018.

Here are some of the highlights that emerged from the gathering as The Asian Banker spoke to leading industry practitioners and stakeholders on key trends, challenges and some of the initiatives that they are focusing upon.

Real-time payments take centre stage

Driven by a combination of new regulations to enhance transparency, competition from non-bank players and shifting customer expectations, payments innovation was a recurring theme. With the transformation of regional and national financial market infrastructures pursued by the government and private parties, a number of industry practitioners agreed that opportunities were being created for banks and non-banks to provide ‘overlay services’ in sync with new customer propositions.

“National Payment Platform (NPP) was directed by the Reserve Bank of Australia to overhaul the clearing system, so we have all as banks spent a fair bit of money building the infrastructure. It’s incumbent on us to work out how we can maximise the return on that investment by using that infrastructure and building overlay services on top”, said Alan Huse, Head of Payments and Cash Management at ANZ Bank. Claus Richter, Head of Transaction Banking Solutions at Nordea and Paula da Silva, Head of Transaction Services at SEB, shared how banks in the region were building a harmonised cross-border system of real-time payment and adopting open banking standards in line with SEPA (Single Euro Payments Area) regulation. They highlighted the private initiative, Project 27 (P27) by leading Nordic banks that aims to unify the payments system across the region. “A privately driven market adoption, P27 is based on the premise of taking down costs, increasing simplicity, and getting all the gains, all the way out to the end customer between the banks”, described Paula. Claus sees new revenue opportunities to supplement the lower transaction margins, from the unification of payment systems. “The transaction price that banks can charge to their customers is heavily under pressure, which forces us to find different revenue streams around the payments. We need to look at the payment ecosystem overall, see what type of value-added services we can put around the payments”.

Encapsulating the potential of growth for payments in Asia Pacific, Philip E. Bruno, co-lead of McKinsey’s Global Payments Practice highlighted various use cases of banks’ response to alternative payment methods. “Instant payment in some ways is the banks’ response to alternative payment methods. Banks are looking to create applications that sit on top of national payments infrastructure, which was created for faster payments to be able to drive end-user benefits”.

New players in the transactions space - An opportunity as much as a threat

Partnership to leverage new technologies- big data, AI, cloud, mobile and blockchain within the overall payment ecosystem reflected the collaborative ethos of banks and digital-only players. Citing massive opportunities, they agreed that fintechs were a source of greater customer experience, and banks could leverage their wider scale to meet common challenges of financial inclusion.

Looking at challenges in expediting payment processes from a clarity, visibility, and reliability perspective, Ripple’s solutions are focused on the open internet model, highlighted Marcus Treacher, Senior Vice President for Customer Success at Ripple. “Our view is that the banks are here to stay as the world needs a strong banking system. It’s an open market and as banks implement Ripple’s technology, the market becomes much more inclusive and also much more competitive”. Entering the market to facilitate better intermediation to further build a secure digital financial system, Fenergo sees mutualisation as a key strategy in driving network success, shared Marc Murphy, CEO at Finergo. “Our secret sauce has been to mutualise the cost of solving regulation, so we bring banks together so that the regulatory costs can be shared”.

Arguing that expectations around speed, use of technology, innovation and transparency were driven to a large extent by new entrants in the transaction banking space, Arnon Goldstein, Regional Head of Relationship Management for Treasury Services at BNY Mellon said that “the industry has progressed since it first felt the impact of new fintech entrants. We are now at the stage of looking at more collaboration between market participants in the transaction banking space to continue to move our industry to the next level”.

Securing the digital future: Tackling cyber threats

In line with technological advancements, the sophistication of cyber threats, breach of data, and rise of fraudulent practices, regulatory technology (regtech) was widely discussed. The industry sees more pressure in meeting regulatory compliance to ensure the soundness of the overall financial system. Practitioners noted that with each passing year, not only had the sheer volume of threats increased, but the overall cyber landscape had become more diverse.

The topic was a burning issue, especially as incidents of financial compliance breach were reported by Australiandomiciled banks. Lisa Vasic, Head of Transaction Banking Australia and Papua New Guinea at ANZ Bank stressed on the significance of keeping an eye for early warning trends and educating corporate customers. “We are constantly trying to keep pace with the amount of innovation on the cyber side. The key thing to look from front and back- what can we do to help our customers in terms of pre-detection and unusual flows while significant investments into correspondent banking networks, basically transaction monitoring”, highlighted Lisa.

SWIFT’s Customer Security Programme (CSP) framework underlines the requirement for banks to look beyond their internal operations to include counterparties and community, as second and third elements. Eddie Haddad, Managing Director,

SWIFT talked about latest developments in Global Payments Initiative (gpi) and how it helps institutions manage and assess payment risks. “SWIFT has got the typical compliance controls, banks have got this customer security program, and then SWIFT is introducing things at the network level that actually look for inbound transactions that might be fraudulent”.

Practitioners in general, were aware of the increasing pace of activities around organised cybercrime. For them, information sharing and industry cooperation in cyber-operations were key strategies going forward.

Adapting to the new world order- Geopolitical frictions

The ratcheting of trade tensions between China and the US from the imposition of unilateral and retaliatory tariffs was a pressing concern at the conference. On the top of the agenda for trade financiers was how to smoothen potential disruptions for clients from supply chain adjustments, especially as the list of products under tariff were to widen.

Juliette Xue Lascoux, Head of Bank and Regional Management, Corporate Coverage International at SEB gave an account of key macroeconomic challenges and how it was creating frictions for corporates in emerging markets space. “The challenge is the changing landscape of geopolitics that has made it more difficult to work with country risk in emerging markets. The needed risk coverage capacity for our corporate clients and likewise for them to analyse the situation and understand the risk exposure towards emerging markets is our single biggest priority”.

For Kai Fehr, Head of Trade-APAC, International Trade Services at Wells Fargo, shifting consumer behaviour amid changing supply chains and on top of that, geopolitical uncertainty, meant rapid adaptation of product mixes to suit faster payment channels. “Long shipping routes changing into shorter shipping routes, we are seeing a lot of electronics coming out of Vietnam instead of China. New supply chains emerging within Asia are shorter which prompts banks to react with different speeds”, highlighted Kai. Connecting the dots, he also spoke on the changing nature of intra-regional trade flows- consumption apart from production happening within Asia instead of the West.

Keywords: Technology, API, Open Banking, Cross Border Payments, Blockchain, Financial Inclusion, . Regulatory Technology, SWIFT, Gpi
Institution: National Payment Platform, Reserve Bank Of Australia, ANZ Bank, Nordea, SEB, Mckinsey, Ripple, Finergo, BNY Mellon, Wells Fargo
People: Alan Huse, Claus Richter, Paula Da Silva, Philip E. Bruno, Marcus Treacher, Marc Murphy, Arnon Goldstein, Lisa Vasic, Eddie Haddad, Juliette Xue Lascoux, Kai Fehr
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