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A hyper-connected community

The expectations for this year’s Sibos – catchphrase “thriving in a hyper-connected world” – was that about 8,000 delegates would attend the London conference. In reality, more than 10,000 people made it to the fintech event, with some unofficial reports suggesting even 13,000-14,000 delegates, making it the largest, most attended Sibos to date.

All these people, who were representing companies and financial institutions from every corner of the industry and across the globe, spent up to four days attending panel discussions, talks, presentations and networking events. Not to mention trekking the enormous London ExCel conference and exhibition centre in search of free merchandise (IBS’s favourites were caricature drawings, wireless earbuds and plush puppies).

Sibos this year made use of several hundred speakers, including Dame Minouche Shafik, director of the London School of Economics and Political Science (LSE), who spoke during the opening plenary. Other speakers included David Schwimmer, chief executive of the London Stock Exchange Group; Thomas Kurian, chief executive of Google Cloud; as well as more ‘flashy’ drawcards such as Brian Cox and Sandi Toksvig.

Several of the 300+ exhibitors used the opportunity to not only showcase their innovations but also announce recent deals. Visa revealed it will hit more than $1 trillion in card payments this year, the Banking Industry Architecture Network (BIAN) unveiled a ‘Coreless Bank’ initiative and Swift showcased the speed of cross-border real time payments and a partnership with Equiniti.

Other companies focused on artificial intelligence (AI), making it one of the most discussed topics at the conference. These included Finastra, revealing plans to partner with NetGuardians on an AI fraud detection solution; SmartStream, which launched an AI module for digital payments processing and Air, an AI-based reconciliation solution; and Pelican, which announced that its AI support will be provided to Italian bank Intesa Sanpaolo.

The main focus of Sibos was, however, on the positive effects real-time payments will have on the sector. Trevor LaFleche, director product management at Fiserv, said platform renewal at payment market infrastructures was contributing significantly to the rise of real-time payments. “The advent of real-time is fundamentally changing the way we transact,” he said. “When you can move money seamlessly and pay invoices when the goods arrive, you can have that confirmation instantly. In a lot of markets, you have to wait two or three days for that payment to arrive.”

Alison Wilkes, regional business leader for Europe banking and payments, real-time payments, North America at FIS, said: “As the Federal Reserve is picking [real-time payments] up as well, I think we’ll now see that it will explode in the US, and that could provide a real sense of engagement of real-time payments, just based on the numbers.”

Another big shift is towards open banking and application programming interfaces (APIs), Parth Desai, chief executive and founder of Pelican, noted. Together with real-time payments, he said, the two trends would disrupt the industry over the next five years or so.

“With open banking, a lot of people will have information, and because of that, a lot of fintechs, and banks themselves, can come up with innovative solutions, focusing on the end-user – the customer,” he said. “Banks have been dedicated to that; they have had all the data. Now, with that data becoming more widely available, many companies can offer products and services.”

Fiserv’s LaFleche agreed, as these companies are meeting a need. He said for one South-East Asian consulting firm, it was cheaper to send money from their US dollar account to TransferWise, to move it to Singapore dollars, and then send it back to their bank. “But that’s just lack of competition,” he said. “The start-ups focusing on one particular problem are going to spur the banks on to be more efficient, to master all that. It is a great thing to have a very rich ecosystem of fintechs, solving a whole bunch of different problems and that allows us to be more creative as well.”

Increasing creativity

The move towards more creativity in the banking and payments space has moved out from the retail sphere and is making its presence felt in corporate banking as well. Wilkes said the customer experience that private customers have with other entities is at the forefront of overall banking relationships as well. “We expect that when we order something it will arrive today or tomorrow,” he said. “Why would sending a payment be any different?”

Volante Technologies called this connectivity a growing convergence of commercial and retail banks. Vinay Prabhakar, vice-president product marketing, said the interest in “cool” APIs is a growing trend across the financial industry. Banks talk to Volante about commercial payments but often end up asking about retail payments and technologies such as APIs.

Several companies have moved to accommodate this – Finastra, for example, has opened its complete software through open APIs. Martin Häring, Finastra’s chief marketing officer, said: “We thought we are really good on back-end systems and we control so much traffic financially every day that we want other people – fintechs, students, universities, entrepreneurs – to develop new applications on top of our platform. So we have opened up our products through open APIs – much like what open banking does for the payment area, we do across our full product portfolio.”

Ben Henshall, general manager Asia Pacific for Red Hat, which was recently acquired by IBM, said open APIs can deeply affect legacy banks structurally as fintechs are “eating the banks’ products for lunch”. He added: “If you look at the market cap for the past ten years, they are flatlining. Their ability to try to have genuine revenue growth has stagnated because interest margins are literally zero. You have relatively stable or declining populations. So how is a bank going to grow outside of a traditional model of receiving money, lending it out and taking a margin on that?”

Payments and transactions are one area but the cost is being driven to a commodity level, because of fintechs, which drive down prices while adding customer-oriented value-added services.

“If you think about that structurally, then add things like the fintech innovation, implementation and profitability in the APAC region, which is leading the world. This is the juggernaut that’s coming, and America and EMEA is still trying to figure out how to restructure their financial organisations to capture and ensure that they are maintaining relevance but also growing and increasing revenue,” Henshall said. “That requires major structural transformation to become a digital native bank.”

With at least 50 conference sessions each day, the Sibos themes and conversations were about as varied, too. According to some, biometrics will be the biggest non-financial technology to affect payments, while quantum computing will be the buzzword to replace blockchain, now that most people have managed to figure out what that entails.

Rebuilding trust was another overarching theme, partly due to the 2008 financial crisis, which significantly affected the reputation of the financial industry. The aftermath of the crisis is still being dealt with by banks and financial regulators. This was reflected across both the main conference sessions and at Innotribe, with focus on identity, reputation and credibility. And the themes were focal points for talks on fraud, data, behavioural analytics and all forms of AI and machine learning, reflecting the connectivity between everyone in the sector and how to progress in a sustainable way.

Some worries were raised on the feasibility of meeting the deadlines of Swift gpi and ISO 20022. But the overall attitude reflected throughout the event has been an enthusiastic hopefulness that disruption, innovation and collaboration – and hyper-connectivity – will carry everyone through to Sibos 2020 in Boston.


Article by-
Sunniva Kolostyak

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