November 2017

SWIFTgpi, cyber-security defence and the rise of fintech payments providers underpinned the Sibos 2017 theme of ‘Building for the future’. Janet Du-Chenne and Clarissa Dann report on packed four days in Toronto

“We are big, good, we are investing, we are committed and we are growing,” said Deutsche Bank’s GTB Head John Gibbons at the Deutsche Bank Sibos preparation session on Sunday 15 October. “What could be better than four days dedicated to customers?” he asked.

Deutsche Bank and cash management

With the launch of flow magazine and the online portal as a source of thought leadership and global transaction banking (GTB) service briefings, Deutsche Bank took the opportunity at Sibos to identify regulatory and technological developments in the cash management space – and what they mean in practice.  Now that corporate cash management and institutional cash management are now combined into one “pillar” of the Deutsche Bank GTB offering, the focus at Sibos was wider, with core themes such as regulation, cyber security, utilities and SWIFTgpi – and the practicalities of incorporating them into payment routines – dominating panel sessions and conversations.
The new-style Deutsche Bank stand buzzed each day…and not just because of the coffee

Overall themes from sessions and videos

Regulation and compliance

Luc Meurant, SWIFT’s Head of Financial Crime Compliance Services division had already told flow in his article, ‘Come together’ that “concerns about the lack of transparency have led some banks to terminate correspondent banking relationships as part of a process known as de-risking”, and in a pre-Sibos video, he said that the conference programme had drawn on speakers from academia, financial institutions and regulators. Their remit was to “look at the new technologies and how they can help reduce the cost of compliance, increase effectiveness and share information better”.

AML and assurance, future trends in sanctions compliance, counter terrorist financing and tackling fraud and cybercrime were discussed in a range of sessions, as well as video interviews. With his brainchild, the SWIFT KYC Registry very much evidence at Sibos, one could only hope, in the words of Christian Westerhaus, Deutsche Bank’s Global Head of Clearing Products, Cash Management, in his Banking Technology interview, for “the full adoption of the SWIFT KYC Registry to have better counterparty data and to be able to match this with the customer security programme and other initiatives that are going on now.”

Another area of much-needed collaboration, said Westerhaus, is aligning real-time settlement systems with ISO 20022, the universal financial services industry messaging scheme, as leading payment structures will be making this mandatory over the next three to four years. Further industry support on how customer payment data should be structured and how the Legal Entity Identifier (LEI) can be implemented in the new ISO 20022 world of correspondent banking would also be helpful, he added.

ISO 20022

Isabel Schmidt
ISO 2002 improves quality of information both sides of the payment chain, says Isabel Schmidt (seated second right)

As Christian Westerhaus pointed out in his video interview, ISO 20022 is upon us and this common messaging language that allows different markets to talk to each other is, added Isabel Schmidt, Deutsche Bank’s Head of Cash and Clearing Products, Americas, Cash Management an opportunity to improve existing operating models and boost efficiency.

Speaking in a panel session entitled, “The innovation enabler: what ISO 20022 can do for market infrastructures and users”, she said that the standard provides the potential to dramatically improve the quality of information for both sides of the payment chain by facilitating a true end-to-end straight-through processing (STP), eliminating the inefficiencies of poorly structured payment messages. Another advantage is the data from ISO 20022 is that it improves fraud detection capabilities.  “It’s about data richness, and for our end clients in the corporate space this means data analytics to understand who their counterparties are and how their behaviours change so that they can understand their flows to improve their services,” said Schmidt.

It also addresses the lack of consistency globally on payment instructions: in Europe institutions make direct virtual payments whereas in the US they have worked on a utility development for requests for payment. ISO 2002 enables automated reconciliation of those payments.

In her video with Finextra, she explained why the development of economies and meeting customer needs is dependent on the modernisation of financial market infrastructures and what is being done to make this happen. Isabel also spoke to Sibos TV about what impact the Federal Reserve Bank’s and the Clearing House’s migration to ISO 20022 would have on the high value payments globally (you can watch her video interview from minute 33:32 to 47:55).

Correspondent banking and SWIFT gpi

C. Westerhaus
Christian Westerhaus advocates the hybrid approach of SWIFTgpi is a huge transformational opportunity

“It is a great asset, it has deep liquidity, you can reach anyone anywhere in the world, but as customer expectations continue to evolve it is doing that”, said SWIFT CEO Gottfried Liebbrandt in an interview with The Banker’s Brian Caplen. He went on to outline the huge progress made on SWIFTgpi since its inception at Sibos Singapore 2015.  But is it the future?

In a session moderated by Boston Consulting Group’s Senior Partner and MD Stefan Dab to a backdrop of reduced correspondent banking lines by systemically important banks, panellists reflected on how the payments environment is being reshaped. “We have a new generation of corporate treasurers who go to Amazon, who are used to buying something in a second,” said Stefan. He pointed out that the SWIFT network of small transactions of under US$500 was growing by 20% and that in the past year there were 23 trillion card transactions – overtaking cash payments.

But, said ANZ’s General Manager of Wholesale Digital Transformation Nigel Dobson, “we are telling our small businesses and our consumers in particular that real-time is all about speed, fulfilment and to a degree data. Our corporate clients are less enthused but could be significant beneficiaries. He went on to compare an internal combustion engine (ICE) and the electric vehicle (EV). SWIFTgpi, he maintained, is about making our current model run faster, cleaner and more efficiently. “My contention is what is our EV?” It needs to incorporate disruptive technology. Tesla has 18 moving parts and ICE car has 2000 moving parts. Cryptocurrencies could be the EV, he added.

“What about a hybrid?” asked Deutsche Bank’s Christian Westerhaus, Deutsche Bank’s GTB Head of Clearing Products. “With gpi you have got the opportunity to send the payments via the SWIFT network and use the new cloud-based tracker by an API which we did as one of the first banks using this. gpi is the new normal. It is live now and we have examples of payments from China to Australia via USD clearing – we just did one last week, 30 minutes end to end.” He added that the next step is getting SWIFT gpi integrated into corporate ERP systems without that corporate having to make a huge investment.

Javier Orejas, airline group IATA’s Senior banker EMEA and Americas (a Deutsche Bank cash client) added that while he recognised banks have to deal with the complexities of regulation, “the experience of our clients has changed – they are demanding instant payments and our processes are not set up for that.”

Dobson said that the dominance of technology payment giants Alibaba and Tencent in China is a “cautionary tale” because a payments ecosystem has been built outside the banking system around a technology.

However help is at hand, and some encouraging examples of collaboration on developing gpi was shared by Wim Raymaekers, Head of gpi at SWIFT, with some fintechs who had participated in the  industry challenge held by SWIFT in Singapore a month earlier by submitting  proposals for new overlay services to the SWIFT gpi platform. This was, he said, “to stimulate the whole ecosystem using APIs”. One fintech, AccessPay, had come up with a proposition that was “entirely different” from their preconceptions as a result of the session and they are moving forward with an gpi-enhanced application that “solves the problem for the corporate of real-time visibility of multi-bank positions given that corporates want to know what receivables they will receive each day and that at present “data is not rich enough to provide that forecast”. While a bank could do it, the fintech, said AccessPay presenter James Higgins, offers “a standard solution that aggregates information across a portfolio of multiple banks”.

Raymaekers returned for a panel session that included Deutsche Bank’s Head of Market Infrastructure and Industry Initiatives, Cash Management, Paula Roels who explained how corporates had been included all the way through the gpi journey through workshops. “We wanted to understand their pain points,” she said. “Corporates appreciate a multi-bank solution and yes we need to get together as an industry and go on asking them the right questions”. In an interview with Sibos TV, Roels commented further on the team spirit and collaboration involved in the implementation of gpi (see her video interview from minute 27:20–37:40).

What does this all mean for correspondent banking? “There is life in the old dog yet”, mused Marc Recker,Deutsche Bank’s Head of Market Management, Cash Management, in his video interview with Banking Technology. “Correspondent banking does have a future but we have to change our mindset. This means being more agile”, he concluded.

Digital perspective

David Watson
The problem banks have to solve is at the front end, said David Watson (far right)

That mindset change was highlighted in a panel titled ‘User experience and organisational culture’. To give customers what they want, banks need to change their organisational culture in order to find new solutions that address customers’ challenges. This means looking at people and process in order to identify the barriers that stand in the way of making customers pay for what they really want. It needs a top-down approach where leaders of the organisation live and breathe the ethos of change and drive the values down.

David Watson, Deutsche Bank’s Head of Digital Cash Products and Americas Head of Cash Management said such a shift needs the individual at its core. “It’s about bringing people into the design development of new products because usually the problem that banks must solve is at the front end (the users of those services).”

It also needs an appreciation of partnerships and allowing fintechs to do the things that they can do better than banks, in order to drive down the cost to serve. “It’s about finding out the minimum experience level first and managing providers to deliver,” said Watson.

One of the main themes that emerged from client meetings was how Deutsche Bank can help corporate users of its services as well as treasury operations people by bringing them into product development.

Lisa Robins, Deutsche Bank’s Head of GTB Asia pulled these varied but deeply connected digital themes together in her interview with Joy McKnight of The Banker. “The key things this year are cyber security, a continued focus on digitalisation and collaboration with the fintechs, and how we can build communities to solve some of the complex issues that the financial community is confronting today.”

The move from competition to collaboration is particularly prevalent in Asia, she added in her video interview with Finextra, as the region is the “cradle of digitalisation”. China is not the only place fast-forwarding with the Alibaba/Tencent phenomena ANZ’s Nigel Dobson was talking about, but the Indian government has been fostering development of a strong business community “that has been allowed to flourish and try new things”, she said (a point made in the flow article, ‘Open borders, open minds’).

Power bank

It seemed fitting that the Deutsche Bank client giveaway for Sibos Toronto 2017 was a power bank. Not only did it keep iPads and phones replenished, but reinforced the message that Deutsche Bank is a cash powerhouse and is hardly going to sit around and let the likes of Alibaba and Tencent eat the global transaction banking lunch. Rather, the bank is working with clients, SWIFT and fintechs to make the customer experience not only more intuitive and convenient – but safe and sound as well.
DB stand
Sibos 2017 Toronto was held at the Metro Toronto Convention Centre, Canada between 16 and 19 October 2017 with more than 8000 attendees

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