Cooperation between financial institutions, technology providers and regulators to meet client demands for faster payments together with the use of APIs to improve efficiency and interoperability were the talk at this year’s Sibos. Clarissa Dann and Janet Du Chenne share an extended snapshot of packed four days on how the ecosystem that moves money safely inside and across borders is reshaping itself.

Please use the navigation bar above to read the articles from the four days and to watch the videos

London’s Docklands area has always played an important role in the wealth of the city and the fortunes of the East End. Once a hub of imports and exports and manufacturing, this area is now home to one of the leading financial centres in the world. Given this status, the area was suitably primed to host the world’s premier financial services event.

Record breakers

SWIFT Chair Yawar Shah welcomed more than 11,500 participants – a record-breaking attendance – to the 41st Sibos in the ExCel. Given London is a key actor on a global stage it was an opportunity to acknowledge – through open banking and real time payments driving the data economy – that all parties in the financial ecosystem are being brought closer together and to take stock of how they are to quote the Sibos 2019 slogan, “thriving in a hyperconnected world”. 

Bringing them all in one place precipitated more than 169,000 contact exchanges (an average of 17.2 per person), 8600 Sibos App users, 52000 sibos.com users, 300 exhibitors, 300 conference sessions, 600 speakers and at times over 9000+ concurrent WiFi users. With 15 speakers across multiple sessions, the Deutsche Bank focus was on cash management, trade finance, foreign exchange, securities services, regulation and technology and how partnership with external companies is enabling the bank to address client challenges.

Continued uncertainty

What’s changed since Sibos Sydney 2018? More action and consolidation and less discussion and exploration was the tone of the London event, despite a backdrop of economic and political uncertainty directly attributable to the ongoing trade wars.  .

Sibos saw instant payments go live in SWIFT gpi, integrating the platform into domestic instant payment systems in July 2019. The new real-time gross settlement service (RTGS) replacing the existing TARGET2 system was a significant milestone, as was the big bang of ISO 20022 going live with RTGS.

Opportunities in global trade in uncertain times were identified as the industry moves to a new world order where trade corridors are rerouted, and levels of trust reset themselves when importers and exporters find themselves working with new counterparties. The demand for an end to end digitalised trade finance solutions has never been so acute.

In securities services custodians were seen to be breaking down virtual barriers by actively using AI and machine learning to bring the industry closer together through partnerships to drive efficiencies. New technologies that manage settlement failure based on data collection and machine learning and DLT solutions to enable further automation of custodian services were announced.

How to use this Sibos information hub

This handy microsite takes you across Days 1 through to 4 (with a tab for each day), which provides summaries of selected sessions, along with open access (into YouTube) video links to the full experience should further detail be required. In addition, we have shared our own videos of the event in the last tab.

Enjoy the ride and until Boston 2020…

Clarissa Dann and Janet Du Chenne are Editorial Directors in Deutsche Bank’s GTB Marketing team and Co-Editors of flow magazine

taxi

Let it flow

Sibos began with a firework of inspiration from outstanding guest speakers, including cosmologist and physicist Professor Brian Cox and Dame Minouch Shafkik from the London School of Economics, whose stellar presentations sparked thought on how to seize opportunities brought about by transformational technology and solid partnerships and networks

As Bank of England Governor Mark Carney put it in his View from The Top, “This new economy require a new finance to serve the digital economy, which balances innovation with resilience. To enable digital economy, the very nature of commerce is changing.” This, he added, was “placing new demands on the financial system”.

Day 1 was an opportunity to hear how technology was changing the way banks talk to each other, how they interact with regulators and work with fintechs on responsible innovation. It was also a day to remember that despite the efficiencies of AI, the human dimension is a vital issue for managers, who are prioritising making their organisations employers of choice. See also the Sibos Day 1 highlights here.

Flow stand
How refreshing! Going with the flow…
When we handed our cover personality, Bank of China’s Deputy Manager for Global Trade Services, Yunfei Liu (pictured) her advance copies of the magazine, her smile said it all and was soon trending on LinkedIn.
Bank Of China

Beyond the black hole

Brian Cox
Professor Brian Cox with an image of a black hole in space
Always a must in the Sibos week is the Innotribe Opening heralding sessions that set out to “travel to the future”. With a theme of “the new face of trust in an increasingly digitised finance sector”, Professor Brian Cox, cosmologist and physicist set the backdrop with his vibrant pictures of the Milky Way and black holes in space.  He reminded delegates that “what we must accept and have discovered through the history of science is what we do not know – and in admitting that we find the open channel”.
keynote LSE

On to the opening plenary where Sibos Chair Yawar Shah welcomed everyone to the 41st Sibos. We then heard from Dame Minouche Shafkik, Director of the London School of Economics, who confirmed the bad news that OECD downgraded economic outlook to 2.9% this year and 3% next year was directly related to the trade wars. “The only way to address plunging interest rates is through investment in infrastructure and skills,” she said (a recurring theme for the week).

She also noted that international financial systems had been too slow in accommodating China an giving it a voice in proportion to the size of its economy, so it has set up its own institutions such as the Belt and Road Initiative and its RMB-based trading system. This, said Shafkik, was symptomatic of China’s worry it would not get a fair deal. She added that the recent hardening in Washington could mean that China “switches to its own horse”. While she hoped cooler heads would prevail, she warned that if this failed, “we will have to think about how we build pipes between two economic systems”.

Although this charismatic Egyptian served as Deputy Governor of the Bank of England from 2014-17 responsible for a balance sheet of almost £475m, she didn’t show signs of being about to step into the top job at the UK central bank when Carney leaves at the end of January 2020.

Crowning FX

FX had a whole room to itself on Day 1 – Conference Room 5, which is hardly surprising given that the foreign exchange market plumbs the global economy. FX business facilitates global trade, cross-border capital flows, FDI and is often treated as an asset class in its own right.


Data dilemma

In a session entitled “Data, data everywhere – but why so hard to measure? BIS Principle Economist Andreas Schrimpf shared the findings of the BIS triennial survey, which has been going since 1986 as a barometer of the FX market. The market has grown to US$6.6trn a day at April this year with a 34% rise in share of swaps trading, with the share of swaps reaching almost 50% of annual turnover.

The report also highlighted that FX trading is now even more concentrated in the five main financial centres, which accounted for 80% of total volumes in April 2019, with London showing the biggest growth in volumes.

While such data is crucial for market participants to understand the changing dynamics of market structure and benchmark accordingly, Schrimpf noted that obtaining high-quality data is difficult given the market is “organised as an OTC market with dealers as main liquidity providers and trading highly fragmented across variety of liquidity pools and fairly opaque in some segments”.

With data so crucial, yet hard to obtain, should regulators step in and mandate increased levels of transparency? “No,” said Schrimpf. “Forcing such things on the market is never a good idea; the private sector needs to see the benefits and contribute willingly, which would also help improve the quality of data.”


London wears the crown

HSBC’s Head of FX Strategy David Bloom reminded a packed auditorium that the FX market is bigger than any other market, with the dollar as its centrepiece. It trades in London at double the amount it trades in the US. “The dollar may be king but London wears the crown,” he said. It looks unlikely to lose its place as the global reserve currency anytime soon.


Corporate journeys

David Leigh, Deutsche Bank’s Head e-FX took part in a panel that looked at the corporate pain points of FX, and how better technology and APIs could improve efficiency.

David Leigh
Deutsche Bank’s Head of e-FX David Leigh reflects on paying into difficult countries

“When you speak to corporates, they are sending euros and dollars into difficult countries rather than local currencies. They are pushing the FX to the beneficiary banks. By giving control to head office you give the ability to pay into these countries and allow them to know what amount of global currency is going to arrive so they can change workflows around invoicing in local currency than dollars. In other words, bring the FX in-house and get a better rate from a large financial institution.” Supporting corporates with FX trading strategy in a way that does not alarm them after scandals in the 1980s is clearly a valuable service. See also David’s article in flow here where he talks more about treasurers automating and digitalising workflows.

Facing the future

‘View from the Top’ held in the Plenary Room was a popular channel, and delegates heard from heard from Lloyds Banking Group CEO António Horta-Osório, how investing in people was a cornerstone of turning this bank around after the financial crisis and taking it private again. Around £4.4m was spent on training to “empower our people to face the future” because, as he puts it, “machines should do the ordinary, but we need people to do the extraordinary”. His top tip: “Kindness is an essential quality in an effective organisation”.

He was followed by Lance Uggla, CEO of IHS Markit who founded this data analytics success story in 2003, growing it to US$4.3bn through organic growth and acquisition. The company has just launched a Commodities at Sea service pulling together shipping movements and port data to track commodities cargoes, and is constantly innovating. “never be afraid to cannibalise yourself,” he said as he shared how his organisation is “constantly learning”.

Standard Chartered CEO Bill Winters completed the line-up, developing the innovation and partnership themes in the earlier talks. When he first joined from J.P. Morgan four years ago investment was around US$650m and mainly on defensive measure such as compliance. This year the bank will have spent US$1.7bn (overall spend is US$10bn so its “material”) split a third new strategic investments (such as its new virtual bank in Hong Kong it is doing in a three-way partnership), a third process improvement and a third defence.

Polina
Deutsche Bank’s Head of Regulatory Strategy, New Ventures Polina Evstifeeva gives an interview with BrightTALK @ Sibos 2019

Digital transformation was explored by Brian Caplen, Editor in Chief of the Banker in his session where he interviewed Deutsche Bank’s Head of Regulatory Strategy, New Ventures Polina Evstifeeva and Aite Group’s David Bannister on how the regulatory structure of financial markets is changing now that new technology such as Big Data is changing the financial services landscape. See also Polina’s white paper, Regulation Driving Bank Transformation.

Infrastructure and correspondent institutions

Christian Westerhaus joined a European Central Bank panel looking at how the new real-time gross settlement (RTGS) service, set to replace the existing TARGET2 system will affect current market participants. “Not only is it the Big Bang of ISO 20022 going live with RTGS it’s also the fully-fledged ISO 20022 – and a big operational risk,” he said. Marc Recker, as Global Head of Cash Market Management was handpicked by SWIFT as a client testimonial for the session demonstrating the benefits of gpi Observer Analytics. He explained how he uses the services to select the best correspondent institutions to work with, to source new business, and identify where we are missing opportunities for payment flows.

“What will the world look like when all payments are confirmed?” was a lively panel session that included speakers from SWIFT, Society Generale, ACI Worldwide and Deutsche Bank client Martin Schlageter at Roche. “We look forward to when every single payment will be tracked and confirmed via SWIFT gpi – we would not bank with a provider not at the forefront of this,” he said.

ISO 20022 hit the agenda that day with a line-up of central banks explaining complexities of their migration to the standard. The Fed’s Phase 1 will no longer be going ahead in November 2020 and the Bank of England is also revisiting its migration strategy.

Trade Information Network

Trade financial digitalisation pulsated as a theme throughout the four days, and the first marker on the map at Sibos 2019 was the launch of the Trade Information Network, now incorporated in the UK with appointment of a new CEO imminent to take over the baton of Alexander Malaket. Next on the roadmap is the pilot, but all being well this should help do something about plugging some of the US$1.5trn trade finance gap.

welcome to sibos

Globalisation revisited

As Day 2 got underway, and news of the UK Supreme Court’s ruling that Boris Johnson broke the law by suspending parliament filtered through Sibos, taking control of the ecosystem seemed the order of the day – rather than waiting to see what politics would bring

Angela Gallo, Lecturer in Finance at Cass Business School (pictured) gave her take on the disruptive political events and their implications for banks. Despite political uncertainty, she urged them to adapt to the era of political uncertainty rather than wait for events to unfold. “The trend over the last few decades has been a wave of populism and nationalism followed by a wave of globalisation −and we are at the turning point of the next wave of globalisation,” she observed.

Angela Gallo Cass

Gallo added that unlike an election, such as those in the US in the past, where banks have sat back until the dust could settle, other macro-economic dynamics mean they are not afforded the luxury this time and they must make decisions for the next waves of globalisation. “Despite the uncertain world they are facilitators of global business and their retreat from this to adapt to the current polarised state would be a self-fulfilling prophecy. It’s important to recognise banks do have a role in determining how quickly we move out of this uncertainty.”

Breaking down barriers

With the ongoing take-over discussions between by the Hong Kong Exchanges and Clearing Limited and the London Stock Exchange in the background during Sibos, it was an ideal time to hear from their respective CEOs about the systemic importance of these exchanges.

First up was LSE’s David Schwimmer who talked about three drivers of change. “The first is the increasing importance of data, then multi-asset class trading across markets and finally, despite market fragmentation in areas driven by politics, key drivers for market infrastructure continue to be pushing global business,” he said, adding that he viewed Shanghai as the Asian centre of finance, not Hong Kong.

Charls Li

Then HKEX CEO Charles Li (pictured) stepped up asserting his vision to connect Chinese investors with global capital. Amid growing tensions between the US and China on trade his proposed merger with the LSE is, in his view, the next step on the path of connecting China and Asia with the world.

This will involve, he told PriceWaterhouseCoopers Jeremy Grant, “a huge effort to address structural differences in the Chinese market, where broker dealers do not intermediate between investors. Instead those investors have direct accounts clearing houses, exchanges and custodian banks. While this makes China one of the most regulatory efficient capital markets it means that its participants are compelled to a level regulatory oversight and responsibility when investing at home and abroad: If you think about all the challenges the West has with MiFID II, well they’re on MiFID X.”

The absence of the middle layer and control of accounts by the state makes connectivity with global markets a difficult pursuit.  “They see us as the international muddy waters with so many layers of trading and risk management. Theirs is a round pipe and ours is a square one and someone needs to connect them.” Li talks about HKEX’s in connecting China with the world in his latest interview in flow magazine here.

The trick is to prefund; ordering and matching is done in Shanghai with settlement done in Hong Kong so the matching of money doesn’t touch China. “We’re doing everything in the same time zone and the whole idea with the LSE is to find a way to manage the structural migration of London issuers and investors and also for Chinese issuers and investors so that we can use the UK and US connection that is already place. The vision is to connect China with English common law and heritage and getting this polarised world somehow together using market structures,” said Li. From a market operator perspective, the objective, he noted, is to lead the market to do two things: one, is to break down barriers but also respect them so that, as Li puts it, “it feels like we are bringing people to come together without risk”. He concluded, “With the work we’re doing with Stock Connect it’s about respecting the sovereignty of Asia, of China, and of the UK in breaking down those barriers”.

Self-help in securities services

Michael McGovern
Michael McGovern, head of Investor Services Fintech, BBH talks technology implications in post-trade

From breaking down market barriers to breaking down virtual ones, a panel titled ‘Technology implications in post-trade: Where AI meets back office operations’ discussed how AI and machine learning could bring the industry closer together through partnerships that drive efficiencies given the challenges in post trade. But the tools need the appropriate governance, asserted BNY Mellon’s global head of custody Tom Casteleyn.

He joined a panel with Michael McGovern of Brown Brothers Harriman (BBH), a fellow global custodian, and Amazon Web Services’ John Kain and Features Analytics’ Cristina’s Soviany who discussed opportunities for AI and machine learning in post-trade to create efficiencies “Machine learning is the ‘killer app’ while RPA is the bang-for-buck tool for removing manual processes and the risk of error but there is a need for discipline around problem solving and applying the appropriate governance around that and to aggregate data in new way that is can be easily understood,” said BBH’s McGovern. “More can be done with our data assets.”

Rebekah Flohr, Global Head of Securities Services Sales at Deutsche Bank concurred with this, adding that these new technologies could be the silver lining to address challenges in post trade. In an interview with Global Custodian magazine she shared that “Innovative solutions that combine new technologies can only ever work when they sit on top of the people layer”. This involves working collaboratively with clients, understanding their needs and developing innovative solutions that address those needs, she added. 

Addressing these pain points is all about packaging data and using new technologies in such a way that they create “self-help” solutions for clients, said Jeslyn Tan, global head of product management, Securities Services at Deutsche Bank in an interview with Funds Global Asia magazine. Using a new data dashboard as an example, she explained how the team has developed technology to manage settlement failure. Aware that clients would have the same challenges as the bank would in complying with the regulation for European CSDs, it worked with clients to effect the same outcome and enable them to become more efficient in their post trade processes. “The better we understand user personas, different attributes and deliver data and insights to them the better the chances are of a successful product,” she said. “The product aggregates settlement data and delivers it to clients on a dashboard, giving them a real time view and insights of where their trades are failing and empowering them with insights in order to take remedial action.”

In addition to using AI and machine learning to provide clients with “self-help” solutions, another project, announced via a press release at Sibos, see Securities Services successfully piloting a solution using distributed ledger technology (DLT) to enable further automation of custodial services. The solution addresses the transparency requirements within many custodial services, such as those around the tax processing of asset holdings at an ultimate beneficial owner level, and streamlines complex data and reconciliation processes for both the bank and its clients. 

Michaela Ludbrook, global head of securities services, concluded that further AI, machine learning and DLT use cases can be used to offer clients greater choice of services in the same way as the popular delivery platforms provide consumers with multiple options in the retail space. “Clients favour tailor-made services and solutions provided by custodians, allowing them to plug and play services such as custody, asset servicing, lending, borrowing and asset optimisation,” she said.

Beginning and end?

Tuesday saw two sessions that looked backwards and forwards at the business of banking – from its origins in renaissance Italy in the 14th century to its outlook in the face of the platform giants, Google, Amazon, Facebook and Alibaba. In the session ‘The future of banking’, chaired by Simon Gleeson from law firm Clifford Chance, Victoria Cleland, Executive Director of Payments and Innovation at the Bank of England made the point that ten years ago payments were just seen as “plumbing”, but that now “payments are the future”. While wallets and phones are the consumer interface, the transactions still go through the card rails of banks, payment systems and central banks, she said.

Benoit Legrand, CEO of ING Ventures and Chief Innovation Officer agreed, and commented that the industry was now seeing a turning point where payments are at the core of the relationship with financial institutions and the data revolution is helping payments play a central role. “As banks we have been sitting on a gold mine that is data,” he said.

While non-bank payment channels are welcome innovations, added Cleland, the main concern for a central bank such as the Bank of England was the “monetary and financial stability of the system as a whole”. Which was why Transferwise, a fintech also on this panel, went through stringent checks before joining the BoE’s Real Time Gross Settlement payment system.

‘The rise of banking platforms and the challenges faced by incumbents and new entrants’ tackled how this was affecting the banking sector in the UK following the impact of Open Banking regulation and PSD2 first announced in 2015. Presented by Warwick Business School academics Pinar Ozcan and Markos Zachariadis as part of ongoing research they are doing with the SWIFT Institute, they made the point that post PSD2, regulators struggled with how to regulate incoming fintechs and passed on this responsibility to the banks. This meant that banks had to demonstrate they had done all the due diligence and checks because if something went wrong the buck stopped with them. In the presenters’ view this is a disincentive for banks to partner with fintechs. You can hear more from Ozcan and Zachariadis on their podcast here, and they have agreed to summarise their research in a future article for flow.

Request to Pay

With the infrastructure for euro instant payments in place and connecting a critical mass of financial institutions across SEPA, EBA CLEARING’s RT1 connects 2,368 PSPs from 19 countries, accounting for nearly 75% of EBA CLEARING’s current SEPA Credit Transfer (SCT) traffic.

This session, entitled, ‘EBA Clearing Community getting ready for R2P, the missing piece of the puzzle’, featured a panel of RT1 users and two representatives of EBA Clearing. They discussed the development phase of this pan-European R2P infrastructure solution that has specifications for consultation coming at the end of 2019 with full implementation slated for a year later. Christof Hofmann, Deutsche Bank’s Global Head of Payments and Collection Products Cash Management said, “The success of instant payments will be defined by the end point connectivity.”

In advance of Sibos, on 18 September, the EBA Group, published their own helpful white paper. The team has since has agreed to work with Deutsche Bank on producing a consolidated Guide to R2P to be made available in early 2020. Scheme-related work on the request to pay functionality is ongoing at the level of the European Payments Council (EPC), notes the paper EBA paper.  EBA CLEARING contributes to these efforts as part of the Request-To-Pay Multi-Stakeholder Group of the EPC and intends to completely align its solution to the EPC work.

Blockchain et al

Distributed Trade
Left to right: Alisa DiCaprio (R3 LLC); Mirka Skrzypczak (RBS); Daniel Cotti (Marco Polo/TradeIX); Agnès Joly (Societe Generale); and Ciaran McGowan (We.Trade)

It was standing room only on the Discover Stage as everyone packed it to hear R3, MarcoPolo and WeTrade tell us more about how on-premises software, destination platforms and distributed networks will digitalise trade with Société Générale and RBS providing a bank perspective.

‘Decentralised and distributed trade finance networks – the ultimate step in the evolution of trade’ was moderated by R3 LLC’s Alisa DiCaprio, and there was a lot of discussion about the technology and benefits. “The biggest advantage is the acceleration of the integration and to develop a new way of doing basis”. Banks that were traditionally competing are now working together, observed Ciaran McGowan of We.Trade.

Marco Polo’s (TradeIx) Daniel Cotti said that Marco Polo (built on the Corda network) is “in a constant phase of learning and deployment, and able to add features and partner organisations to create win-win for corporates, banks, and networks as well as logistics and insurance companies”.

Skrzypczak (RBS) made the point that while connectivity is easy, it is not the hard part in deployment. You need a good level of technology education and capability in-house and must also decide which cloud environment is the most optimum for your business. What’s more, she added, “If you don’t get an ability to understand it all you won’t be running full deployment”.

In general, banks remain cautious, noting that while there are numerous announcements in the blockchain space, none as yet have real value or scale.  Strategic bets have been placed by various financial institutions as they assess where the opportunities with the biggest value lie. The trade finance discussions continued throughout Sibos.

Sibos

Sibos Day 3

With two days of wall-to-wall meetings and conference sessions behind most delegates, hats went off to those who braved the 5k fun run that took place round the docks in the small hours of Wednesday. Entrants included Deutsche Bank’s own Sibos Talent Accelerator Route (STAR) participant Claudia Ebel   – other past Sibos 5k veterans having decided that with 8k of walking a day to get from meeting to meeting was enough exercise. This was a day of hearing how people got on with the job, balanced innovation with safety and soundness, and moved the needle with SWIFT gpi. You can check out the official video of Sibos Day 3 highlights here.

Views from the top

Christian Sewing, CEO Deutsche Bank
Views from the top, Christian Sewing

Ten weeks after his announcement of Deutsche Bank’s largest restructure in a generation that resulted in our newly created Corporate Bank, CEO Christian Sewing (pictured) was reinforcing the message of its centrality in the new structure in his View from the Top talk – this being the first time the bank has had a CEO speak at Sibos. “Transaction banking is an area we are very excited about – both with regard to our corporate clients and to financial institutions,” he told the auditorium. His main call to action was one to Europe itself that “risks losing further ground if we do not seize the opportunities offered by digitisation”. When the largest sovereign wealth fund in the world (Norway) switches out of Europe into US equities, there is a danger of Europe losing relevance, so “we must act fast and decisively,” he warned.
His five points for success were:

  1. Europe needs a real single market, not a collection of 27/8 separate markets with different regulation, insolvency schemes and labour laws
  2. Europe needs to become a more attractive business location and address the global trend to lower corporate taxes
  3. Europe needs to attract the top talent rather than having it migrate to Silicon Valley or other tech centres
  4. Europe needs to invest in technology, digitisation and related infrastructure
  5. Europe needs to review its attitude towards technological disruption that is reshaping the global economy. “This is crucial because the competition for technological supremacy will determine the future division of global economic power – and thus also determine Europe’s position,” said Sewing.

Developing the platform theme from Day 2, he observed, “Names like Google, Amazon, Facebook and Alipay, with their vast potential client bases, market capitalisations and data analytics capabilities, are already taking market share from banks, not only in the retail area.” He said that the banking industry “needs to catch up in terms of utilising our vast stores of client data – this is a priority for us at Deutsche Bank as it certainly is for many of our peers”. The CEO expressed optimism about the future, “Change is coming but if we embrace technology, work together and keep clients at the centre of everything we do, I believe transaction banks have a bright future.”

A more extended summary of his talk can be found on the Deutsche Bank website here.


Dame Stella Rimington, former Director General of MI5

Dame Stella Rimington, former Director General of MI5
Dame Stella Rimington on why being a spy is not what it used to be

Dubbed the inspiration for Judi Dench’s portrayal of ‘M’ in recent James Bond films, Rimington’s calm, almost laconic recollections of what it was like to be approached by the Secret Service in India at the end of the 1960s – when India was at the forefront of the Cold War where East meets West – was mesmerising. “The world of security and intelligence is increased in complexity and size than when MI5 came across me,” she noted.

This was a lady who hadn’t set out to be a spy, and had simply joined her diplomat husband John on his posting to Delhi, running coffee mornings and jumble sales. She was dispatched to the typing pool where ability to type was less important than being “trustworthy”.

In those days, said Rimington, “The world of espionage was all about person to person rather than who had the best technology”.

The transition from the Cold War years to dealing with terrorism meant priorities changed. “With terrorism, speed is more important than certainty and you have to take decisions on inadequate information. Do you wait until you are sure, by which time it might be too late and the bomb may have gone off?” Another recollection that resonated was when she said how once the iron curtain had gone, MI5 was supporting the Eastern bloc countries from services working in totalitarian countries working for the government against the people to those working in democracies working for the people. “It was a time I never thought I would see”. You can watch the video here.

Technology and digitalisation

International Chamber of Commerce (ICC) Sibos briefing – providing rules and standards for a digitalised trade finance landscape

One of the difficulties in fully digitising trade finance is that there is no central compulsion to do so – there is no SEPA or PSD2 equivalent forcing change. So it all has to be arrived at by consensus, which is taking a very long time as it involves achieving consensus from five industry bodies. The other difficulty is getting other stakeholders, such as port authorities, the logistics industry and customs houses to agree.

The other complication, explains Deutsche Bank’s Global Head of Trade Finance and Chair of the ICC Banking Commission is that dispute resolution for a digital document is not allowable in court, so documents have to be presented physically.

Acceleration of progress on this issue tended to dominate all trade discussions, as it has done for the past four years. A single trade finance transaction requires the interaction of more than 20 entities, and involves between 10 and 20 paper documents and 5,000 data field exchanges. Arriving at agreed standards and rules is, everyone agrees, the only way forward, with the ICC and SWIFT leading on this. There is an opportunity to help drive the momentum of this.

Standard Chartered’s Head of Global Trade Michael Vrontamitis, who co-chairs the ICC working group on trade finance digitalisation with flow author and former Deutsche Bank trade expert David Meynell, reminded delegates that the ICC had published new electronic rules (eRules) to advance digitalisation effective rom 1 July 2019. “They try to create in the digital space support for the key roles and obligations of participants in a traditional trade transaction and as you would expect from the ICC this is technology agnostic,” he said. 

Watch the video here

SWIFT gpi

There were many sessions on SWIFT gpi on day 3. Sessions ranged from its migration to ISO 20022, tips and use cases for corporates with corporate feedback, and validation services to ensure that all the information is present and correct so the payment does not get stopped. Please use the navigation to read a selection on some of the sessions on this topic.


Real time cross-border payments in Europe – from vision to reality

Real time cross-border payments in Europe – from vision to reality

In May 2019, the European Central Bank (ECB) and SWIFT launched a trial to leverage the 24/7 availability of central bank money settlement offered via the TIPS system, allowing for instant crediting of accounts at ultimate beneficiary banks across Europe. 20 banks have taken place in this trial. Ignacio Terol of the ECB outlined that the trial aimed to prove that the 24/7 availability of central bank money settlement provided by TIPS can reduce the processing time for payments originating outside of Europe.

The outcome was two-fold, he explained: firstly, they increased speed, with one payment being made from Singapore to Spain, via Germany, in merely 41 seconds and secondly, they overcame the availability and automation challenge, with multiple payments conducted with no human intervention while TARGET2 was closed (i.e. overnight).

In total the trial saw over 300 trial messages sent, with Deutsche Bank involved in various transactions as either debtor, intermediary or creditor.  The bank’s Christof Hofmann (pictured) said, “This proves that cross-border payments can still further accelerate, that we can become independent of time zone differences and cut-off times, and that we can facilitate global convergence of payment types.” The go-live is subject to changes in the SEPA instant scheme in order to allow full compliance for the processing of one-leg-out transactions.

Securities services and new technologies

APIs: Practical use cases in securities services

Facing similar pressures as the payments industry – external competition and regulation – securities services has adopted new technologies to increase operational efficiency and reduce cost. Among these, APIs seem to have found a privileged space in the post-trade industry.

SWIFT delivered a session on APIs: Practical use cases in securities services to share its experience of gpi, where banks connect their APIs to the messaging utility to send instant payments messages cross border in under 30 seconds. The utility explained how this model could be replicated in post-trade based on the example of account pre-validation in gpi.

More on these use cases and the pain points they target are included in a report, jointly written by SWIFT and the Boston Consulting Group that notes that securities services is ripe for APIs in the following areas: efficiency and cost savings through automated data exchange; real-time visibility of information such as settlement status and intraday risk and value-added services such as enriched data and analytics.


Securities services risk management: Financial crime compliance & cyber risk – ISSA’s priorities and plans

Hobson Gem
Left to right: Dominic Hobson (Hobson Cardew); Mark Gem (Clearstream); Andrew Gray (DTCC); Colin Parry (ISSA); Andy Smith (BNY Mellon)

The other, equally important challenge in securities was cybersecurity and financial crime compliance, with market infrastructure providers and banks agreeing they need to raise the bar in due diligence. Since more than half of the attendees at a session on this topic were not confident in their own firms’ ability to manage cyber risks and some of the largest money laundering cases have been in securities, regulators are now backfilling the black hole with rules and frameworks.

But many participants are still not aware of them. Only half of those attending the securities session have heard of International Securities Services Associations (ISSA) compliance cyber principles. Clearstream’s chair and ISSA co-chair Mark Gem said the principles are geared towards participants taking account of how securities are intermediated in any jurisdiction where you don’t look through, while focusing on practical steps and employing digital technologies. SWIFT’s customer security programme gives you the baseline for performing due diligence on customers and counterparties, he said. But this form filling has to be accompanied with the analysis of the results of the data and implementing that data for controls and security.

DLT was hailed as another help in fighting financial crime. The centralised ledger technology makes the beneficial owner the owner of record at the central securities depository but it also allows beneficial owners of securities to be easily identified including their tax status.

Watch the video here

Digital wallets

Digital wallets (or e-wallets) are rapidly being adopted around the globe, and many are trying to understand what is needed next in this increasingly interesting space. A packed audience headed over to the Discovery Stage to hear Modo’s Bruce Parker and Deutsche Bank’s Rick Striano discuss the future of wallets and some of the implications broader bank/wallet collaboration may have for banks, businesses and consumers in a session entitle ‘Digital Wallets: so what now?’.

Striano explained that while wallets are almost always created on the foundation of C2B payment flows (whether e-commerce or routine daily purchases – think using Apple Pay for your daily coffee), there is also an opportunity in the B2B2C space, using what he termed the “pay-out model”. This would see banks supporting their corporate clients in directly loading money into the wallets of beneficiaries (whether corporates or consumers), and even be able to do this cross-border with FX capabilities. This is important given both the growing gig economy (where people expect to be paid pronto) and in emerging markets where banking preferences are different, he said.

The big challenge, outlined by Parker, is interoperability. You need to be able to connect with all the major wallets – many of which have different rules – and you need to be able to work with non-bank partners.

Safety and soundness

Have new business models created a perfect cybersecurity storm?
Microsoft
Left to right: Jason Oxman (Information Technology Industry Council); Rob Wainwright (Deloitte); Sian John (Microsoft); JF Legault (J.P. Morgan); Cheri McGuire (Standard Chartered)

Banks have achieved great success over the past decade in identifying fraudulent activity by cybercriminals and protecting clients from loss and service disruption. But it is harder to halt illegal activity when transactions are processed in real time, especially across borders, concluded this panel including speakers from Microsoft, Deloitte, JP Morgan and Standard Chartered.

Sian John, Head of cybersecurity strategy at Microsoft, said that banks may be further increasing vulnerability to attack as they open up to third parties via APIs. The key to mitigating this risk is strict protocols and standards, she said.

John also stressed that many should start with getting the foundations right: “Only 3% of the institutions we work with have multi-factor authentication at the start, yet this would halt 90% of attacks.” The technology, she said, while creating more risk, also offers a solution. Microsoft is employing AI and Machine Learning at scale to help detect phishing and malware attacks, for instance. The banking panellists concurred – saying that such technology can then free up cybersecurity teams to do more detailed analysis on the most serious threats.


Designing compliance for the future

With a general acceptance that financial crime obligations are more complex than ever and carry major cost and efficiency implications for the correspondent banking industry, SMEs were optimistic of the opportunities to improve compliance processes of today. Using the experience the industry has gained thus far, with the technologies of today, Lee Hale Deutsche Bank’s Global Head of AML and Sanctions joined other experts from the Financial Conduct Authority and the consulting world for a panel titled “Looking ahead – designing compliance for the future” to discuss modern business practices to design compliance in the future. 

The FCA’s financial crime specialist Clive Gordon said the areas of control, the outcomes for firms and regulation should be aligned and the purpose of innovation should be to lessen the impact of financial crime on society. “While rules and frameworks are important, each organisation is different and the challenge is on the effect of implementation rather than the rules themselves.” Hale confidently assured that the costs of compliance could be reduced and spoke about strides being made in data aggregation for sanctions screening, allowing customers to see the whole transaction form a risk perspective “which is good for efficiency but also effectiveness”. A data lake with five years of transaction data with peers will be another key initiative in not just responding to regulation but also meeting compliance.

Using these analytics to combat financial crime is not just about an internal control environment, he stressed. Since correspondent banking has multiple providers a holistic view of the data is needed because the majority of financial crime involves shell companies. “Industry collaboration is key. The sharing of analytics can help us fight for that good cause,” said Hale. “Until you understand the legal entity and legal vehicles you don’t understand who is behind the money. The data sets can give you the information flow detail but the compliance officer still needs to process it so they know what to look for”.

Watch the video here


After Bangladesh Bank

In February 2016, Bangladesh Bank became the victim of an infamous cyberattack targeting the bank’s infrastructure, connected to the SWIFT network.

SWIFT’s Chief Security Officer Karel De Kneef shared his perspective in the session “Bangladesh Bank, 3 years on – are we any safer?” on how malicious attackers are successfully breaching financial institutions, escalating privileges, conducting recon and carrying out high-value payments fraud. Such attacks are evolving to impact new victims, end beneficiaries, currencies, message types and amounts and he outlined a number of steps that help the community to better screen and defend against attacks.

The first stage of targeting a victim, he said, can be very slow and typically takes from a few months to around two years as a foothold is gained in the institution. Once the criminals are close to messaging and payments acceleration is rapid and the damage done in an instant.

Sibos Skyline

Sibos Day 4

Following three days of thematic discussion and debate, the last day was more reflective, and less technical, with highlights including Dame Kelly Holmes on talent, Author and Trust expert Rachel Botsman on building trust and sessions on financial inclusion.

There was no Day 4 Highlights video but you can see a whistle stop tour of the whole week here

Banking for a better world

Sir Roger Gifford

New to Sibos, the Spotlight saw talks range from engaging with Generation Z to sustainable finance, financial inclusion, the role of technology and how to remain human in a digital world. Sir Roger Gifford, Chair of the London Green Finance Initiative (pictured) and also a banker at Sweden’s SEB talked about how the power of finance can drive sustainable behaviour. Standard Bank’s Nigel Beck, who heads Environmental and Social Risk Finance made the point that consumer demand will drive sustainable behaviour. “They (consumers) need transparency in their supply chains, the need for tech to ensure that their products from source to shelf are sustainable, and we need technology to make sure there is no child labour in the value chain, that there is no adverse impact on diversity,” he said.

SWIFT’s write up of these sessions can be found here

Back to the trade finance ecosystem

Following the ICC Banking Commission update on Day 3 and the incorporation of the Trade Information Network headed by interim CEO Alexander Malaket announced 23 September – alongside four sessions at Sibos demonstrating the platform – two further panels on Day 4 assessed when the equivalent of SWIFT gpi for trade was likely to happen.

The emergence of the new trade finance ecosystems

A panel comprising Boston Consulting Group’s Sukand Ramachandran and SWIFT’s Huny Garg among others has resulted in the publication of this helpful report ‘Digital Ecosystems in Trade Finance: Seeing Beyond the Technology’ in advance of Sibos. BSG moderated a lively session that included representatives from Commerzbank, General Electric, DBS and Natixis. To achieve digitalisation, more universal technological, regulatory and legal standards need to be developed, with banks, ecosystems, governments and other bodies working together to make this happen. There needs to be cooperation to enable interoperability and a move way from any particular “winning” ecosystem, while and remembering that participants want functionality not technology.

Panelists agreed that this was rather like the mobile phone industry, where the hardware all has to use the networks and these rails cannot exclude any particular models. But there is some way to go still. “We banks, when asked for a financial solution push paper at the corporates,” said one banker, adding that corporates don’t pay banks to push paper. The corporate treasury speaker from GE made the point that he needs his treasury solution – complete with trade plugin – to actually work when signing a commercial deal.

SWIFT’s Garg, hinted at a gpi-type solution for trade being on the way in his interview with Trade Finance TV before Sibos, something he also told TXF in a SWIFT/TXF round table where he confirmed SWIFT was considering whether gpi “would also make sense for trade”. Given that the Service Level Agreement (SLA) is a key pillar of gpi, where banks agree to specific processing guarantees to tackle different bank service levels (difficult to do for LCs), there is still a lot of unpacking to do.

The Sibos video of the panel can be viewed here

How is the world’s fastest economy leading the Next-gen Trade ecosystem

Nandy Thomas Cook

Having heard several variations on a theme of trade finance digitalisation here was a panel that was just quietly getting on with it with full support from its central bank and government.

With India’s ambition to reach US$5trn GDP, ease of doing business and trade digitisation heading the list of government priorities. VG Kannan, CEO of the Indian Banks’ Association explained how a document stamping process had been digitalised and Thomas Cook (India)’s President and CFO Debasis Nandy (pictured) told delegates that they do around US$1bn in turnover (as the company has no linkage with its stricken UK namesake) 26% of which is online. He has to balance physical and digital trade, running both concurrently. All panellists agreed that trusted security all along the trade process was very important, and that SWIFT was best placed to make this happen. “There has to be a way of identifying and checking access control,” said one panellist. Delegates at this session came away with the distinct impression that India is in a very strong position to lead the next-gen trade ecosystem and has got pretty far along the road already.

Watch the video here

Trust and transformation

Kelly Holmes
View from the top with Dame Kelly Holmes, former Double British Olympic Champion and gold medallist

Given that the last day had a strong talent theme, who better to kick off proceedings than Dame Kelly Holmes (pictured), double Olympic champion and gold medallist, who gave an insight into her journey from the army to professional athlete. She shared that driving her success has been about expanding her network, finding people around her to work with who push her to excel at what she is good at, and recognising when she needed help and being brave enough to ask for it. “Know which skills are transferable throughout your career, however different or specific they may seem, and use those skills you have acquired previously, in different roles, to go into the next phase of your career,” she recommended.

Practising what she preached, Holmes shared how she joined the army at 18, having left school two years earlier, working initially as a shop assistant in a confectioner and later as a nursing assistant for disabled patients. Once in the army, she become a lorry driver followed by a stint as a physical training instructor. Using her physical prowess, she ascended the PT training ranks with a full time transfer to the Royal Army Physical Training Corps. This set her up for a return to her running, and in the 1992 Olympics, after seeing Lisa York win the 3000 metres, an athlete she had previously ran against and beaten, she decided to return to athletics. “You have to look at what you’ve done during your career, ask yourself how you got there and what were the transferable skills that led you there”.

Watch the video here

Leveraging innovation and digitisation to drive financial inclusion in the Middle East and Africa (MEA)

This sentiment was shared during a panel discussion on financial inclusion, where panellists from the banking sector (including Bana Akkad Azhari from BNY Mellon Treasury Services) agreed that leveraging new technologies for compliance should enable banks to develop their products. These technologies are being leveraged to provide services to the unbanked. In the Middle East and Africa – regions that boast a young, tech-savvy population, yet less than half their people have a bank account – technology is creating opportunities to enhance existing banking solutions and further financial inclusion. National programmes are underway to harness digital developments, as well as drive trade, diversification and attract foreign investment.

Government alignment on digital will be an important part of this journey. Banks in the region are in the process of transformation and are moving away from looking at documents on paper but further progress will require government flexibility. Data labs also analyse transactions coming in and out of these wallets with analytics that determine when customers need credit and when they will pay it back. This enables us to do transaction screening and AML monitoring.

The digitisation of transaction data is going to be key for SMEs in trade. These companies may not have substantial balance sheets but technology can give provide them with a level playing field if there is added transparency.

Watch the video here

Chat & Connect: What do you think we think?

A picnic lunch brought together the STAR scholars to share their perspectives on the burning issues and main take-aways from Sibos week. Deutsche Bank’s Claudia Ebel shared how as part of the programme, she got to network with 30 other women from different parts of the industry, which amplified the importance of collaboration on the key issues. In particular, the tech-savvy Ebel was inspired by discussions about using data to build trust and transparency with clients, while at the same time balancing transparency needs and privacy requirements. 

Protecting privacy and instilling trust in a millennial world

Michael Hegarty

This trust and transparency discussion filtered into a debate on instilling trust among millennials, who are in an era of ubiquitous technology, and who are sharing and freely giving away their. Michael Hegarty, Deutsche Bank’s Chief Information Security Officer, UK & Ireland (pictured) said: It’s important that we collaborate as an industry. The interconnectivity of the industry means we’re servicing our clients in different channels, which brings different threats so we have to be collaborative in bringing the industry together and we do that through intelligent sharing of information.

He added that trust is all about control, which can be implemented through digital identities. “Digital identify is everything so your trust boundary is your digital identity. But there is a difference between the two. People trust banks with their data. Thinking about what trust is and being a partner who provides that identity is important.”

Watch the video here

Sibos closing plenary

Thomas Kurian, CEO Google Cloud

Once these trust aspects are solved this will lead to a broader adoption of open cloud. Kurian noted that data acquisition leads to data silos, which makes things like manging risk and risk calculation more complex and means a more fragmented view for customers. The quicker this is rationalised the quicker we get to common meanings of data and how to use it. “If data is the underlying liquid gold, then managing and storing it is a critical element of being successful. There’s no magic wand – there are tools to make you reconcile and consolidate it but you still have to do the job.”

Watch the video here


Rachel Botsman

Author and trust expert Rachel Botsman closed the session with her take on trust in the modern world and insights on how we can make smarter decisions around trust and win more customers. Our competency, reliability (time and the consistency of behaviour over time) are important capability traits when it comes to trust, she said. “But the liquid gold is around why we do things and is dependent on two things: the first is empathy and how the extent to which technology can get to the empathy of a situation and understand a different perspective.

“The second, and most important trait in financial services is the trait of integrity, which comes down to intentions and motives. Integrity is about being honest about whether your intentions and motives align with another person. Where organisations get into trouble is when they have an integrity issue and blame the capability. There are questions that we as creators of products and services can think about far more carefully about who we are giving our trust to. When we click, swipe and share, we can ask is this product worthy of my trust and also on the flip side are we designing products and are we behaving in a way that is really trustworthy.”

Watch the video here

Sibos tomorrow

And so it was that the 41st Sibos was a wrap, next destined for Boston 2020, Singapore in 2021 and Amsterdam in 2022. But with what clocked up as 11,572 delegates this year, we think a London return visit to the Excel centre before too long is on the cards – delegate numbers can be highly persuasive.

taxi

SWIFT gpi

There were many sessions on SWIFT gpi, which is gaining traction especially since going live with instant payments for domestic transactions in July. Sessions ranged from its migration to ISO 20022, tips and use cases for corporates with corporate feedback, and validation services to ensure that all the information is present and correct so the payment does not get stopped

SWIFT gpi – creating value for corporates

In a session on day three of Sibos chaired by Head of SWIFT gpi for Corporates Sebastian Rojas, the corporate perspective on how banks are extending the value of gpi to corporates was represented by Päivi Paananen from booking.com and Wim Grosemans from Airbus. “It all comes down to full visibility on the payables and receivables side”, said Paananen. “Having to connect to many different banks to obtain this is just not sustainable. Having one portal to track payments makes complete sense from a corporate perspective,” added Farid Boussatha of Airbus.

So what’s next for Swift g4C? Paananen explained that for booking.com – which makes payments into many different exotic locations and hence numerous banks of different sizes – the key is it being scaled-up: “The key to unlocking the solutions potential is coverage – we need all banks to join if we are to obtain the full transparency we need.”

Watch the video here

SWIFT gpi meets ISO 20022 reducing friction further

Paula Roels

Perhaps one of the most surprising features of ISO 20022, often referred to as the new global payments messaging standard, is that it was first created back in 2004. Since that time, the ISO 20022 standard has, fortunately, gained wide acceptance but it has been what could be termed an “uncontrolled adoption”, says Paula Roels (pictured), Deutsche Bank’s Head of SWIFT & Market Infrastructures. On day three Roels shared the SWIFT Theatre stage with Pedro Mullor, Head of gpi Core Initiatives at SWIFT in a session calling for banks to migrate sooner rather than later – with gpi banks having no excuse not to migrate.

“The ISO 20022 migration project alone has been described as the payment industry’s greatest challenge since the introduction of the euro – but also its greatest opportunity. While it comes as a pain, it also has the potential to transform the industry dramatically to the benefit of our clients,” she said.

SWIFT gpi looking to the future

Next up on day three we saw our Head of Cash Products Christian Westerhaus representing the Deutsche Bank partnership with SWIFT joining Wells Fargo, New Payments Platform Australia and LCH (part of the London Stock Exchange Group) where SWIFT Head of Banking Harry Newman chaired a panel that discussed “reality and practice” in SWIFT gpi now that the trial to integrate SWIFT gpi Instant into Singapore’s domestic instant payment services (FAST) was announced as successful on 18 July.

Christian shared with delegates the positive feedback the Bank has received from corporates now that they can consume the information within their TMS and/or ERP systems, but that there was more work to do. “The market is not stagnant, it is going to develop further,” he said. In particular, a solid framework of rules that everyone trusts is a priority. Others agreed that the rails connecting domestic systems had been successfully tested with good proofs of concepts, but the momentum of reach needs to continue.

Watch the video here

SWIFT gpi validation – discover the service

In a somewhat surreal gathering on the Knowledge Bar (a large table with leather stools where we all wore headphones); Jose Maria Buey Deutsche Bank’s Head of Accounts Platform & Services demonstrated how a gpi validation service could be used from the perspective of a key pilot bank. With more than 90% of cross-border payments sent via SWIFT processed end-to-end in less than 24 hours, the remaining 10% tend to get held up, he said, because of “inaccurate or missing beneficiary information”. “Beneficiary account pre-validation is a highly demanded service by global retailers and payment service providers particularly in the context of Open Banking,” said Buey.  

  • Harmonising market infrastructures

    Cash management, Market infrastructure

    October 2019

    Harmonising market infrastructures

    Deutsche Bank's Christian Westerhaus, head of Cash Products, Cash Management, Deutsche Bank Corporate Bank, shares his main takeaways from Sibos London 2019
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    Cash management, Payments

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    The new cross-border payments landscape

    Deutsche Bank's Christof Hofmann, global head of Payments and Collection Products, Cash Management, Deutsche Bank Corporate Bank, shares his main takeaways from Sibos London 2019
  • Deutsche Bank and SWIFT gpi's Observer Analytics Tool

    Cash management, SWIFT gpi

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    Marc Recker, head of Cash Management Market Management, Deutsche Bank Corporate Bank, shares his main takeaways from his session on the SWIFT gpi Observer Analytics tool
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    Liquidity management, Cash management

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    Liquidity management at Sibos 2019

    Vanessa Manning, global head of Liquidity Management, Deutsche Bank Corporate Bank, shares her main takeaways from Sibos London 2019
  • Deutsche Bank's Claudia Ebel experiences the Sibos Talent Accelerator Route programme

    Trade finance, Technology

    October 2019

    Deutsche Bank's Claudia Ebel experiences the Sibos Talent Accelerator Route programme

    Claudia Ebel, client lifecycle management for Institutional Cash Management & Trade Finance FI, Deutsche Bank Corporate Bank, shares her experience of the Sibos Talent Accelerator Route
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