Take a look at all our coverage of this year’s Sibos in Geneva. Blockchain and cybersecurity were the biggest topics at the event, but issues such as artificial intelligence, financial inclusion and payments were also discussed extensively. 2016 was seen as a gateway year to innovation and financial professionals are just waiting to see what comes next. However, this is where problems arise because bankers are not ready for the next big thing and a prominent message at Sibos was that security must always come first.
Technology trends and disruption to expect
Technology is needed more than ever in business because we’ve reached the stage where products and services need to serve the customer successfully and efficiently, otherwise customers will refuse to use it. Sessions at Sibos looked into how regulators are embracing the fintech ecosystem and how technology trends effect the infrastructure that financial institutions could be using in the next five or ten years.
Dr Leda Glyptis, Director at Sapient Global Markets, gave an outstanding speech at the start of the Technology Trends in Financial Services session about how technology was viewed 15 years ago in comparison to how it is viewed now. She spoke about how those who worked in the IT department remained in the basement and were used to being treated in a certain way because they were bad at the messiness of human life. Now, they’re in the boardroom.
Sharing the pain of real-time payments
With a rapidly approaching deadline and a clear call to banks to take action by 2017, industry leaders gathered to discuss the potential of, the barriers to implementation and benefits of both domestic and cross border real time payments. Standardising the solution is proving to be difficult in the Eurozone region and it is even harder to step away from fragmentation as we heard from Pascal Augé from Société Générale, Stefano Favale from Intesa Sanpaolo, Rodolphe Meyer from STET, Christian Rhino from Commerzbank AG and Patrick Tans from KBC.
Thierry Chilosi, Head of Markets and Initiatives EMEA, SWIFT chaired the session and started off by questioning the panelists about what success looks like to them and said that focusing on a long term vision is always beneficial when adopting instant payments. The client expects more in this day and age, and also expect everything quicker, which means that bankers should manage their flows at a faster pace. Unfortunately, for the banks, new players are putting the customer first and customers are beginning to bank with them.
Innovation in finance? It's all about the community – Head of SWIFT Innotribe
Innotribe is the part of SWIFT tasked with identifying emerging trends in financial services innovation, as well as generating discussions about how these trends will impact the industry going forward. Born in the ashes of the global financial crisis, it aims to take the industry beyond talk and into action. At Sibos, Innotribe runs the startup and industry challenges, which identify the most promising startups from around the world and pulling together task forces to start working on barriers facing the global community.
In the latest episode of the FinTalk podcast, we talk to head of Innotribe Fabian Vandenreydt about key trends in emerging financial technology, what to expect from Sibos and why there’s never been a better time to collaborate in financial services.
Are robo-advisors the ultimate provider of financial choice?
There was a strong focus on the relationship between technology and security and how the two have evolved in recent years and in turn, how entire industries in financial services have also had to transform in order to keep up with emerging trends. Remaining sustainable is proving to be difficult as the funds industry is under pressure to deliver returns at reduced risk and cost. In a session called Enabling the Investment Management’s Next Era: The Rise of the Robo-Adviser, we heard from Nicolas Mackel, CEO of Luxembourg House of FinTech, Matteo Cassina from Saxo Bank, Edward D. S. Glyn from Calastone, Michael Mellinghoff from Techfluence, Silvan Schumacher from Swanest and Paolo Sironi from IBM.
The biggest question for the wealth management industry is why Europe is so far behind when America is so far ahead with services like robo-advice now being mainstream. Schumacher highlighted that there is a revolution in the wealth management space, but it is not all rosy as there are huge difficulties associated with getting rid of a service that is primarily done so manually. “Firms in America like Betterment and Wealthfront are pouring money into marketing and those in Europe do not share their figures, perhaps because of slow growth”, Schumacher said. Glyn said that it is difficult to segment the differences between robo advice and what is defined as distribution. He went on to say that asking yourself questions about progress can also be very beneficial and that is how some providers are now providing much more than others are.
Regulators like fintech now
There has been a shift in attitude in the financial services. With the introduction of regulatory sandboxes, regulators can keep a closer eye on what fintech startups are up to, but also provides the new players with a safe place to experiment and test out their products before they go out to market without the burden of compliance from naissance. This could be a game changer for the financial sector as startups are getting the support that they very much need with these initiatives that stimulate change, instead of hindering innovation.
In the When RegTech meets FinTech: the day after tomorrow – How Technology Disruption intersects with Regulation in Securities session, Fabian Vandenreydt, Global Head of Securities and Innotribe at SWIFT, highlighted that we are at a crossroads for disruption and it is important to assemble all the stakeholders of innovation who will be responsible for making the future happen. As part of the Project Innovate initiative, the FCA opened its regulatory sandbox to applications from companies in order to provide a “safe place”.
BRICS countries have no plans to build a Trump wall
“The world is becoming multi-polar, but it is also multi-connected. What’s next after the Brexit and the UK economy? Banks have an important role in interlinking in order to support different communities in different countries that may be in the developing world. I’m proud to say that SWIFT is supporting market infrastructure in many countries in a world that will move to multi-laterality.” This is how Alain Raes from SWIFT opened the session on After the Brexit, what’s next: A BRICS-it towards a multilateral financial system? Representatives from Brazil, Russia, India and South Africa were present at this panel and they all had a similar attitude towards working together to achieve success.
BRICS countries represent 43% of the world’s population and as Eddie Astanin, Chairman of the Executive Board at the National Settlement Depository highlighted, being a part of this group is a “good symbol of the cooperation between countries and this is evident because of similar political and economic agendas.” Strate’s CEO Monica Singer agreed with this and said that all countries have a common need and work together because it makes sense to. “In South Africa we have a word called ‘Ubuntu’, it means ‘I am because you are’ and that resonates with us.” She went on to say that if the presidents of each country can work together, why can’t we? These countries are open to conversation and this freedom is infiltrated into the psyche.
AI is the self-driving car of financial services
Artificial intelligence has been around for a long time, but it is only starting to take shape as an innovative piece of technology in financial services as of this year. The emergence of AI has been described as the beginning of a new frontier for banks and switching to more automated services could mean big things for an industry that is historically set in its ways. 2016 has also seen banks and other financial institutions partner with fintechs and we heard from three leading figures in their respective sectors who showcased how they use AI in their company and for their customers at the Innotribe area at Sibos this year.
Eric Rosenblum from Palantir started off by saying that he and his colleagues are AI sceptics and that it is unusual that he is at a discussion on this particular form of technology. The reason he gave for this is because he regards artificial intelligence, not as elaborate, but as a “toolkit structure that can be used for other industries because of the data analytics technology associated with it.” When it comes to AI, it is all about how you manage data flows, but it can get a little bit difficult when you try to do it on legacy systems and use manual processes. This is why it is important to get the system right in the first place.
“We are creating a world robot without realising it”
Cybersecurity has been a big subject in discussions at Sibos this year and experts are warning the banking industry about the lack of defence that is integrated into the infrastructure when new systems are created and put to market. This year at the Innotribe area, we saw Bruce Schneier, CTO and Special Advisor at IBM Security talk about how he is seeing a change in computer security because everything is a computer now. Your phone, your car, your fridge: all of these are computers with a screen or wheels added to the device.
“This means that the world of computer security becomes the world of everything,” Schneier said. He highlighted that with this, systems are becoming interconnected and “it is no longer the web you connect to, it is the world you live in.” With the introduction of credit cards, the attitude towards changed and people got used to being able to defer payments and conceptualising money; this is the mindset that has allowed money to just become a number of a screen and cash is being used less and less as time goes on and new payments products become mainstream.
“In 5 years, banks will be completely invisible”
KPMG’s Fintech Lead Warren Mead started off the session on Learning from Fintech – Can we fail fast and learn fast at Sibos this year by showing a video that depicted how we all might bank in the future using a system called EVA. The video showed a virtual assistant giving financial advice to a man getting ready for work in a similar fashion to Siri and reminiscent of the film Her, Mead highlighted that if we are to move on from the current reality, where we still scan cheques and use cash, banks will need to up their game, collaborate with the digital giants and learn from fintechs.
86% of the audience at the session believed that a partnership between banks and fintechs is vital for the future success of both industries. Cindy Murray from Bank of America Merrill Lynch highlighted that the key word here is partnership, but the cultural shift between both types of company is staggering because the banking industry is burdened with regulation compliance. “Where we’re not nimble is in security and technology and the RFP process to them is to get their foot in the door, whereas we use it for due diligence,” Murray said.
Get ready for M-Pesa 2.0
The promise of mobile money has changed many lives all over the world, but despite the wide recognition of the success of M-Pesa in Kenya, it is yet to be replicated and the rest of the industry remains fragmented. While fintech hubs exist all over the world, more needs to be done to make a real impact on the business model of traditional services so that financial inclusion and poverty reduction is a priority.
Only 2% of adults worldwide report having a mobile money account, however, this reached 12% in Sub-Saharan Africa in 2014. This shows that mobile phones are most prevalent in the poorest part of the world, according to Jay Rosengard from Harvard University, and this ensures that the developing country can skip a couple steps ahead in the evolution of finance in that particular country.
Cybersecurity and the weakest links
If any delegates attending this week’s Sibos 2016 conference in Switzerland’s financial centre Geneva suspected that the topic of cybersecurity might be downplayed, any such thoughts were swiftly dispelled. Indeed, ‘Cyber resilience in a changing world’ was one of the sessions that kicked off the first day of the four-day event, which was standing room only long before the outset due to the mass of delegates keen to attend.
The session included a number of audience polls, with questions that included ‘Should all financial service firms be required to purchase dedicated cybersecurity insurance cover as part of a broader risk management policy?’ Rather like Brexit, opinion was evenly divided, with 46% of delegates agreeing with the proposal but 54% opposed.