On the opening morning of Sibos 2013 in Dubai, UAE, crowds were queuing round the block to get in and not all of them happily in the 40 degree heat outside, writes Neil Ainger, but once inside the Technology Forum started out with a lively panel debate on if big data is a big deal? A CIO keynote from Commerzbank and BNY Mellon's respective officers then addressed how to handle big data and cloud, mobile and cyber-security challenges. Simultaneously, the SWIFT Innotribe stream was debating the future of money and how tech developments might impact the business model of banks. Not surprisingly the techies predicted a revolution, but the bankers and operational technologists in the Forum, who actually have to do delivery, foresee an evolutionary change.
The consensus among the banking panel gathered for the first session of the Technology Forum on Monday 16 September at the Sibos 2013 trade show in the Dubai World Trade Centre (WTC) was that big data analytics is a big deal but that it is an evolution, not a revolution. Yes, you can get valuable business intelligence from the explosion in the amount of data and analytical tools that are now available, improve risk and regulatory reporting and benefit the business, but you have to do it across a legacy estate and without spooking the customer, recommended Jennifer Boussuge, Head of Global Transaction Services, EMEA, Bank of America Merrill Lynch (BAML) and Thomas Statnick, Global Head, Treasury and Trade Solutions Technology, Citibank.
For the remaining member of the Technology Forum panel, David Cyr, Senior Vice-President, Retail Applications, Royal Bank of Canada, he advocated numerous uses for big data but agreed “it’s an evolution, not a revolution.”
“I once had someone argue with me that big data is bigger than the internet and I don’t agree with that. It’s important but it’s an evolution. For example, big data is useful for fraud prevention and allows you to anticipate and prevent fraud, but the application of it builds upon existing skills and technologies.”
Tech Forum Opens: Big Data End Uses
The first poll question for the opening ‘Big Data: Big Deal’ Technology Forum debate in Conference Room 3 at Sibos 2013 bore out Cyr’s comments somewhat, as in response the question ‘what is the most promising use of big data technology in financial services (FS)?’ the audience of approximately 200 people, placed fraud detection second:
· Fraud detection – 23%
· Product development – 29%
· Customer segmentation – 15%
In answer to the later poll question of ‘what are the key challenges in using big data?’ only 20% of the audience voted for governance issues, including privacy and compliance, with technology and IT challenges winning this vote with more than 30% of the poll.
“I’d have voted for governance issues personally,” said Citibank’s Statnick.
According to BAML’s Boussuge, finding people with the right skills is the key. “After all, you need skilled people to analyse this data well,” she said, citing the need to get the basics of processes and people right if the advantages of automated big data collection and analytics are to be fully harnessed by the business.
Over at the rival Innotribe innovation-focused stream a more revolutionary feeling was in the area with Dave Gray, author of a business book entitled ‘The Connected Company’ and one of the speakers at ‘the Future of Money’ opening debate advising the audience of approximately 300 people that “you should act as if Amazon might open a bank tomorrow”.
Gray advocated preparing your financial services business for the possibility that Apple could buy Visa tomorrow, citing their $45bn of free cash flow and the fact that they have the technology know-how to do so. There is a clear and present danger of disintermediation of banks by technology or non-traditional FS companies like PayPal said the Innotribe panel, which included Scott Bales, Chief Mobile Officer, Moven, and Hank Uberoi, chief executive officer (CEO) of Earthport and Chris Skinner of the London FS Club as moderators.
There was also Patrick Murck, General Counsel, Bitcoin Foundation, representing another possible disintermediation threat from the digital money group, although of course bankers might argue that there are some anti-money laundering (AML) and regulatory concerns about digital money that might impact its widespread adoption - not that banks don’t have those concerns themselves after the heavy fines handed out last year to HSBC and Standard Chartered.
“The network-centric business model of the future is the one that will win out,” concluded Gray as he dismissed the pyramid hierarchical structure of the past and argued for the need to flatten organisations out, including banks, to encourage innovation.
A straw poll of the Innotribe room showed that approximately 60% of the room thought that a technology-led revolution was coming, which would impact banks, while 40% held up a green card instead of a red one, indicating that they thought it was more of an evolutionary process; perhaps believing that Square, PayPal, social media trading and other such tech-led developments could be co-opted or acquired later down the line. They would have found solace in the room next door at the Technology Forum where the Darwinist evolutionary approach was being advocated. The debate about technology revolution versus evolution continued into the coffee break and throughout the rest of the day.
Technology Forum Keynote Address: CIOs Speak
The debate about whether technology is a revolutionary force or an evolutionary one depends somewhat upon how much tech budget you have to spend on innovation, and how much goes on operationally ‘keeping the lights on’ and bank platforms and systems running across siloed infrastructures. All this while under the threat of cyber-attacks, and as more and more budget is diverted to meeting regulatory reporting and compliance demands. These issues were discussed by Stephan Müller, chief information officer (CIO) at Commerzbank and Suresh Kumar, CIO, at BNY Mellon, during the Technology Forum keynote address during the opening day of Sibos 2013. Integrating big data and possibly aligning it with private or hybrid cloud computing models was also addressed.
“A third of our budget is now spent on regulatory projects, which is a dramatic increase over the last 10 years,” admitted Stephan Müller, CIO at Commerzbank, during the Sibos 2013 Tech Forum keynote address. “Dodd Frank, FATCA, the European Market Infrastructure Regulation (EMIR) and so on all consume money.”
It’s a statement that his colleague and fellow keynote speaker, Suresh Kumar, CIO at BNY Mellon, agreed with as he admitted that “regulatory spend is increasing for us too.”
“Every year though, BNY Mellon tries to shift 5% of our budget from ‘keeping the lights on’ to innovation projects,” continued Kumar, acknowledging the need for banks to cater for revolutionary technology, which consumers and clients used to Apple, Google and other innovative products have come to expect from their banks.
Finding the balance between what is technologically and economically possible is the constant debate, allied to if consumers will accept certain data requests from a ‘retailer’ such as Amazon that they wouldn’t from their bank, in terms of data privacy or sharing information. The Technology Forum will no doubt return to the debate throughout its two days of activity, and hopefully the Innotribe will meet with the Forum tribe around the campfire to try to find some solutions.
SWIFT Opening Plenary: FIN Messaging Price Cut and KYC Platform
In the afternoon of the first day of Sibos 2013 SWIFT hosted its traditional opening plenary with its chair Yawah Shah and Gottfried Leibbrandt, CEO, addressing the gathering with the latter highlighting “three global mega-trends that will shape the future of FS”:
· The move from west to east: Dubai straddling the two provides an ideal venue to observe this shift.
· A third technology revolution: following the industrial revolution and the engineering manufacturing one in the 20th century, a third technology based revolutuion is now underway, argued Leibbrandt, adding "everyone is glued to a computer screen now."
· Geo-political and regulatory issues: with the fifth anniversary of Lehman Brothers' collapse just passed Leibbrandt said that government and regulatory action is now shaping the industry, referencing "a tsunami of regulation".
Shah agreed with the “mega-trends” but concentrated on pleasing the audience by announcing a 20% cut in the price of FIN messaging on SWIFT from January 2014 onwards.
He also explained that as it celebrates its 40th anniversary year, and the 35th Sibos, SWIFT is now aiming to diversify its core services by developing regulatory compliance services, adding to the payments messaging core and the securities messages that have built on the SWIFT platform over the past decade and now account for half of its volumes. A new Know Your Customer (KYC) SWIFT platform is on its way.
“We will move into offering a compliance shared service solutions where we can,” said Shah, citing the sanctions screening utility service that the collective already runs for its member banks and others.
The guest speaker at the opening plenary Samir Assaf, group MD and chief executive of global banking and markets, HSBC, was supportive of SWIFT’s move in this direction as offering shared services compliance utility platforms fits in with his declaration that the banking industry needs to move away from proprietary systems.
“Client-centric technology development is the future, not product-centric development,” he added. “We all do Know Your Customer (KYC) compliance [for instance], but there is no proprietary value in it, so we should use a utility platform via SWIFT.”
The move towards shared services to reduce the cost of running banks in an era of tighter regulations and lesser return on equity margins is expected to one of the key themes of Sibos 2013, alongside new regulations and post-crash ways of working as the Basel III capital adequacy regime hoves into view and centralised repositories and clearing for over-the-counter (OTC) trading becomes a reality under Dodd Frank and EMIR. Large infrastructure projects such as the TARGET2Securities (T2S) single securities settlement engine in Europe, which is due to start in 2015, and will involve considerable technological and market changes [read last week’s news analysis for more on this issue].
There is also the threat of newcomer banks, payment providers and entrants to the sector, said Assaf when budgets are constrained by regulatory demands, aping the earlier CIO discussion during the technology forum. “We’re living through a time of great change and challenge, but I’m confident we can rise to it,” he concluded. Whether the change it revolutionary or evolutionary is a matter of debate, but it is coming and cannot be ignored.
• Bobsguide will be producing a daily show report from the Dubai World Trade Centre (WTC) venue on 16-19 September all this week at Sibos 2013. See our Sibos 2013 blogs HERE and news announcements via the homepage.