Sibos Issues I Sibos 2019 London I 23-26 September
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PREVIEW EDITION
Sibos Issues I Sibos 2019 London I 23-26 September
Evolution or Eyes on the Faster, Adapting to The new A to Z
revolution? prize but safer? a new age of of banking
uncertainty
page 6 page 12 page 17 page 22 page 28
PAYMENTS SECURITIES FX DAY
Delivering a Investor needs Two drivers for
digital future driving post-trade change in the world
revolution of FX
Welcome to Sibos 2019
in London
page 32 page 38 page 43
With Sibos 2019 just around the corner, we hope this
preview edition of Sibos Issues whets your appetite for
a week of debate, discussion and networking. All based
COMPLIANCE TECHNOLOGY INNOTRIBE
around the Sibos 2019 theme of ‘thriving in a hyper-
connected world’, these preview articles reflect the fast-
changing nature of our industry and the topics highlighted
Inflection Enabling a Understanding
in conference sessions throughout the week.
point collaborative model trust
Chantal van Es
Head of Sibos
of finance
page 46 page 52 page 58
OPENING PLENARY FUTURE OF BANKING LEVERAGING DATA SWIFT INSTITUTE STANDARDS FORUM WOMEN OF THE WORLD
Global citizen, Evolution or Eyes on the prize The present and The great Put gender
public servant, revolution? future shape of payments on your Sibos
Londoner banking evolution agenda
page 4 page 6 page 12 page 63 page 64 page 68
CYBERSECURITY GEOPOLITICS & REGULATION NEXT GENERATION SPOTLIGHT STAGE SWIFT at Sibos
Faster, Adapting to The new Lights, Around the world
but safer? a new age of A to Z camera, in real time
uncertainty of banking action
page 17 page 22 page 28 page 70 page 72 Front cover photo of
Dame Stella Rimington, ex-DG, MI5
Copyright ©Zach Chudley 2016
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O P E N I N G P L E N A R Y
Table of Contents
Future of banking:
Evolution or
revolution?
Global citizen,
public servant,
Londoner
Held in London for the Born in Alexandria, Egypt, Shafik studied Fund (IMF) in 2011 as deputy managing
for an MSc in economics at LSE, having director with responsibility for many of
first time, this year’s graduated in economics and politics at the the crisis-hit countries in the euro-zone
University of Massachusetts in Amherst, and the Arab countries in transition. She
Sibos will be opened before completing a DPhil in economics at also oversaw the IMF’s university, which
St Antony’s College, University of Oxford. trains thousands of government officials
by an economist who each year, and was responsible for human
She then left the UK to teach at both resources and an administrative budget of
understands both the Georgetown University and the Wharton US$1 billion.
School of the University of Pennsylvania.
city and its place in a In a 15-year career at the World Bank, From 2014-2017, Shafik served as deputy
Shafik worked on the organisation’s first governor of the Bank of England,
fast-changing world. ever World Development Report on the responsible for a balance sheet of almost
environment, designed reform programmes £475 billion, and sat on all its major policy
for transition countries in Eastern Europe, committees, including the Monetary Policy
Dame Minouche Shafik, director of the and developed proposals for economic Committee, Financial Policy Committee,
London School of Economics and Political integration in support of the Oslo peace and Prudential Policy Committee. She also
Science (LSE), one of the world’s leading process in the Middle East. led the Fair and Effective Markets Review,
social science universities, is ideally which put in place a set of reforms to tackle
positioned to deliver the welcome address Having become the youngest vice-president misconduct in financial markets.
at a conference focused on ‘Thriving in a in the history of the World Bank at the age
hyper-connected world’. Her research has of 36, Shafik returned to London in 2004 Shafik currently serves as a trustee of the
frequently revolved around the dynamic to continue her career in public policy. She British Museum, the Council of the Institute
forces that support sustainable economic rose to become permanent secretary of the for Fiscal Studies, governor of the National
growth in a complex global environment. Department for International Development Institute for Economic and Social Research,
where she was responsible for the UK’s and is honorary Fellow of St. Antony’s
Independent of the LSE leadership role she development assistance efforts around the College Oxford. As well as holding three
has held since 2017, Shafik has experienced world. honorary doctorates from UK universities,
London from a number of perspectives she was made a Dame Commander of the
– student, central banker, civil servant, Shafik joined the Washington- British Empire in the Queen’s New Year’s
trustee – across a varied career. headquartered International Monetary Honours list in 2015.n Dame Minouche Shafik
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F U T U R E O F B A N K I N G
Global citizen,
public servant,
Londoner
Leveraging data:
Eyes on the prize
Evolution or
revolution?
Banking services Over the centuries, banking has been
no stranger to disruptive forces. Most
are becoming more historians identify the emergence of the
banking system that we know today in the
integrated, but will Italian merchant cities of Florence, Venice
and Genoa during the 14th century. The
bigtechs be partners, oldest bank still in existence is Banca Monte
dei Paschi di Siena, which has operated
rivals or both? continuously since 1472; this longevity
should speak volumes about the resilience
and adaptability of the banking industry.
Financial crises, booms and busts have
come and gone, banks have fallen by
the wayside and new technologies and
competitors have emerged. Throughout,
the business of banking has continued.
“There always will be regulated entities
that will serve the needs of customers who
want a safe entity to borrow money from or
to place their money in,” says Mark Evans,
managing director, transaction banking at
ANZ Bank. “Call them banks or anything
else, they will be the lynchpin in providing
financial stability to support governments
and promote social and economic stability.”
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As banks, we don’t The role of banks as
focus enough on trusted counterparties
how our customers maintaining a stable
behave. system is not changing.
Paula da Silva, Mark Evans,
SEB ANZ Bank
Even so, we appear to be living in an era of Understanding behaviour is increasingly To date, financial services comprise only a know their customers’ banking behaviour.
profound change in the nature of banking.
David Bannister, senior analyst in research
company Aite Group’s wholesale banking
about big data – turning the information a
financial institution holds into actionable
business insights. The organisations that are
small part of the big techs’ global businesses.
But given their size and customer reach, said
Shin, they have the potential “to spark rapid
That is a perfect combination; no one entity
can develop everything on its own.” The biggest disruptor
and payments team, says some digital
technologies – such as artificial intelligence,
machine learning and distributed ledger –
most adept at leveraging data have been
the bigtech firms such as Ant Financial,
Google, Apple, Facebook and Amazon. These
change in the industry”.
The BIS report was compiled before
Aite Group’s Bannister agrees. Digital
technologies will allow banks to do things
“faster and cheaper”, but they will also
of them all?
are leading to questions about how banking companies have vast stores of data, powerful Facebook announced plans to launch its make it faster and cheaper for everyone
is done. “People are saying ‘we don’t have analytics capabilities and are relatively own cryptocurrency, Libra. Facebook says else, too. “Banks and non-banks are The four years between 2014-2018 were the At ANZ, Evans believes climate
to do things this way’ because some of the lightly regulated compared to banks. the currency will be backed on a one-to- defining the roles they will have in the hottest on record. Climate change could change will have an impact on how
existing processes are getting in the way,” one basis through cash bank deposits, emerging ecosystem. Transaction banks be the biggest disruptor that not only the banks operate. “The focus for large
he says. In its Annual Economic Report for 2019, short-term government securities and are in a better position because their banking industry, but the world, will face. multinational companies is to make
the Bank for International Settlements’ hard currencies, including the US dollar, customers are multi-banked and they have sure their supply chains are green and
Paula da Silva, head of transaction services, economic adviser and head of research, sterling, euro and Japanese yen. A number a collaborative mindset.” SEB’s Da Silva says banks will have to sustainable. Banks can play a role by
SEB, says: “Most changes that the banking Hyun Song Shin, outlined the pros and cons of companies have already backed Libra, adapt to the changing world, reconsidering issuing green bonds, for example, and
industry has undergone historically have of bigtech involvement in financial services. including Mastercard, Uber, PayPal and Collaboration between banks has how to determine value and who to encouraging clients to identify their
been about automation, about making eBay. At present, no banks are part of the accelerated in response to technology- lend to. This may involve funding the climate change risks and support the
things more visible for customers and “The predictive power of the bigtechs’ group. driven change. Emma Loftus, head of global transition efforts of firms in carbon- creation of transition plans – along with
ultimately to enable them to carry out scoring systems arises in large part from payments at JP Morgan, points to SWIFT intensive industries as well as identifying adjusting their own processes.”
some services themselves. In the future exploiting the network structure. For Defending the company’s plans at a US gpi, an initiative driven by SWIFT and its green technology pioneers that might
banks may become ‘invisible’, but they will instance, MYbank (Ant Financial group) House Committee on Financial Services member banks. SWIFT gpi’s initial focus soon become world leaders. “We need to But Evans warns that such change
be embedded in the value chain in a totally uses network analysis of transactions hearing in July, David Marcus, co-creator was on improving speed and transparency understand what climate change means will involve tough decisions: “All coal
different way.” to evaluate whether an entrepreneur of Libra and head of Calibra, the subsidiary in the cross-border payments ecosystem, and collaborate with the rest of the mines cannot be shut down tomorrow
separates personal funds from business formed to operate the currency, said: “If but its application is now being investigated industry. This may mean dramatic change, as there are communities that depend
Predictive power funds, one of the basic principles of good America doesn’t lead innovation in the digital into other areas including low-value ACH funding green initiatives and implementing on them.” However, through collaboration
The biggest disruption, says da Silva, will business conduct,” he said. currency and payments area, others will.” and real-time payments. “Global banks eco-friendly ways of working. There is a and a “balanced approach,” banks can
be in how customers buy banking services, have worked together to provide the demand on us as companies – and also as help to formulate the best outcome
rather than in response to a particular These data analytics are fundamental to Combining competences same client experience as the non-bank humans – to examine our behaviour.” possible.
regulation or technology. “How banks work bigtechs’ finance sector ambitions. The Da Silva believes banks should be working and fintech players, who previously had
with their brand and what they identify as combination of granular data and machine with the bigtechs and fintechs to connect predicted the death of the bank payments
value-added will be very different from the learning has the potential to improve and combine competencies. This is a “big model,” she says.
past. As banks, we don’t focus enough on the accuracy of repayment predictions, leadership challenge” for banks, she says.
how our customers behave, how they buy especially for small merchants that are “The bigtechs and fintechs know their The longevity of banks and the banking
banking services.” typically not well served by incumbent banks. customers’ social behaviour and banks model comes down to trust, Loftus adds.
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A D V E R T O R I A L
Resilience first:
Alipay Be prepared for
looked at old ‘when’, not ‘whether’
technology Dan Thieke, managing director, Business Risk
in a new way & Resilience Management at DTCC, emphasizes
the role of resilience in financial stability.
to address When it comes to making today’s
interconnected financial ecosystem more
In light of this challenging environment,
DTCC executives attending Sibos will
Dan Thieke, DTCC
payments
resilient, everyone agrees on one thing: It’s discuss principles and guidelines for
not a matter of ‘whether’ critical business promoting financial stability by planning
services will be disrupted, it’s just a matter for disruptions. They will describe our
of ‘when.’ It is more important than ever to vision for enhancing resilience as a way to
friction. be prepared for cyber-attacks, technology-
related incidents and other types of shocks
safeguard critical business services. They
also will highlight some of the salient
We are committed
Zenon Kapron,
that could have systemic ramifications. paradigm shifts faced by the industry
and describe how this topic has morphed
to leveraging our
Kapronasia As concerns over physical events are
starting to be eclipsed by the threat of
from an IT-centric concern to a first-
order business imperative and a strategic experience to lead
Any company where the collection of or including wealth management, credit scenarios. For their part, the bigtechs can
wide-scale technology disruptions, the
scope of resilience programs has expanded
enabler.
the evolution of
disbursement of funds is central to the
operating model will also require an end-
scoring and lending. provide credit ratings of individuals and
SMEs, based on their behaviour,” says
significantly. The ability of these programs
to adequately absorb shocks and allow
DTCC’s team also will describe how the
firm is leveraging leading-edge design industry-wide
to-end experience that delivers security,
finality and local regulatory compliance.
The ‘secret’ of Alipay’s success has been in
addressing friction across the value chain,
Kapron. firms to quickly recover from disruptions
has become a central point of focus for
principles as it embarks on a multi-year
strategic initiative to build a future-state resilience.
The greater the number of countries says Kapron. To do this, the firm has not It’s 25 years since Bill Gates observed that regulators and practitioners alike. In view of IT architecture that is resilient by design.
such companies do business in, the more always looked to the latest technology. One banking was necessary, but not necessarily how significantly the market environment The principles and guidelines that support
on strengthening our processes to address
important these elements will be. “Banks of the biggest Alipay success stories has banks. ANZ’s Evans says the role banks has changed over the last few years, DTCC’s approach to enhancing resilience
ever-changing threats, we look forward
do all of this for a living, all day long,” she been the facilitation of payments based play will always be in response to how the maintaining appropriate levels of resilience are being shared with the industry as an
to collaborating with our partners in the
notes. on QR codes, a technology that emerged wider community operates. “The players is a complicated balancing act that needs invitation to foster an active and robust
industry on a new vision for enhanced
well before blockchain, for example. “Alipay in banking may differ, but I cannot see to incorporate a wide array of trade-offs dialogue on this critical topic that includes
global resilience.n
“Huge change” looked at old technology in a new way any fundamental change to the role of and competing objectives. all stakeholders.
While the impact of fintechs and other to address payments friction,” explains banking in my lifetime. The way the service
disruptors has not yet been as dramatic in Kapron. “A merchant can set up the ability is delivered may be different, but the Developing the vision, however, is only the
Europe and the US as forecast a few years to accept QR code payments very quickly role of banks as trusted counterparties first step toward enhancing resilience. To
ago, there has been a “huge change” in the and such transactions take only around five maintaining a stable system is not Operational successfully implement these concepts,
Risk
way individuals and SMEs in Asia conduct seconds.” changing.” n organisations must set up an effective
their banking, says Zenon Kapron, director governance structure and an operational
of consultancy Kapronasia. Kapron believes one picture of the future of Financial
Business model that best suits their needs. DTCC
Continuity
banking may be emerging from China. For Risk
Management is creating a Business Resilience Center
Alipay, a subsidiary of Ant Financial, the past few years, the central government of Excellence to this end. This approach
Business Resilience
has achieved deep market penetration, has been pushing the bigtechs to become will help facilitate rapid deployment that
Centre of Excellence
with millennials in China investing their tech providers, rather than financial leverages existing resilience-related
money with Alipay (and WeChat Pay) services providers. This will mean that Product Technology activities, while centralizing talent and
Management Risk
rather than with a traditional investment when a loan application comes to Ant expertise within the company. If you’d like more information about DTCC,
firm. Alipay was originally created to Financial, it will be syndicated through stop by our stand onsite at Sibos London,
at W104.
provide the technology infrastructure the banks and sit on their balance sheets, Safeguarding the stability of financial
to support e-commerce, providing trust rather than on Ant’s. “In this model, banks Vendor Risk
Infrastructure markets during times of uncertainty has For more insights on critical industry
Management
for merchants and their customers. It will bring trust and balance sheet liquidity been a key part of DTCC’s mission for more issues and cutting-edge innovations, visit
has since expanded into other services that can be applied to different customer than 45 years. Today, as we double-down Perspectives.dtcc.com
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L E V E R A G I N G D A T A
Future of banking:
Evolution or
revolution?
Cybersecurity:
Faster,
but safer?
Regulators are rightly
concerned about the explicability
and auditability of AI.
Stuart Breslow, Google
Eyes on Banks looking to Regulatory fragmentation over data use – Politically, the access and control of
and political concerns about its capture and data has become a key concern for
leverage data to exploitation – create challenges around a
key resource for global financial services
governments, primarily impacting
technology firms. The current US
deliver superior players. Seeing data as the fuel for the administration has frequently alleged
the prize
engine in many of their businesses, banks intellectual property theft by Chinese
services must are keen to navigate any obstacles to its
effective use.
state-owned enterprises and restricted
the domestic use of technology supplied
overcome technical Neil Francis Ryan, head of investment
by firms such as Chinese telecoms
provider Huawei.
and regulatory analytics and data services at BNP Paribas
Securities Services, says, “We are very Cloud services provision is dominated
challenges. conscious of understanding our data
internally, and what the conditions and
by US firms including Amazon, Google
and Microsoft, but in China foreign
constraints are on that data going on the operators can only function if they
cloud, even if it is a private cloud.” partner with a local firm. The two markets
appear to be developing on separate
Constraints come in the form of both paths, with Amazon selling the hardware
technical and regulatory barriers. of its Chinese cloud business to its
According to experts, challenges to local partner, Beijing Sinnet Technology,
leveraging data are threefold: developing in 2017.
technology that can offer the required
analytics; optimising cloud technology in Yet China has announced two plans
order to store and deploy data efficiently; for becoming the global superpower
and providing transparency to regulators in artificial intelligence (AI) by 2030,
and clients. which could be an invaluable resource
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All firms are aware of pressure We are very conscious of
to improve data governance and understanding the conditions and
control. constraints on data going on the
Charles Teschner,
BNY Mellon
cloud.
Neil Francis Ryan, BNP Paribas
for the finance industry in the future. Firms increasingly recognise data’s of the house, in the execution of repetitive Floating costs cleansing of data masses across disparate in the Americas and Asia-Pacific, so we
Meanwhile, Europe has led the world in potential, he says, but are also aware of tasks. AI/ML can potentially impact Cloud computing is crucial to bank efforts sources, delivering the foundational also take those jurisdictions into account
setting high standards for the protection “pressure from all users to improve data compliance activities, making them more to leverage large data sets. By tapping benefit of strong data hygiene.” in terms of our data governance,” notes
of data, obliging global players and governance and control, partly as a result effective by identifying bad behaviour data stores that can be accessed at will Ryan. “There are often country-specific
infrastructure providers to raise their of regulation, but also an institutional which has otherwise been undetected, but can be paid for as needed, rather than Breslow says the prescription for success privacy concerns, with certain countries
game. Understandably, there is both ‘Facebook-effect’.” and by materially reducing false positive as a fixed cost, financial services players in adopting AI is the engagement with having additional requirements for how
caution and optimism among banks looking investigations.” can grow their use of AI and ML while ‘hyperscale’ cloud service provider data is managed and limits on data
to leverage data more effectively to better Technical ability firmly controlling cost. offerings, in other words industrial- leaving their borders. We have taken these
serve clients across jurisdictions. Some of the most advanced technologies AI/ML-based tools can tackle labour- strength tools. “These providers can be regulatory requirements into account from
being used across the industry to intensive processes, even those that Chris Jones, global head of strategy, used to create robust data environments an operations, technology and people
“In securities services, businesses are leverage data are based upon AI and require cross-checking between systems, innovation and architecture for IT and [and] scale compute on which to run perspective.”
becoming more adept at using data ML. By allowing a flexible approach to as long as the data is available to change at HSBC Securities Services, complex analytics against massive data
effectively,” says Paul Clark, global head of finding patterns – based on tracking and train them on. “Reconciliation is a big notes the inherent peaks and troughs in sets,” he says. Authorities are also keen to know that
digital and data, for HSBC Securities learning their characteristics, rather operational pain point for any firm,” says processing power needed to support AI data processing is being undertaken
Services. “It will become an enabling factor than using inflexible rules – these models Allen Cohen, digital officer at BNY Mellon’s and data processing. “Through the cloud, Playing by the rules with due care and consideration. For
for us to do fast processing, driving can quickly assess much larger data asset servicing business. “Advanced AI/ML we are able to get that processing power Legal and ethical considerations can also AI, that can include ensuring it is not
insight, powering AI and machine learning sets than can be appraised by a human, algos are being used in the reconciliation as and when we need. It’s allowing us impact the effective deployment of data discriminating between clients unfairly
(ML). All this helps us aid better decision finding correlations and linkages that process to eliminate false breaks and to focus on the functionality the client to support banks and their clients. BNY or making decisions that cannot be
making. Also, as the industry becomes might otherwise go unnoticed, as well problems due to timing issues, thus wants, rather than worrying about how Mellon’s Cohen says cloud providers have explained.
more comfortable with the concept as subsequently spotting them in new allowing firms to focus on the exception much capacity we have in a data centre,” adjusted in recent years to data privacy
of central digital ledgers, we will start to data. This can be invaluable in areas processing, instead of having to figure out he explains. rules that require client data to be held in “Regulation does pose challenges to
see the benefits of single versions of as disparate as voice recognition and what the exceptions are.” country, typically by expanding data centre AI adoption,” says Breslow. “There’s
truth, which reduce that need for anti-money laundering, where a bad Google’s Breslow argues that many networks. “They have matured enough the risk management requirement that
reconciliation, speeding up straight- actor may adapt an existing approach to For AI/ML-based tools to add sustainable financial services firms are “encumbered” to put data where they want it, but can the financial services providers must
through processing.” avoid detection, but unwittingly continue value to clients, service providers need by data systems which are fragmented accommodate the privacy requirements,” demonstrate transparency as to how the
certain behaviours. to focus on the quality, reliability, and and inconsistent, often as a result of he explains. AI itself works and how the output can be
Being at an early stage in the use of these accessibility, according to Stephen M&A activity and silo-led technology explained. Regulators are rightly concerned
technologies, banks must navigate barriers Financial service providers keep a close Bayly, chief information officer at HSBC purchases. He also notes limited levels of In Europe, the General Data Protection about the explicability/auditability of AI;
carefully, to ensure they take the best steps eye on the lead provided by bigtech Securities Services. “If you give AI bad comfort and understanding of AI at staff Regulation (GDPR) has set very beyond fundamental risk management,
forward. pioneers. But even Stuart Breslow, data, it’s going to make bad decisions. and leadership level. stringent guidance for the use, storage they have to be comfortable that decisions
managing director for technology and It’s not just how we train our robots, if and protection of data, but the overall and output are wholly objective—that the AI
“When I look at the ability of technology policy at Google, admits there is a long the end-client is receiving bad data on “The good news? The cloud can provide regulatory landscape remains diverse. works as intended.”
and analytics to transform the industry, I way to go. “AI/ML is already in use both on the front end, then the reputation of a singular environment for consolidating
feel like it is only at 5% of its potential,” the business growth side of the house, for both our clients and ourselves is hugely data across these federated systems, “GDPR is a regulation in EU law, and These challenges are not deal-breakers;
says Charles Teschner, global head of data example supporting informed sales lead damaged. Better quality data is absolutely which can then be tapped by AI,” he says. non-European firms trading in Europe finance sector firms are working hard and
and analytics solutions at BNY Mellon. generation, and on the cost savings side paramount.” “There are now tools to automate the are governed by it. We have operations working together to ensure that regulatory
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C Y B E R S E C U R I T Y
Leveraging data:
Eyes on the prize
Better quality data is absolutely
Geopolitics &
paramount. regulation:
Adapting to a new age
of uncertainty
Stephen Bayly,
Faster,
HSBC
guidelines are adhered to and technological and financial service providers to address
but
challenges can be overcome. regulators’ concerns are starting to bear
fruit.
“We continue to have discussions with
regulators regarding data protection,” “With the advancements in explicability
says Jones at HSBC. “If one player was tools and methodologies, as well as
to have an issue in this space, we would articulation by cloud providers of AI
safer?
all be tarred with the same brush, so a principles founded on fairness and
collaborative effort is needed.” transparency, we also see increasing interest
among financial regulators to explore the
Google’s Breslow suggests efforts by cloud use of AI in financial services.”
n
How will banks protect
Deutsche Bank their clients’ assets
Corporate Bank
in the era of open
banking and real-time
Everything payments?
is in flow
Connecting you to the world
of corporate banking
Register at db.com/flow
#PositiveImpact
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You may be able to create more We have reached
resilience in the system because it a point of
is more distributed. interdependence
Tim Maurer,
Carnegie Endowment for International Peace
in the digital
ecosystem.
Sir Rob Wainwright,
Deloitte
Cyber-criminals are intelligent, creative themselves,” says Wainwright. Perfect or must all recognise that there is a new at a faster rate than any other industry,” almost instantaneously, are we – and
and increasingly resourceful. The good not, this storm is severe. dimension to bank-to-bank, and market says Wainwright. our defences – likely to be left behind
news is: so are we. “We’re seeing larger infrastructure-to-market infrastructure, as we battle all this adverse weather?
investments of brainpower, larger budgets Business risk relationships.” At one level, this is a KYC Adverse weather Maurer says: “I don’t think we can make
and increased IT capabilities focused on Beyond this, it’s a storm no banker – nor issue, and that’s potentially expensive in For all of our institutions, what matters a definite statement as to whether new
cybersecurity, while at the same time, the regulator, nor fintech, nor other participant itself, but at another level, it’s a “don’t is to keep up or even ahead. Sibos 2019’s developments in technology will improve
threats have gone up a gear as well,” says in global finance, large or small – can be shut out of business” issue – we’re cybersecurity strand runs through the or hamper cyberdefences. At the same
Sir Rob Wainwright, senior cyber partner afford to ignore. The Big Issue Debate talking about survival. Gem continues: week, of course, and the SWIFT Institute time as we’ve seen changes to payments
at Deloitte North and South Europe, on cybersecurity will be addressing a “Every organisation has a duty to has published ‘Cyber Resilience and systems, we’ve seen changes to defence
who will contribute to Wednesday’s Big challenge that we must all face – and assess the operational risks of being so Financial Organizations: A Capacity- technologies, particularly with respect to
Issue Debate around the question: Have it’s not just a threat that comes from interconnected.” building Tool Box’ in partnership with the machine learning.”
new business models created a perfect outside. Effective cybersecurity measures Carnegie Endowment for International
cybersecurity storm? have become a requirement for any Cybersecurity is the biggest of big issues, Peace (CEIP) and others. This set of six There’s a belief that “offence always
bank connecting to global networks, for and Wednesday’s speakers will identify guides and checklists, available in seven trumps defence” in cybercrime versus
On the face of it, they have. The downside the simple reason that a bank unable to best practice and discuss present-day languages, delivers actionable guidance cybersecurity, Maurer observes, in that
of high-speed processing and API-enabled demonstrate its own cybersecurity – a bank and evolving counter-measures and on cybersecurity frameworks, policies and systems are vulnerable and criminals
hyper-connectivity on a global scale is not up to speed on the latest cybersecurity solutions, in the context of ever-faster standards around the world. Tim Maurer, have the advantage of surprise. Criminals
that criminals can transact more quickly measures being deployed across the transaction speeds processing speeds co-director of the CEIP’s Cyber Policy only have to be lucky once, as the saying
than we can detect them. But that’s only industry – risks being treated (or rather, that leave less time for security checks. Initiative, says: “When used properly, these goes, while we have to be vigilant all the
part of the challenge we face today. avoided) as a potential weak link. We’ll hear about initiatives to contain and tools will prevent dangerous hacks to time. But this may be changing. Maurer
Cybercrime itself is evolving, constantly. even defeat cybercrime, and to track its financial institutions across the world.” says: “Some experts expect that machine
Once, state-of-the-art cybersecurity If you’re not secure, you’re at risk of perpetrators, and there will be discussion learning will tilt the balance in favour of
meant reminding customers to protect losing business. Mark Gem, member of of cybercrime as a tool of statecraft Does Maurer believe that new business defence.” Over time, rapid processing
their passwords; now, we’re putting up the executive board and head of the risk – there are ramifications here that go models – with their emphasis on speed, might work to our advantage rather than
barriers against a systemic threat. “There committee at Clearstream, says: “Your beyond banking. And yet the tone of the openness and cloud-based collaboration our disadvantage. Steve Silberstein, CEO,
is a growing involvement of malicious own organisation might have taken the debate will be positive: we’re focused, and – have created a perfect storm? Now Financial Services Information Sharing
state actors, while the most capable necessary steps to be secure, but if the we’re getting to grips with cybercrime. that real-time payment initiatives have and Analysis Center (FS-ISAC), makes
cybercriminals are moving towards defences of a counterparty or client have “The financial services industry is cut processing times to sub-second a similar point. “Real-time payments
direct attacks on the banking networks been penetrated, you too are at risk. We accelerating its cybersecurity capability levels, so that settlement is irrevocable have different risk characteristics than
18 Sibos Issues 2019 Preview edition Sibos Issues 2019 Preview edition 19Rapid processing might work to our Every
advantage. organisation has
Steve Silberstein,
FS-ISAC
a duty to assess
the operational
risks of being so
interconnected.
Mark Gem,
Clearstream
traditional timelines. One of the risk- about innovation? Cybersecurity is a new technologies.” An example might be Wainwright says: “We have reached a threat of cybercrime. It’s here to stay. It’s and above all, mindset. “In the end, we’re
benefit ratios is that there is almost co-operative not competitive space, but if the use of a tokenized account number point of interdependence in the digital part of the landscape.” Strategic resilience talking about the integrity of the financial
instant feedback on the transaction, we’re openly and necessarily co-operating, instead of the actual account number. ecosystem. We cannot now remove the requires quick detection, layered defence, system as a whole.” n
which allows the bank originating doesn’t that have at least some impact on Silberstein adds: “Open banking can offer
the payment to deal with any issues our ability to compete? avenues such as payee confirmation to
immediately,” he explains. prevent a consumer from sending money to
So far, we know that faster processing the wrong account.”
Layered defence speeds can work for us as well as
How good is your AI? This is an against us, if our machines are up to the Fresh perspectives
increasingly important question for banks’ challenge, and that a primary defence Coming at this from another angle, Maurer
information security professionals. If your against cybercrime is to get together and says: “If you have an open system, you may
machines learn faster than their machines,
you’re safe until next time. And if you keep
share. Our new business models might
have created a storm, but we already
be able to create more resilience in the
system because it is more distributed and
Thriving in a
up with best practice, you’re safe next time
as well. Silberstein continues: “Financial
have access to some pretty robust
insulation. Cybersecurity is a space in
you have a greater diversity of actors. Also,
some of the innovation we may expect in hyper-connected
institutions must employ a layered and which we’re doing pretty well already, and the coming years may be more resilient
adaptable defence model to adequately
detect and prevent fraud, including strong
the message on Wednesday won’t be that
we need to wake up, so to speak, but that
than systems currently in use.” The picture
is mixed, he concludes. Cybersecurity is
world
authentication measures and threat we need to stay sharp. Feel confident, but mission-critical for enterprises seeking to
intelligence.” On top of that, Silberstein don’t feel complacent. connect to banks as well. We’re opening
suggests, banks should engage in the ourselves up to new risks, but also to fresh
sharing of threat intelligence to facilitate But if that’s the present message – what perspectives on how to defeat cybercrime –
#Sibos
a greater industry-wide understanding of about tomorrow? New business gives and distributed networks may be a complex
evolving criminal methodologies and tools. way to newer business, after all. As we challenge to cybercriminals as well as
open up our systems to third parties – to the rest of us. Maurer does, however,
There is almost an analogy with principles deliberately – aren’t we further increasing point to implementation as an area of
of survival in the natural world – stay our vulnerabilities? vulnerability: be vigilant as you move to the
close to your peer group because the cloud, or implement a new connection.
predators will be more likely to pick off Again, this is a question where the answer
the outliers – but there is a powerful isn’t quite as obvious as might be expected. New technologies may also be more secure
business case for keeping informed and Silberstein says: “Financial institutions than we have now, and new approaches are
keeping your defences up to date. If you’re must constantly adapt their cybersecurity evolving – there’s an emphasis, for example,
not networked into the state-of-the-art to address evolving risks. While the on constantly seeking “better practice”
solution, you risk being seen as potentially increase in the amount of connections to a rather than settling on best practice.
part of the threat. That’s bad for business, customer’s financial information can lead But the final argument for a rigorous
as above – but it also prompts a further to new cybersecurity risks, there can be policy of keeping your cyberdefences up
question: what about new business; what opportunities to mitigate fraud with these to date is simply: there’s no alternative.
20 Sibos Issues 2019 Preview edition Sibos Issues 2019 Preview edition 21G E O P O L I T I C S & R E G U L A T I O N
Cybersecurity:
Faster, but safer?
The geopolitics of trade
Next generation:
The new A to Z
of banking
are beginning to impact
overall trade values and
volumes.
Dr Rebecca Harding, Coriolis Technologies
Adapting to
Banks are turning Following 18 months of tariff hikes and
threats by US and China, there is no
to technology to resolution in sight. Nevertheless, signs of
geopolitical tension are unlikely to subside
mitigate the risks in the medium term, as more countries
temper their support for globalisation
a new age of
of an increasingly and the multilateral organisations that
govern it, their policies and outlooks tinged
unpredictable increasingly by economic nationalism.
business environment. Rising tariffs are only one symptom of
heightened geopolitical discord, alongside
uncertainty
more frequent use of sanctions, compliance
fines and regulatory fragmentation. In a
number of countries, domestic political
agendas are increasingly winning out over
economic reasoning, as policy-makers
appear to prioritise national interests over
consensus-seeking and co-operation with
allies and neighbours.
“The US-China trade war, and the
geopolitical tensions that are building
in the Middle East, are making trade’s
compliance and cost environment more
complex,” says Dr Rebecca Harding, CEO
of Coriolis Technologies, and author of
‘The Weaponization of Trade: The Great
22 Sibos Issues 2019 Preview edition Sibos Issues 2019 Preview edition 23Innovations in e-commerce, We’re witnessing a
digitisation and DLT are transition from an era
making trade safer and of globalisation to the
more efficient. opposite.
Natalie Blyth, HSBC Dr Angela Gallo, Cass Business School
Unbalancing of Policy and Economics’. “The levels of uncertainty,” said director-general ledger technology are also making trade make trade considerably faster – cutting entity. For non-EU globally systematically
geopolitics of trade are beginning to impact Roberto Azevedo. With world trade and safer and more efficient.” transaction times from 5-10 days to 24 important banks (G-SIBs), the picture is
overall trade values and volumes and this GDP having grown in tandem since 2008 hours – freeing up valuable working complicated by the EU’s Intermediate
is a serious challenge for growth in the (26%), consensus estimates put world GDP From a tactical perspective, banks are capital,” says Blyth. Parent Undertaking (IPU) proposal, part
coming year.” growth at 2.6% in 2019 and 2020. already working closely with importers and of plans for the fifth Capital Requirements
exporters to ease their pain. As tensions At Coriolis, Harding is seeing some Directive. According to a report by London-
Trade distortions Digital technology plays an important but rise, the cost of protecting import and diversion of trade and reclassification of based Cass Business School2, 19 G-SIBs
The problem has been a long time coming, complex role in this uncertain geopolitical export flows is likely to increase, admits components of global supply chains, but could have to consolidate all existing EU
but is increasing sharply. Discriminatory environment. On the one hand, it is the Daniel Schmand, head of trade finance notes that current conditions are not yet a entities under a single European subsidiary
trade actions by G20 economies have risen cause of considerable anxiety, playing a at Deutsche Bank, both because of the “full-blown trade war”, despite the bellicose that would serve as an IPU, for resolution
steadily since 2012, according to Global key role in the US’s complaints to China greater frequency with which firms use language. “While uncertainty persists, it purposes. The report says the necessity to
Trade Alerts. Between December 2018 over intellectual property and national safer instruments such as letters of is hard for banks and businesses to make restructure and develop new organisational
and April 2019, G20 countries imposed security, and Europe’s anti-trust measures credit (L/Cs), versus open account, and investment decisions. While businesses models would prove “costly” and “require a
288 trade distortions affecting more than against US internet giants, as well as the because the cost of each L/C transaction are trying to mitigate the challenges with long transition period”, noting also plans by
US$1.15 trillion of trade1. Retaliatory US- data protection laws being introduced in will rise. Further, greater uncertainty specific measures in their sector and banks to establish post-Brexit ‘delegation
China actions accounted for just one sixth. Europe and elsewhere. On the other, it places a premium on liquidity, which stronger attention to compliance detail, the management’ models that could allow
has already reduced much of the friction increases firms’ need for working capital fact is that this pushes up costs. That will them to select an EU-based legal entity
Even where multilateral deals can still inherent in cross-border trade flows and solutions. “Depending on the nature of be a longer-term difficulty to manage with for passporting and IPU purposes, then
be struck, such as the European Union’s may help goods and services to continue a firm’s geographic exposures, a further substantial broader economic impact.” delegate certain tasks and functions back
trade agreement with the four South to move around a more fragmented globe – consequence of rising geopolitical tensions to established UK-based entities.
American countries of the Mercosur Group, assuming the economic nationalist agenda may be the need to expand into new Weighing their options
contrasting positions on other policy issues does not fracture prevailing standards, markets or make adjustments to supply As Harding suggests, rising hostility and When weighing up their options, report
(in this case, conservation of the Amazon protocols and frameworks. chains,” he says. uncertainty at the geopolitical level are co-author Dr Angela Gallo says banks need
rainforest) can threaten to undo multi-year having diverse impacts on banks and to recognise an underlying shift in the
negotiations. Long-term opportunities Schmand, chair of the International their corporate and institutional clients, political landscape, suggesting strategic
Natalie Blyth, global head of trade and Chambers of Commerce Banking reshaping organisational structures, agility will become increasingly important.
In April, the World Trade Organisation receivables management at HSBC, does not Commission, also points to the ICC’s coverage models, operating infrastructures “The traditional approach to increased
(WTO) predicted merchandise trade volume discount the short-term risks, but takes a blockchain-based pilot schemes and value propositions. political risk by banks and other large
growth would fall to 2.6% in 2019 from positive view on long-term opportunities. as demonstrating the potential for commercial entities has been to postpone
2018’s 3.0%. The WTO suggests a possible “We’re seeing a dematerialisation of technology to facilitate new business At present, Brexit is perhaps having the investment decisions until things become
rebound to 3.0% in 2020 – if trade tensions trade with a rapid growth of trade in data models and improve access to finance to biggest influence on banks’ organisational more certain. But now they must adapt
ease. “Trade cannot play its full role in and services, which we expect will make SMEs. Meanwhile, HSBC is implementing structures. Many UK and non-EU to a permanent state of uncertainty
driving growth when we see such high up 25% of total trade by 2030. Take a full automation of money laundering institutions are weighing their options up and relinquish expectations of a return
drone: the most valuable part is not the and sanction checks for trade finance if there is, post-Brexit, no agreement on
1 Jaw Jaw not War War – Prioritising WTO physical good, but the coding lines in the transactions and reducing processing times passporting rights that hitherto allowed 2 ‘Brexit and non-EU banks: Challenges and
Reform Options. The 24th Global Trade Alert flight module,” she says. “Innovations in via blockchain. “Over the last 16 months, them to access the entire EU single market Opportunities’, Centre for Banking Research,
Report (Global Trade Alert, 2019) e-commerce, digitisation and distributed we have proved that this technology can for financial services from a London-based Cass Business School (December 2018)
24 Sibos Issues 2019 Preview edition Sibos Issues 2019 Preview edition 25Any reversal of
globalisation will increase
the amount of work done in
pre-trade and operations. Download the
John O’Hara,
Sibos app to see
Taskize
the full conference
programme and
plan your agenda
for the week at
to political stability. We’re witnessing a Adjust and thrive A recent European Central Bank analysis3
transition from an era of globalisation to Cloud computing has done much to argues that the current tariff situation
the opposite, characterised by nationalism further the globalization of finance, but presents only “modest adverse risk”
and populism,” asserts Gallo, who will
present ‘Living in an Era of Political
the down side of cross-border data flows
(e.g. cybercrime, industrial espionage,
to economic growth, warning that the
“medium-term direct impact of an
Sibos!
Uncertainty: Implications for Banks’, part erosion of confidentiality, challenges escalation could be sizeable, compounded
of the SWIFT Institute programme at Sibos to cultural norms) is leading not only by heightened financial stress and a drop in
2019. to regulatory fragmentation, but the confidence”.
establishment of parallel, competing
Banks, financial institutions and corporates infrastructure frameworks, especially in Although the report advises against a
may all need to build greater flexibility non-western markets. O’Hara worries that retreat from openness, it also asserts
into their business models and operating bifurcation of global commerce is a real the root causes of protectionism must
structures, agrees John O’Hara, CEO of threat, but says financial service providers be acknowledged and addressed. “By
Taskize, a London-based workflow solutions can adjust and thrive. encouraging regulatory convergence,
specialist. multilateral cooperation helps to protect
“Any reversal of globalisation will people from the unwelcome consequences
“If we cannot assume in future the increase the amount of work done in pre- of openness, and therefore remains
homogeneity that we previously took for trade and operations, but increasingly crucial as a response to concerns about
granted, we may need to revert to more assisted by digital technology, this the fairness and equity of trade. The
federated models. The regional offices of may become a source of revenue,” distributional and social effects of greater
multinational firms which were unwound he suggests. “Processes to navigate economic integration should also be
during the 1990s may take on a new legislation, to pre-check and pre-establish addressed by targeted policies that achieve
lease of life,” he says, noting also the the parameters of deals before embarking fairer outcomes.” n
technology infrastructure burdens imposed on them can be automated if the rules
by diverse new data privacy and residency stabilise. While sanctions and tariffs
laws across jurisdictions. “Federated remain fluid, manual interventions will
systems are non-trivial, and firms should increasingly be required and technologies
be looking to favour services which will be needed which provide venues
are clearly designed to deal with such and channels for these matters to be 3 The economic implications of rising
partitioning. This need is also supported by addressed between businesses, banks and protectionism: a euro area and global
the regulators’ observation that global- their advisors.” perspective (ECB Economic Bulletin, Issue
scale cloud providers represent a new kind 3/2019)
of concentration risk, which needs to be
mitigated.”
26 Sibos Issues 2019 Preview edition Sibos Issues 2019 Preview edition 27N E X T G E N E R A T I O N
Geopolitics &
regulation: Adapting
to a new age of
uncertainty
Payments:
Delivering a digital
future
The new
A to Z
of banking
Generation Z’s digital natives will have different priorities
from their parents when buying financial services.
It is the prerogative of every new university face the prospect of £50,000
generation to think they are markedly in debt. This is having an impact on their
different from their predecessors. In the financial spending.”
case of Generation Z, they are unique
in being the first to have come of age Deferring consumption
in a truly digital world. This means they GlobalData’s 2019 Retail Banking and
expect information, products and services Payments Survey echoes these sentiments.
instantaneously and via a mobile phone, It shows that rapidly increasing educational
although human interaction is preferred costs, greater job insecurity, a scarcity
for advice. As a result, banks and other of well-paying jobs, and higher property
incumbent financial service providers are prices are leading Generation Z to be more
being forced to rethink their offering if they concerned with deferring consumption and
want to capture this cohort’s collective taking care of financial wellbeing instead of
imagination, loyalty and wallets. living in the moment. This suggests banks’
Gen Z customer acquisition strategies
Gen Z – born between the mid-1990s and should initially focus more on promoting
early 2000s – accounts for 32% of the savings tools, instead of enticing them with
global population, making them the largest credit card offers.
demographic in the world, according to
Chloe Combi, consultant and author of The findings are borne out by research
‘Generation Z: Their Voices, Their Lives’. which shows that one-fifth of US Gen Zers
“They have grown up in the world of have had a savings account since before
the internet and social media as well the age of 10, while a third of their UK
as in the shadow of the financial crisis counterparts had put away more than
and uncertainty,” she adds. “There is no £1,000. Forty per cent of Gen Zers believe
defined career path and those that go to saving is “fundamental” for their future
28 Sibos Issues 2019 Preview edition Sibos Issues 2019 Preview edition 29We are seeing Gen Z adopting a People are
cherry-picking approach versus moving larger
building a relationship with one sums of money
bank. in transit than
Hiral Patel,
Barclays
ever before.
Diane Reyes,
HSBC
and, according to recent Financial Conduct Stealing a march cards and the option to use Apple Pay especially in the mobile app space, to Diane Reyes, global head of liquidity and Anytime anywhere
Authority figures, they are the least likely Challenger banks are already stealing and Google Pay. Rather than handing over attract and retain not only Gen Z, but also cash management at HSBC, concurs. Reyes believes that in the future the omni-
working-age group to have debt of any a march. Unencumbered by legacy pocket money, parents will transfer it into their predecessors, who are increasingly “Mobile is the device of choice for Gen Z. channel approach that is prevalent in Asia
form, including overdrafts, credit cards, infrastructure, they have been able to quickly accounts and have the ability to monitor conducting business over their phones. Many are now entering the labour market will be applied throughout the UK, US and
and loans from family and friends. The vast launch products and features to keep pace the spending. “One of the problems is that it can still be and they are influencing companies in Europe. This allows a customer to access
majority check their bank balance every with new demands. Typically, the challengers’ a cumbersome, very manual experience a permanent manner which impacts their banking services, in real time, through
day, shunning physical branches and even service offerings share the common goals of Value delivery to deal with financial institutions,” says the capabilities that banks offer. We are any channel they choose, be it the physical
online banking in favour of mobile apps. providing affordable and transparent fees, This of course is not the death knell of the Julie Harris, head of global banking digital seeing a blending of home and work, with branch, an ATM, a call centre or online. This
easy to open bank accounts with access mainstream, but longer-established banks strategy at Bank of America Merrill Lynch. people moving larger sums of money in gives customers the freedom of choice
Although Gen Zers inhabit a virtual world from any part of the world and an enhanced have to step up the learning curve if they “Gen Z are no longer just our kids, they are transit than ever before, whether they to access their finances anywhere, at any
characterised by convenience and speed, customer experience, either via mobile or want to compete more effectively with now entering the workforce full-time. This are on holiday, going to the office or time, via any medium.
security and privacy are of paramount through multiple access points like social these innovative upstarts. They will need to population doesn’t need to adopt a digital working abroad. They want applications
importance. A report from Kantar Media media. As they mature and develop, these pay particular attention to segmentation, way of operating – they simply expect it. to be simple and fast, but secure. For this Patel believes that, given their high
shows they are more concerned about services are differentiating through premium customisation, attitudes and insights They want to do everything as cheaply, as reason, we have enabled biometric access expectations around technology, a ‘one
protecting their online personal data than subscription services, in-app ‘marketplaces’ in order to develop the right products, quickly and as securely as possible on their to mobile banking in 40 countries. We have size fits all’ strategy is unlikely to work
any other generation. In comparison with that offer products from third-party services and experiences. While security mobile phones. These expectations are taken lessons learnt in Asia, where mobile for Gen Z. Nor should incumbent banks
millennials, they are less likely to impart providers, budgeting and individualised and cost efficiency are significant, the true changing how banks are interacting with apps are very popular, and applied them to see challengers as their only rivals in a
information such as transaction history, financial planning advice and international appeal of digitsation is the value-add to the their customers and clients.” other markets.” continuous battle to retain customers. “We
mobile banking activity and geolocation expansion. customer. are seeing Gen Z adopting a cherry-picking
with their main financial institution, even approach versus building a relationship
in return for more tailored products and Challenger banks have been making their “When engaging with Generation Z, banks with one bank,” she says. “However, in
services, or personalised financial advice. In presence felt particularly strongly in the need to understand that it is no longer time I can also see bigtech firms disrupting
addition, they are more reluctant to disclose UK and Europe. The UK’s Monzo, launched about value proposition – where strategy the financial landscape as they develop
information with third parties, including four years ago, is among the fastest is the main factor – but more about value sophisticated products and services.”
account balances and spending history. growing, standing out for its bright pink delivery, which is obtained through a
debit cards and an app designed to easily focus on engagement and alignment,” For example, the Barclays report notes
Banks will have to work hard and
reconfigure their models, but they will
organise, track and save money. The firm
recently debuted Monzo Plus, which offers
says Jean-Philippe Richard-Charman, a
brand development director and MBA
New widely-publicised discussions last year
between Amazon, JP Morgan and Capital
expectations
be rewarded. Gen Z are expected to have additional services such as travel insurance student at Henley Business School, Reading One to create an Amazon-branded,
serious financial clout. “We believe this for a small monthly fee. University. “There needs to be a deeper mobile-friendly current account aimed at
coming of age is worth capitalising on focus on values, and the interactions younger and underbanked customers. If
now, with Generation Z in the US already
having US$200 billion in direct buying
In Europe, Germany’s N26 is one of the
most popular of the new breed and
between people, i.e. relationships.”
are changing successful it would allow Amazon to draw
in Gen Z early, and provide the online
how banks are
power and US$1 trillion in indirect spending recently opened its virtual doors in the UK. Not surprisingly, many conventional retailer with a greater understanding
power, as they command significantly more The company provides budgeting tools, banks are forging ties with fintechs and of their purchasing habits as spending
influence on household purchases than prior spending insights and easy payments as leveraging their technology. However, as power rises. A report by consultancy
generations,” says Hiral Patel, an analyst
at Barclays and co-author of ‘Generation Z:
part of its basic current account, but also
offers a Black premium account with free
Patel points out, it is two-way street, “One
of the biggest challenges for fintechs is
interacting with firm Bain estimates that this type of
service could garner over 70 million US
their customers.
Step aside Millennials’. “By 2020, Generation ATM withdrawals anywhere in the world scale and these partnerships enable them customer accounts within the next five
Z is expected to be the largest group of for frequent travellers. Meanwhile, France’s to expand their business models,” she adds. years, equalling the size of the country’s
consumers worldwide, making up 40% Pixpay, a fintech started by parents, is third-largest bank – Wells Fargo. In a Gen Z
of the market in the US, Europe and BRIC planning to give children aged 10-18 a Global players are also investing heavily Julie Harris, world, it seems market share – as well as
countries, and 10% in the rest of the world.” mobile bank account, contactless payment and developing their own digital offerings, Bank of America Merrill Lynch payments – can shift in real time. n
30 Sibos Issues 2019 Preview edition Sibos Issues 2019 Preview edition 31You can also read
