Day one of Sibos 2021 established the foundations of an event set to touch upon all the discussion points around Recharging Global Finance.</em></p> An attempt to establish a takeaway for an entire four-day digital conference from the first 24 hours is probably akin to assuming the outcome of a sporting result after just the end of the first quarter. But day one of Sibos 2021 was comprehensive in its coverage, diverse in its speakers and hit on all of its key objectives under the umbrella theme of Recharging Global Finance.</p> Day one has set the foundation: data is knowledge, and knowledge is power; technology and digital acceleration are the answers no matter the question; and the conversation around sustainability issues has evolved from ‘what we can do?’ to ‘here’s what we’re doing’. </p> Like the concluding part of a movie franchise, the themes of previous Sibos events seem to be maturing into use cases and the end of theories and questions. This, after the most challenging 18 months globally since the financial crisis, is a feat worthy of noting, as discussions on innovation have become discussions with innovators.</p> Innovation is at an all-time high in the financial services industry and there is a profound sense of excitement.”</p>Yawar Shah, Chairman, SWIFT Board</cite></blockquote> “Innovation is at an all-time high in the financial services industry and there is a profound sense of excitement,” said Yawar Shah, Chairman of the SWIFT Board at Monday’s Sibos opening plenary.</p> Backed by their own examples in SWIFT gpi, SWIFT Go and a vision for enabling instant and frictionless transactions, SWIFT’s chairman, along with CEO Javier Pérez-Tasso, had their own experiences to draw on when setting the scene for others to discuss giant leaps in innovation this year.</p> “We have been delivering at pace,” said Pérez-Tasso. “This time last year, I talked about our plans to move beyond our traditional high-value segments to enable fast and competitive SME and consumer payments over SWIFT.</p> Highlighting also how SWIFT’s focus had been broad – with a foot in the camps of payments, securities, and financial crime compliance – Shah describe its moves as putting “in place pillars for the future”.</p> Shah and Pérez-Tasso pointed how central to achieving its aim of enabling instant and frictionless transactions from account to account anywhere in the world is an enhanced platform, which will provide comprehensive transaction management services to orchestrate flows seamlessly.</p> “We are full speed ahead on our platform transformation. Next year, we introduce a major deliverable in our journey with our new API-driven transaction manager that lies at the heart of our vision. And once the transaction manager is in full force, when we promise instant, we will really deliver instant.”</p> Along with Shah and Pérez-Tasso’s openings, the opening keynote is a standout from each year. Sibos 2021 welcomed Noel Quinn, Group Chief Executive, HSBC, arguably the perfect global speaker given his experience, and the bank’s presence, across Asia, the US and Europe.</p> Key areas such as sustainability, flexible working and the digital evolution were covered, with Quinn open to stating HSBC would be keen to be on the journey of digital currencies – a question everyone has for the major global banking players.</p> On sustainability he added that the industry has to wake up to the fact that sustainability has to take a more prominent role going forward than in the past. Quinn emphasised the need “to be part of that change and lead that change”, especially given the bank’s global presence.</p> Meanwhile, his stance on flexible working was simple: Quinn trusted his team to work from home and they delivered, so it seems HSBC staff can count on a flexible working pattern going forward. Overall, Quinn touched on all the points a global banking CEO should, while demonstrating empathy, social awareness along with ambition.</p> One of our first sessions of the day featured Helen Wong, group CEO of OCBC Bank, who provided a wide-ranging account of what a bank can do for sustainability and climate change, down to the finest details. Acknowledging that to be carbon-neutral by 2050 we have to reduce our carbon emissions by 45% by 2030, Wong discussed how interactions with clients go hand-in-hand with assessing the whole supply chain, assessing real estate and even eliminating plastic water bottles in the office. Once again proving it can be the answer to everything, Wong also stated that while technology is typically associated with using energy as opposed to reducing it, it can also be used to improve efficiencies in buildings including air conditioning control. Recognising the role a bank plays in society, Wong touched upon digitalising the customer journey and how it has had a positive impact on the environment through less paper usage for transactions and by reducing the need to use transport to perform transactions in person. Wong drove home how the bank is also encouraging financial literacy; teaching children what money is so they can learn how to use it smartly, in a start to the digital event which touched on so many crucial aspects of finance. </p> The future economy will run on digital rails.” </p>Sopnendu Mohanty, Chief Fintech Officer, Monetary Authority of Singapore </cite></blockquote> Digital identity, balancing between convenience and trust</h4> “The future economy will run on digital rails,” explained Sopnendu Mohanty, Chief Fintech Officer, Monetary Authority of Singapore (MAS) in Digital Identity: Balancing between convenient and trust. He outlined why it matters in terms of electronic Know Your Customer (eKYC) digital on-boarding procedures, powering cross-border trade, payments and other transactions, as well as outlining the principles Singapore is using to embed digital ID into its national and economic infrastructures. </p> Examples include its SingPass, which lets users securely transact with over 60 government agencies online, and the way Singapore and Thailand’s domestic real-time payment (RTP) systems, and underpinning national identity systems, have this year been linked to power easy cross-border payments, initially helping migrant remittances just by using a mobile phone number. </p> Rod Boothby, Global Head of Identity at Banco Santander and a member of the Open ID Foundation in San Francisco, US, supported the centrality of ID as a means to power global trade, adding that: “We need to turn trust from a noun into a verb”, alluding to the need to make it more active and a state of being. </p> The panel agreed that underlying principles matter. These span digital credentials and identity proofing so you can link a person to their digital attribute. Schemes must also have principles that ensure a safe and secure environment and that only trusted partners or participants can join an ecosystem. You must be able to prove who you say you are; and they must be inclusive and involve consent. Elderly, young, digitally illiterate, poor, rich, migrant and indeed all classes of people must be able to join whatever schemes are set up. To make them effective and efficient you will also need underpinning standards and global interoperability to make them cross-border. </p> Looking to the future, MAS’ Mohanty said three clear overlapping trends were evident in financial services (FS) and all of them require ID. Embedded finance is advancing as open application programming interfaces (APIs) are used to integrate the front-end. Decentralised finance is evident by the accelerating use cases for blockchain-based technology in FS. Finally, green finance – including carbon certificates and trading – will only become more important as countries’ net zero targets near, and the Environmental, Social, and Governance (ESG) agenda advances. </p> “If you want decentralised finance to move the ownership of assets, green certificates and payments in future, for instance, then you will need a very clustered credentialled system of identification,” said Mohanty. On-boarding checks, good principles and secure technology will all be vital. </p> Hard-hitting facts</h4> The following session, “In catching the criminals … are we effective and at what cost?” highlighted how an estimated 25 million people are enslaved globally, human trafficking generates $150 billion annually and one in ten people in the US have been victims of a financial scam, but less than 1% of criminal proceeds are seized or frozen. Some hard-hitting, astonishing facts.</p> The profile of financial crime compliance has been significantly elevated within banks and most recognise the importance of complying with regulations governing the identification of the source of funds and the concept of beneficial ownership. Therefore, it is critical that banks share intelligence on criminal activity given the international nature of financial crimes and help to develop a collective strategy to fight them. Public/private partnerships, where banks, law enforcement agencies and government agencies are equal partners, also will be effective. </p> A greater diversity of thinking is being brought to bear in tackling financial crime, although “outdated thinking” concerning laws and regulations has not kept pace with technology. The ability for banks to experiment with AML and KYC solutions within a regulatory sandbox environment would help the industry to progress. At present there is no large-scale data sharing between banks and agencies, which criminals often exploit, using different identities across different organisations and countries. Financial crime compliance is a moral duty for banks and information, intelligence and best practices should be shared across all borders and between public and private sector bodies. The focus should shift to regulating the activity, not the entity involved. A clear understanding of the role each financial institution has in a regulated activity, along with their obligations is required. One session that touched upon data, technology – but without a sustainability or cultural angle – was on settlement fails, which have fallen increasingly under the microscope following market volatility and incoming regulations in the securities space.</p> Numbers behind the failures</h4> Why are they failing? Well, Steven Wager, Head of Direct Custody and Digital Asset Product Development at BNY Mellon, stated: “We did some research, and probably not a surprise, but over the course of 12 months in US and developed markets, 77% of our fails are down to locate issues; this means typically the brokers don’t have the inventory available – I don’t want to use the term short-selling – but typically they won’t have the shares available for them to settle, in equities, a locate issue, and that’s the primary driver.</p> “Secondarily, is really ‘trade is not known’; this could come down to allocation issues, flow issues. Lastly, only 2% of what are identified as factors for fails are down to incomplete SSIs; what that shows is that we as an industry have spent a lot of time on this and there’s been real tangible success.”</p> The panel highlighted the importance of using data sharing to form predictive analysis on why some trades settle to fail, in order to counter a potential wave of penalties coming under future regulation. Meanwhile, it was agreed that distributed ledger technology (DLT) will play a major role but the shift won’t happen overnight. Market infrastructures and custodians alike have an eye on the developments to ensure they won’t be disintermediated, but ultimately the benefits and tools based off the back of such technology will enhance efficiencies in the market and ultimately reduce fails and associated costs. </p> For an industry eyeing a settlement of cycle of T+1 and then – one day – T+0, the space is set to evolve drastically in the coming years, as market infrastructures and securities services providers look to support clients while also establishing their own roles in the systems of the future.</p> In a Spotlight on Transformative technology: Going deeper with data, Richard Brown, CTO of the R3 blockchain company, described how confidential computing is the future: “If there is one thing you should take away from this virtual Sibos to go and discuss further with your chief technology officer it’s that,” he said. “There is an opportunity now if you seize it before it becomes table stakes.” </p> Confidential computing will solve the problem of having no technological control over what third parties do with data, after you share it with them. This problem can theoretically be solved by software cryptographic techniques that are currently the subject of academic papers that use phrases like zero knowledge proofs and so forth, said Brown. But there are issues of expense, resiliency, skills and so forth that mean development time is needed. </p> Connected digitalisation is the new baseline. We can no longer operate as individual self-contained entities behind borders.”</p>Kahina Van Dyke, Global Head of Digital Channels & Data Analytics, Standard Chartered</cite></blockquote> Alongside him, Kahina Van Dyke, Global Head of Digital Channels & Data Analytics, Standard Chartered, described how data is the new oil (something echoed in the Innotribe opener as well). “The future of the financial services ecosystem will be digital and data-driven, but most importantly it will be interconnected,” she said, alluding perhaps to the way APIs will link front-ends and embed finance into customers everyday lives. “Connected digitalisation is the new baseline. We can no longer operate as individual self-contained entities behind borders [or silos].” </p> Future-ready transformation</h4> Another view from the top session, Sim Tshabalala, Group CEO, Standard Bank addressed the need for what he called 'future-ready transformation', while also touching on COVID-19 and the riots of July 2021 in South Africa which unsettled both local residents and international investors, Tshabalala noted that things had gone back to normal, and respect for the law had reasserted itself. The real issue, he said, is the need for structural reforms that address the causes of that social dislocation with attention to logistics and energy as the underpinnings of economic growth. </p> In the session ‘Payment ubiquity is no longer an option’ a panel discussed providing various payment options, using different devices and technologies, in order to serve different customer needs at the most appropriate contextual time is crucial for success. </p> Using data to identify the best time to offer credit or Buy Now Pay Later (BNPL) embedded options to consumers for instance is an obvious benefit, as is enriching payment data for multinational corporates that want to optimise flow or cut costs to prioritise cash management. These are all key considerations for the future of payments. There are also mobile money and wallets to consider, debit and credit cards, real-time 24x7 drivers, new payment rails offering synchronised clearing and settlement, and a trend towards digital assets and tokenisation that will power fractionalisation and perhaps micropayments in a future enlivened by the Internet of Things (IoT) where your fridge will order replacement food, triggering an automated payment. This will rely on partners and a good ecosystem powered by open APIs, AI, data mastery, cyber-security and orchestration. Central Bank Digital Currency (CBDC) and cryptocurrencies will also be an element. </p> You’re probably lagging behind the curve if you still believe your FI can be ‘Best-in-Class’ for everything.”</p>Nigel Dobson, Banking Services, ANZ</cite></blockquote> There isn’t currently a global international payment standard, excepting SWIFT. But that may change as CBDCs emerge and cross-border interoperability and connections increase using blockchain technology, ISO 20022-driven real-time payment (RTP) infrastructure cooperation deals proliferate, and so forth. The key thing for FIs is how to select what payment options to focus on? You need to look at your strengths, expertise, and use partners to cover any gaps, advised the Sibos 2021 opening day panellists. “You’re probably lagging behind the curve if you still believe your FI can be ‘Best-in-Class’ for everything,” said Nigel Dobson, Banking Services, ANZ. However, you can get coverage from partners and retain volumes and wallet share if you prioritise the experience. </p> If you’re a Sibos veteran, you’ll be familiar with the Innotribe opening speakers and their mind-blowing presentations. If it’s your first Sibos: don’t worry, we always come away with as many questions as answers too.</p> Trying to answer the question of ‘where does wealth come from anyway?’, Dr. Michio Kaku, began by looking at how physics are the greatest driver. Kaku went back 200 years to when physicists worked out the laws of thermodynamics, which created the vast fortunes of the oil barons, through to the current day molecular-level physics of biotechnology and nanotechnology. He then suggested the next “great wave” will be physics at the atomic level, which will enable fusion power, unlimited energy from sea water and quantum computing among other advances. Quantum computing could render Silicon Valley into a “rust belt” as the internet becomes the “brain net”, revolutionising communications as users mentally control the internet, hooked up to a vast world of expertise in which artificial intelligence crunches enormous amounts of data. Even now quantum computers are rivalling the most advanced digital computers in solving specific problems. Within 10-15 years, quantum computers will enter the marketplace and revolutionise society. Just as oil greased the wheels of capitalism in the past, data will generate fortunes in the future. </p> The advances in technology and telecommunications are changing the nature of capitalism itself, moving us towards “perfect capitalism” where the “middleman” is digitised and bottlenecks and chokepoints are eliminated. This is already happening, with companies such as Amazon, Airbnb and Uber generating vast amounts of wealth. Capitalism is moving from commodity capital – based on products of the hands – towards intellectual capital – products of the mind. By the 2050s, the brain will be digitised, opening a new era of telepathy and telekinesis as thoughts are transferred from person to person. Data is the new oil in financial services as artificial intelligence and quantum computing technologies will enable financial institutions to mine “mountains of meaningless data”, searching for the information that will enable them to generate wealth by cracking the stock market, or identifying inefficiencies in their operations.</p> Not to sound too clichéd, but day one was a real ‘the future is here’ kind of day. </p>