Sibos 2021 Resident blogger, Jame DiBiasio: The finance world’s trifecta of digital challenges

Fintech expert Jame DiBiasio, a true Sibos Insider, is a resident blogger for Sibos 2021, offering his unique take on this year’s event. This blog is part of a series released daily throughout Sibos week.

Climate change, revamping tech stacks, and digital identity are interrelated challenges for banking and payments. What kind of progress will we hear at Sibos?

Gatherings at Sibos provide a useful temperature check on the finance industry’s ever-changing priorities. I’ve outlined the three most significant – the trifecta of digital challenges for banks, payment processors, fintechs, and regulators.

The biggest test – the mega-biggie, the uber-giant – is climate change. It’s usually the sort of amorphous problem that gets tagged on at the end of lists. “Yes, yes, and we mustn’t forget climate change.” Time perhaps to put this first.

In the context of Sibos, climate is about two things. First: standards. I often hear people in the industry say, “We’d love to do more but, there’s no standard, see?” SWIFT and regulators can do something about that, and I’ll be listening for signs of progress.

Second: data. Banks are working to harness data around, say, payments and loans around a shipment of goods. Such efforts could extend to measuring the carbon impact. Who’s building these use cases?

The next monumental challenge is putting banks on new tech stacks. There are now many urgent reasons to retire legacy mainframe IT. A few off the top of my head:

Transitioning from LIBOR Enabling instant payments The securities world moving to T+1 Increasing cyber threats The allure of cryptocurrencies and tokenisation Personalisation of services through data insights

No more fixes. No more band-aids. Middleware patches is a non-strategy that will only increase complexity, and lead organisations down blind alleys. The old product-focused technology silos must finally end.

The starting point for such a transition is usually around cloud-based infrastructure. This positions banks around customer service rather than products, which can create its own problems. I’m based in Asia, where many governments have data sovereignty laws.

The merits of these rules are dubious, but they are politically powerful. Parts of the industry are already engaged with local regulators, but I sense this is fraught territory.

There are two ways to tackle this. One is through technology. Federated artificial intelligence (AI) and blockchain-related cryptography are both potential enablers of immobilising, screening, or protecting data. Certain jurisdictions could be excellent places to work with regulators on such projects, including several in Asia.

The other is through vision: try seeing the world through green-tinted glasses. What data must be shared to help corporations, banks, and investors fully meet their climate-related mandates? It might need a standard in place first to give names and qualities to whatever “green data” is being discussed.

This could be the thin end of a very thick wedge, one that transforms the industry to being something far more agile, resilient, and climate-aware.

I’d like to raise a third and final theme: identity. Banking and payments are grounded on the need to validate who’s paying whom. Identity is also at the heart of compliance, regulation, and supervision.

Fraud is a perennial problem, made far worse by cyberattacks. But anti-money laundering (AML) is a bigger problem in that it seems endemic, yet it’s something that the industry can address.

The budgets spent on AML and KYC are staggering, and the paperwork is prodigious. Yet as the latest Pandora Papers data release shows, money laundering, tax evasion and sweetheart deals for powerful companies are business as usual.

But the world is changing. Think of advances in AI, a new government deal forged by OECD on corporate tax minimums, and the possible tapering of the Federal Reserve’s cheap money. Politicians are responding to gross inequality, and technology is upending what is possible, for good or bad.

Banks can stay relevant by being trustworthy providers of digital identity solutions. Moreover, the sensitive needs around handling personal information gives yet another reason why banks need to transition to tech stacks that prioritise people, not products. Innovation in data handling and protection can also lead to new solutions around climate-related services.

The trifecta is there to be won – by those banks with the clearest strategy.