WRAP-UP EDITION

Sibos Issues I Sibos 2018 Sydney I 22-25 October

Expect the Catching up with A problem Meshing new Asia’s great unexpected the customer shared … with old leap forward

page 6 page 12 page 18 page 24 page 30 Sibos 2018 Sydney PUBLISHER’S LETTER in numbers Contents page

TOTAL PARTICIPANTS MALE 73% FEMALE 27% 7526 5494 2032 From Sydney to London

UK/NORDICS 26% 1248 16% 1931

Dear Sibos delegates

We hope you enjoyed attending Sibos 2018 as much as we enjoyed hosting it. The attendance and networking metrics speak for themselves: more than 7,500 delegates attended the conference and exhibition, sharing their contacts via their Sibos badges 100,000 times. Some things can’t be measured of course, such as the value of the AMERICAS unique insights gained by delegates from their individual Sibos experience. We can 13% only hope that the opportunities to understand industry trends and develop business 990 opportunities in Sydney will bear fruit in the months and years to come. The Sibos team always looks to learn from one year to the next to ensure we continue APAC to enhance the experience of delegates and exhibitors. Personally speaking, three 45% elements made Sibos in Sydney a special occasion: a great location, with the light- filled venue set in a spectacular and welcoming host city; a dynamic industry buzz, 3357 animated by exciting future opportunities driven by demographics and technology; and an insightful content programme, in which experts from across the industry and the wider business community shared their perspectives on multiple hot topics.

In truth, there was simply too much going on for any participant to experience all the different aspects of Sibos in just four days. For this reason, we have made it even easier to catch the sessions and presentations you might have missed in Sydney. As 600 293 166 144 well as the articles in this wrap-up edition of Sibos Issues (including video clips of Publisher: Chantal van Es, SWIFT featured sessions), delegates can relive many of the highlights of Sibos 2018 with Managing editor: Alan Rowan, SWIFT conference sessions and Sibos TV interviews available via the Sibos app and on Sibos Issues is written and produced by sibos.com. Making Markets on behalf of SWIFT

Advertising contact: All in all, Sibos 2019 has a lot to live up to! But if anywhere can follow Sydney, London Stephanie Gerniers, SWIFT can. We’re already working hard to ensure that Sibos 2019 will offer a valuable [email protected]; and memorable experience to everyone who wishes to take part in our continuing +32 2 655 4734 conversation on collaboration and innovation in the finance industry. London in Legal notice: SWIFT © 2018 autumn may offer less sunshine than Sydney in spring, but Sibos promises you a Reproduction is authorised with acknowledgement of source. All other warm welcome. rights reserved. SWIFT, the SWIFT 98140 57 130000 4000 logo, Sibos, Accord, SWIFTReady, and Best wishes SWIFTNet are registered trademarks Sibos smart badge kiss / Sibos TV interviews Total number of trees planted AUD given by live NPP payments to of SWIFT. Photographs feature SWIFT Chantal Van Es bump – digital contact exchanges charity by Australian delegates employees, customers and partners. Head of Sibos in the Sibos closing plenary

2 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 3 PUBLISHER’S LETTER OPENING PLENARY CROSS-BORDER PAYMENTS From Sydney Expect the Catching up with to London unexpected the customer

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CYBERSECURITY DOMESTIC PAYMENTS INNOVATION IN ASIA A problem Meshing new Asia’s great leap shared … with old forward

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4 Sibos Issues 2018 Wrap-up edition SGEN_1807124_SGSS_GTB_180x118_SIBOS_November.indd 1 12/09/2018 16:56 OPENING PLENARY Table of contents

Cross-border payments: Catching up with the customer Expect the unexpected

In a world of growing uncertainty, the of SWIFT’s traffic, as proof of the increasing Banks must ability to adapt at speed and scale will be agility of the wholesale payments sector. paramount, delegates were told in Sibos work together 2018’s Opening Plenary. All three speakers In both retail and wholesale banking, the emphasised the need for banks to have the key to growth and adaptability is the use to keep ahead tools, technologies and – above all – mindset of open platforms to support further to respond to new sources of competition, innovation, he suggested. In October of the pace of evolving trends in customer demand and 2018, SWIFT and a group of banks in changes in the regulatory landscape. the Asia-Pacific region successfully change. completed trials for a real-time cross- “It is not just the speed of change but also border payments service over SWIFT gpi the diversity of change – from technology through correspondent banks into domestic to product relevance to risk management payment systems. to the geo-political environment – that we must manage well,” said SWIFT chairman “As banks embed gpi into their digital SWIFT is moving fast, Yawar Shah, in his opening address. offerings, you can start thinking of the role gpi can play in e-commerce and in Fast-paced, far-reaching the fast-growing digital payments space,” engaging, and increasingly Leibbrandt observed. Taking up the theme of fast-paced and far-reaching change, SWIFT CEO Gottfried Enabling instant payments Leibbrandt pointed to the speed of new working with the coalition developments in the payments sector. In domestic payments, the use of open “Innovation is everywhere. Especially in platforms to support innovative solutions payments – especially in Asia,” he said. “We is already firmly established. Australia’s of the willing. have never seen such levels of investment New Payments Platform (NPP) went live in new financial technology, especially in in February 2018, enabling consumers to Yawar Shah, SWIFT payments, nor such speed in development make real-time payments using just an and change as we have over the last couple email address or mobile phone number. of years.” NPP is a key component of SWIFT’s global Noting the rapid growth to market instant payments strategy – a strategy that dominance of Tencent’s WeChat and also includes the provision of an instant #Plenary Alibaba’s AliPay in the Chinese retail payments messaging service for the euro #Payments payments market, Leibbrandt cited area. Launching in late November 2018, Sibos 2018: #Fintech SWIFT gpi’s three-year journey from to coincide with the launch of TARGET Opening Plenary #Digitisation concept to today, where it is carrying a third Instant Payment Settlement (TIPS) service,

6 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 7 We are investing heavily to allow access to all our services through APIs.

Gottfried Leibbrandt, SWIFT

SWIFT’s new messaging service will enable Leibbrandt. “We are using our expertise to their banking partnerships with smaller instant payments across Europe. standardise API calls between banks, and institutions, SWIFT customers are due to we are running proofs of concept to carry submit their re-attestations by the end Even as instant payment systems are interbank API calls over our infrastructure.” of the year. Failure to self-attest their being implemented around the world the compliance with CSP’s mandatory security underlying technologies are being refined Duty of care controls will result in customers being and augmented to deliver new features and reported to their regulators. functionality, with minimal disruption to Shah also emphasised the potential of service providers and their end-clients. “All APIs to enable innovation, customisation “Many global transaction banks are these initiatives use new SWIFT technology. and collaboration, and to facilitate data already looking at your self-attestations,” NPP is built on a peer-to-peer architecture exchange and system interoperability. Shah warned. “But early next year they with all the intelligence at the edge. Our But he also reminded delegates of their will begin incorporating them into their European solution goes a step further and collective responsibilities in relation to the risk management processes and start to delivers an intelligent edge using container careful management and protection of data decide whether and how they will continue technology from Docker. That means we – often derived and collected from clients to do business with you in the context of and our customers can easily add new – even as they look to enable greater data cyber-risk.” functionality to the edge, instead of waiting access, integration and analysis. for the next upgrade or software release. Raising the bar It is like downloading an app on a smart “SWIFT has tremendous data and phone,” Leibbrandt explained. information. Leveraging it for your Shah outlined how new SWIFT services are business purposes in a collective way with helping banks to keep ahead of cybersecurity To respond quickly and positively to confidentiality and integrity is an important threats, through new transaction monitoring changing customer demand, service job – and one that SWIFT takes seriously,” services such as Daily Validation Reports providers, including SWIFT, are rapidly he said. and Payment Controls, emphasising the exploring and expanding the capabilities need for banks to continually upgrade their of digital technologies. But they need to Cybersecurity is of course a critical capabilities. “The bar on the CSP mandatory do so in a way that does not add excessive element of effective and responsible controls will continue to rise as this threat cost and complexity for end-users data management for financial service evolves,” he observed. whilst also allowing for interoperability providers. Shah pointed out that strength and competition. SWIFT gpi is a great of information security arrangements But cybersecurity is far from the only example of how to build on secure, is an increasingly important factor in area in which banks must remain alert to tested infrastructure, argued Leibbrandt, determining commercial success. “Those change. In concert with his fellow speakers, while incorporating and leveraging new firms that are able to work with their Shah underlined the need for banks – and technologies such as APIs to improve the customers to protect, detect and recover SWIFT itself – to evolve their strategies and customer experience. Banks can easily will be competitively advantaged in the capabilities on an ongoing basis. “SWIFT move to gpi, embed it in their customer future,” he said. is moving fast, engaging, and increasingly applications, and consult the tracking working with the coalition of the willing: database through an API, he explained. While banks are beginning to factor banks that want to innovate and partner cybersecurity attestations under the with SWIFT as their fintech,” he said. “In “We are investing heavily to allow access Customer Security Programme (CSP) this dynamic environment, seizing the to all our services through APIs,” said into their due diligence when reviewing opportunity with speed is important.” n

8 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 9 Exposing ourselves to different ways of thinking and different skills makes us stronger.

Shayne Elliott, ANZ Bank

In conversation with Sibos TV’s Juliette “Customers want a better user experience both for us and fintech providers. It’s an made that model less efficient for many Foster, ANZ Bank CEO Shayne Elliott and increasingly engage with us using exciting first step,” he said. banks. As we move to the open banking The future of sketched out a future of banking in which technology. But all the research shows era, the cost of digital opportunity has Banks must be agile, human qualities could become more, that customers still want to talk to “Australia is among the early adopters, reduced dramatically; it has begun to rather than less, important. Further, he someone when they’re doing something joining a club of around 40 countries. Part throw the universal model into doubt. At move at pace, and banking will suggested that more banks could of real importance to them, like buying a of the next stage is how we join these ANZ, we think that the only way to win in switch focus to fewer areas of excellence home, saving for retirement or starting systems together and make it a global the future is to do fewer things, and do respond to changing and expertise, shifting away from a business. That’s a fundamental human capability. In Australia, we’ve also got a lot them really well.” have a human the once-dominant universal banking need and I don’t think it’ll ever disappear,” to learn from observing how this has been customer needs. model. he asserted. adopted elsewhere and the innovation it In future, more banks will choose either has seeded in other economies.” vertically or horizontally integrated models, Shayne Elliott, ANZ Bank face Whilst acknowledging the growing Nevertheless, understanding and deploying suggested Elliott, increasingly partnering importance of technology in delivering technology effectively is also important. Elliott characterised NPP as one of two key in areas where they feel it is inefficient to services to clients, Elliott said cultural “Even if you have the most brilliant ideas ingredients shaping the future of payments develop internal expertise. “Banks will look mindset, and an honest assessment of attributes would become an increasingly in the world, you still need to be able in Australia, alongside open banking, which less alike than we’ve been used to over the strengths and weaknesses. critical factor in the future success of the to implement them. Do you have the is already exposing banking services to past 20-30 years.” industry and individual institutions. “The technology to move at pace and respond to greater competition from non-traditional Ultimately, banks will require a “blend” of only way to be better is to have a culture the changing environment? That requires sources, and offering users access and Mindset shift human skills and technology capabilities that enables us to constantly adapt to a different architecture both in a technical ownership of their data. “When these two to succeed at a time of uncertainty and customer needs.” sense and in how you run the company,” come together, we’ll see an explosion of Banks have already proven themselves opportunity, Elliott suggested. “The people said Elliott. new business models, revenue streams and able to partner in the back office, said who survive in a disrupted world are those Human needs, technological means customer experiences.” Elliott, but now need to collaborate to that can adapt at scale and speed,” he said. Elliott referenced the SWIFT-designed deliver a superior customer experience, “Large organisations are difficult to change, According to Elliott, the ideal bank and built New Payments Platform (NPP) Further, Elliott suggested that NPP and bundling services together that might not in terms of culture, strategy and direction. To culture of the future would incorporate – Australia’s recently-launched instant open banking could provide the catalyst necessarily all be manufactured in-house. survive, banks must be agile, move at pace, a growth mindset, a willingness to payments infrastructure – as an example for a new type of banking model. “In the “We’ve chosen that path at ANZ and are and respond to changing customer needs. learn and experiment, an ability to of how new technology can encourage past, the universal banking model was looking to partner with people who are listen to customers, and an approach to further collaboration and innovation. “More very attractive, with banks essentially really good at what they do. Exposing “We’re not in a position to say what the partnership that can adapt experiences important than the real-time payments looking to broaden customer relationships ourselves to different ways of thinking future looks like; we’ve just got to be ready. from other industries to banking. “All of are the data capabilities that come with it. by adding more services,” he explained. and different skills makes us stronger,” he The only way to be ready is to have people these things are human, they’re not done As banks, we haven’t fully explored all the “Over time, we’ve found that the cost and said, acknowledging that this approach who are capable of learning, adapting

by robots,” he observed. doors that this technology will open up, complexity of doing lots of things well has required banks to undertake a shift of quickly, and are open to new ideas.” n

10 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 11 CROSS-BORDER PAYMENTS Opening plenary: Expect the unexpected Banks can offer new Cybersecurity: A problem shared … services by being better information providers. Catching up with Philippe Henry, HSBC the customer

Few sectors of the finance industry are The new business models of the digital Despite recent undergoing more profound or rapid age are also driving change at the retail change than international payments. level, observed Jennifer Boussuge, innovations, a Demand for cross-border retail payments treasury fulfillment, service and operations is soaring, driven by demographic shifts, executive at Bank of America Merrill Lynch. more transparent, facilitated by super-apps and wallets. The “The gig economy, the sharing economy wholesale payments sector is reinventing is generating huge volumes of small-value inclusive and reliable itself in response to heightened customer payments, which require the development expectations, risks and costs, warding off of cost-effective cross-border, cross- ecosystem is still a the threat of disintermediation. Technology- currency options,” she said, citing forecasts based innovation is critical to survival as by Accenture that the value of cross-border work in progress. distinctions between low- and high-value payment volumes will rise by 5.6% per channels fade. But other skills and assets annum up to 2022. will also be needed to keep up with demand and ahead of the competition. Sibos 2018’s To provide these options, neither banks nor payments sessions indicate the pace of their fintech competitors are attempting to change will not relax for some time. fly solo, instead partnering to meet specific customer needs with a tailored mix of In Monday’s big issue debate, ‘Re- capabilities. engineering international payments for a fast, digital age’, panellists highlighted China’s Ant Financial, for example, the importance of customer focus, partners with local banks in nine collaboration in service development countries to provide digital wallet and and delivery, and the potential for data other smartphone-based services that analytics to enhance customer experience. bring payments and micro-credit to the previously unbanked. “We work with local Philippe Henry, global head of partners to deliver wallets, but we work corporate, financial and multinationals with banks on many other fronts. It’s a banking at HSBC, said banks must collaborative relationship,” explained Clara reimagine payments as a service, not Shi, head of financial institution strategic a product. “Clients are facing up to the partnerships in Ant Financial’s international consequences of the fourth industrial business group. The firm develops revolution. They are revisiting how they partnerships with merchants across Asia Sibos 2018: work with customers and suppliers. If we in order to supply payment services to Re-engineering #BigIssueDebate understand these changes, we can offer Chinese consumers abroad, she added. international #Payments more tailor-made services. Payments is a payments for a fast, #CorporateTreasuryAndTrade part of that challenge, if not necessarily In response to the burgeoning market for digital age #GPI at the centre,” he said. low-value cross-border payments, Western

12 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 13 Intelligent Many automation treasurers will empower struggle to clients. achieve daily

Jennifer Boussuge, Bank of America Merrill Lynch visibility.

George Zinn, Microsoft

Union has invested heavily in digital access to payment-related information, Virtual reality? status. This approach solves some Swedish subsidiary to an Australian parent George Zinn, corporate vice president transformation over the past decade. Henry also noted the security implications operational efficiency problems, but we could take up to seven days. Dan Birdseye, and treasurer at Microsoft, said this kind According to Molly Shea, global manager of open banking. “When banks offer open The twin need to reduce costs and can also overlay third-party solutions group treasury manager at Cochlear, of service could help address a common for global money transfer, Asia Pacific at access to our systems, via mobile apps increase service levels to corporate to address other pain points around said the firm had started to take a highly fraud tactic whereby a supplier is sent an Western Union, the firm is reaping the etc, we have to have appropriate security and institutional customers is leading sanction screening and account validation conservative approach to month-end email claiming to confirm new payment rewards with 40% annual growth in digital features too, including biometrics,” he correspondent banks to rethink the in a more comprehensive way than at reconciliation. “Visibility and speed is what instructions. “Many treasurers struggle revenues, as mobile and wallet payment observed. mechanisms underpinning cross-border present,” explained Ashish Sharma, chief we’re after. I will only rely on what I can to achieve daily visibility. If you reconcile volumes multiply. payments. The linear nature of the operating officer for global payment see in my account, rather than including at month-end, it can be hard to identify a BAML’s Boussuge said corporate customers correspondent banking transaction chain services in the financial institutions group expected in-bound payments,” said fraudulent payment that took place earlier

“Customer expectations are very advanced. were already beginning to benefit from new has led to increased duplication and at Wells Fargo. Birdseye. “We don’t need payments sent in in the month,” he noted. n As service providers, we have to keep initiatives in cross-border payments – such inefficiency in recent years, with KYC and a matter of seconds: same-day value would catching up,” admitted Shea. “The future as the greater speed and transparency other compliance checks being applied Niall Cameron, global head of corporate be good.” will be about collaboration and partnership. being delivered via SWIFT gpi – but insisted multiple times. Although SWIFT gpi now and institutional digital, HSBC, added that Fintechs are good at the customer more innovation was needed, citing the use sheds greater light on a payment’s status, a virtual ledger could help correspondent In this context, panellists welcomed the experience, but more established providers of real-time data sets to develop self-service helping to identify bottlenecks and thus banks to meet their compliance obligations greater transparency on cross-border really understand customer needs when models. An increasing number of banks increase speeds, could a more radical shift in the era of instant payments. “When payments offered by SWIFT gpi, noting that moving cross-border payments securely are already using AI to support customer also eliminate duplicated effort and cost? payments become instant, our approach to gpi tracking for multi-banked corporates and efficiently.” service teams, for example, to reply to screening and compliance has to change, went live in October. In a subsequent simple client queries or refer complex ones Some have proposed solutions that in concert with regulators,” he said. “With session, centred on the potential benefits In the corporate market, emerging on to staff. Boussage suggested technology leverage distributed ledger technology. But this model, all messages could go up to the of open banking to corporates, Mark business models not only require upgraded would help to offer greater flexibility to in ‘Cross-border payments over a virtual cloud layer where the sanction screening McNulty, global head of clearing and FI cross-border payment services but new clients and efficiency to providers. centralised ledger – future or utopia?’, process is executed at a higher standard, payments at Citi, said the combination information services. “Clients are more panellists considered the merits of a cloud- with more information.” of open banking and instant payments demanding today due to the pressure they “Intelligent automation will empower based service layer across correspondent could yield new collection opportunities face to revisit their business models. We clients to access services where, when and banking networks. In this model, banks “Visibility and speed” for firms switching to direct-to-consumer now have solutions that utilise and share how they want,” she said. and other service providers would use sales models in the digital age, especially information across the ecosystem – partly APIs to provide and/or access services via Two further sessions – both focused on in Asian markets where card penetration driven by (EU Directive) PSD2 and the Ant Financial’s Chi agreed that new use a central cloud utility, not only tracking the needs of corporates – suggested is less comprehensive. “You can request new service providers it brings in. Banks cases and customer experiences would transaction status, but applying KYC transparency is one of several cross- a payment through open banking, then can offer new services by being better continue to emerge. “The journey is just at checks or other services. border payments needs not being met get the payment by immediate return in information providers,” said HSBC’s Henry. the beginning,” she said. “We’ve completed satisfactorily. a country that has implemented instant 100 metres of a 10,000-metre run. We need “Instead of messages flowing back and payments,” he said, adding that Citi is Acknowledging the role of APIs in contributions from all parties to build a forth between institutions for cross- In ‘Service matters – how can banks better working with various bodies to define a facilitating the development of new more transparent, inclusive and reliable border payments, banks could call into the serve corporates on the seller side?’, new API standard that enables payment value-added payment services and greater financial ecosystem.” cloud via API to determine transaction delegates heard how a payment from a requests and micro-credit.

14 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 15 Can technology release trade from legacy technology and governance?

Cross-border payment volumes might be system that is keeping us anchored in On the same morning, an optimistic view of ecosystem for the benefit of all, added surging, but the outlook for trade finance yesterday’s capabilities?” he added. the global trading environment was offered Khanna, citing China’s One Belt, One Road transactions – and the commercial flows by Parag Khanna, a renowned author and initiative, which is creating much-needed they support – is clouded by geo-political The multilateral institutions of trade’s advisor on international relations. In his physical trading infrastructure across Asia tensions. Introducing ‘Trade wars and established governance framework had breakfast keynote, Khanna argued that and into Europe. From energy to finance technology – A new era for trade finance’, failed to resolve bilateral disagreements, accelerating investment in cross-border to the internet, the connectivity between Coriolis Technologies CEO Rebecca Harding panellists agreed. Further, the US dollar’s infrastructure and connectivity – digital domestic capabilities through globalisation said US-China disagreements were just the role as dominant settlement currency and physical – would ensure governmental bolstered overall system resilience, he said. most prominent example of trade becoming brought global trade within oversight of a disagreements did not lead to open conflict “weaponised”. jurisdiction with increasingly unpredictable or outright isolation. “The more the world “Being big doesn’t make you important, trade policies. becomes an integrated marketplace, the being connected makes you important,” Panellists noted the challenges of financing more we compete over supply chains,” he he concluded. “All countries are realising global supply chains in an uncertain Could the World Trade Organisation and the observed. that connectivity is how you enhance your

political climate. Rajkiran Rai, CEO, Union US$ be replaced by a new trade paradigm, influence.”n Bank of India, said the 180-day trade cycle based on the blockchain and a country- Rather than a war, Khanna characterised left banks highly susceptible to interest neutral crypto-currency? Daniel Schmand, current struggles as a tug-of-war in which rate and currency movements. “Banks global head of trade finance at Deutsche nations compete for influence over the are exposed to huge risks, due to a lack of Bank and chairman of the International binds that connect their economies. confidence in the system,” he said. Chamber of Commerce’s (ICC) banking Further, he explained that the rise of China commission, said it was possible to make had been achieved by a well-established But they welcomed the potential for trade governance more independent from template that was increasingly being smarter use of data to increase credit geo-politics. The ICC is already exploring pursued by other countries in Asia and risk appetite, by enhancing visibility the potential of technology to reform world beyond. This approach relies on the across counterparties and intermediaries. trade, but Schmand acknowledged the development of an increasing number and In particular, this could accelerate need for support from other bodies to raise The more the world complexity of interactions with trading If we can change the international expansion by SMEs. the subject at a G-20 summit. counterparties to bring an economy and its becomes an integrated workers up the value chain. way we share data, we “If we can change the way we share data, “First, we need to create an ecosystem and permission others to see that data, we in which technology is able to come to marketplace, the more “The import-displacement industrial policy can begin to change can begin to change where the risk sits,” its full fruition, perhaps starting with a is how America became a super-power in said Jason Kelley, general manager at IBM closed loop, and then branch out. It may be we compete over supply the 19th century. China is no different and where the risk sits. Blockchain Services. Not only can innovation possible also to agree on a new currency now India is doing it too,” he observed. improve credit access, it has significant and settlement system outside of the chain. Jason Kelley, governance implications. “The system is traditional currencies. But we need to start Whilst these policies are pursued for self- IBM Blockchain Services the challenge. How do we get beyond the with baby steps,” he said. Parag Khanna interest, they also strengthen the broader Sibos 2018: Breakfast Keynote - 23 Oct 2018

16 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 17 CYBERSECURITY Cross-border payments: Catching up with the customer The worst case scenario Domestic payments: Meshing new with old is when cybercriminals attempt several attacks simultaneously.

Dmitry Samartsev, BI.ZONE

Financial institutions and market their money, they can cause just as much From large-scale infrastructures are more vulnerable to a duress to the system as a major network 9/11-style, black swan cybersecurity event outage for example,” she said. threats to the entire than other critical infrastructures on which society relies, such as telcos or even power The biggest threat of a black swan A problem industry to the cybersecurity event in the financial service grids. Sibos 2018’s big issue debate on cybersecurity grappled with how global industry comes not from state-sponsored response tactics of market operators and participants should cyberwarfare, terrorists or hackers, but collaborate, innovate and work to improve rather from organised criminals, via the smaller firms, greater resilience against cybersecurity threats. dark web, said Dmitry Samartsev, chief executive officer of BI.ZONE, a Russian shared … coordination can cybersecurity firm. Organised cybercrime Jacqueline McNamara, head of cybersecurity at Australian telecommunications giant is increasing every year, he asserted, and reduce cybersecurity Telstra, explained how her firm runs scenario is absorbing more resources to develop testing in order to plan and test responses tools that leverage artificial intelligence risks. to attacks on network resilience or network for use in more sophisticated attacks. outages. She said the company’s Network Samartsev also noted that cybercriminals 2020 plan focuses on resilience, pointing out will collaborate in ways that institutions that the imminent arrival of fifth generation and governments do not. mobile phone networks would reduce vulnerability of systems hitherto dependent “The worst case scenario is when on a single cable or physical installation. cybercriminals attempt several attacks Noting the efforts made by Australia to simultaneously,” he said. “For example implement collaborative frameworks they’re making DDOS attacks and then between business and government to at the same time they’re making huge protect critical infrastructure against informational attacks on social networks security threats, McNamara said that a – spreading fake news claiming that the cyber-attack impacting financial service biggest banks are going down. Can you infrastructures could be as big a challenge imagine the domino effect it will have? This to a country as an attack on its will lead to troubles with liquidity, troubles #BigIssueDebate telecommunications network. with central banks or troubles with the Sibos 2018: #Cyber government. Cybercrime has no borders Is a ‘cyber 9/11’ event #MarketInfrastructures “When you have significant impact to and there must be cooperation between inevitable? #Culture financial systems, or people can’t get to countries and companies.”

18 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 19 Significant barriers are associated with sharing material, from the point of view of customer relationship management.

David Pegley, Australian Financial Crimes Exchange

Business risk its efforts to collaborate. However, speakers to attacks that can spread throughout the campaigns. Not only are you securing acknowledged that there are real barriers supply chain. your organisation, but you’re also By treating cybersecurity threats to sharing information across institutions, securing your home life.” as a business risk, rather than an IT such as privacy regulations and the Kathryn Taylor, a researcher with the Cyber consideration, organisations are better protection of customer data. Policy Initiative at the Carnegie Endowment Incident response training is also a key part able to manage the potential repercussions for International Peace, presented research of any organisation’s cybersecurity strategy, throughout the organisation, Sibos “Significant barriers are associated with commissioned by the SWIFT Institute in a due to the importance of managing the delegates were told in the SWIFT sharing material, from the point of view session entitled ‘Protecting the ‘long-tail’ of aftermath of an attack to its impact and Compliance Institute session titled ‘Cyber – How of customer relationship management smaller organisations from cyber attacks’, recovery, said Chris Hockings, CTO for IBM you can mitigate the business risk?’ Dr and ensuring there is appropriate focus in which she noted that governments Security in Australia and New Zealand, in Maria Milosavljevic, government chief on privacy,” said David Pegley, managing are attempting to build resources and the same panel discussion. To help clients information security officer for the director, Australian Financial Crimes processes for smaller firms. In one improve incident response, IBM has built is necessary, Australian state of New South Wales, Exchange, a non-profit, cross-industry example, Taylor cited the UK’s National a truck, the interior of which serves as a suggested that while the understandable organisation. “The challenges within each Cyber Security Centre, which has issued simulation room in which executive teams initial organisational response to cyber institution lie in their legal and compliance a guide for smaller businesses outlining and CISOs test their response plans to a practice is risk is to focus on putting controls on requirements – the interpretation of governance and operational approaches to cyberattack, Hockings explained. technology access, a more holistic view the law between different jurisdictions managing cyber risks. would seek to put in place mitigation is important in considering sharing of “When we started, we thought people strategies as well. material. We do our best to deal with this Incident response would be doing exercises on computers, essential. within constituencies, primarily through but in reality they needed to realise how Chris Hockings, “What else increases your likelihood of standardising exactly what we share, Managing how staff responds to risks, in would they coordinate during an incident,” IBM Security something going wrong?” she asked. “Poor how we share and, more importantly, the addition to managing technology controls, Hockings said. “Panic can set in. You contact management arrangements, not behaviours recipients of that information is an area that organisations, large or [must] work out who your leaders are being able to hold people to account when will adopt.” small, can address, said Andrew Pade, chief when you immerse them into an unfamiliar things go wrong, buying from the wrong information security officer (CISO) at the circumstance: ‘Your response plan is not suppliers, not knowing where your critical Experts emphasised the need for greater Reserve Bank of Australia, noting that the there. Your systems are offline. What are assets are.” collaboration on a number of fronts: at a majority of cybersecurity breaches occur you going to do?’ You don’t know until you pre-competitive level between financial due to staff action, such as clicking on a test it. Compliance is necessary, practice is A persistent message across all the institutions themselves; between institutions link in a phishing attack. essential.” cybersecurity sessions at Sibos 2018 was and government and regulators; and across that organised cybercrime is already supply chains. This can take up significant “The technologists love to buy This level of immersive training may not collaborating and sharing information, resource for global organisations, but there technology, because it solves problems,” be available to smaller organisations, and thus has a potential significant are also complex issues facing smaller and Pade said. “[But] if you’re in a small acknowledged Hockings, but the principle knowledge advantage over financial medium sized institutions, which can be organisation, you can educate your staff of running simulations and testing plans is

Sibos 2018 highlights: Cybersecurity institutions if the sector does not step up less prepared and thus more vulnerable on how to identify the typical phishing still possible. n

20 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 21 In the time of Sigmund Freud, solving an In terms of the legal and regulatory said. “We’ve seen a lot of startups trying “The JCSC initiative is looking at this identity crisis necessitated a therapist and framework, Bayle noted the efforts of EU to solve the identity issue with blockchain. from an economy-wide perspective. I think Solving the a couch. But in the 21st century, an identity member state governments to coordinate But it’s going to be very difficult for one it’s really important that governments crisis has different implications – and on the introduction of electronic identities, organisation to own the solution. It needs facilitate that kind of conversation. The demands a different response – compared adding that legislation such as Europe’s to be a consortium. The government concept of safe harbour is very important identity crisis with an existential loss of self. Identity recent Payment Services Directive (PSD2) obviously has a significant role to play, and here too,” she added. n theft is a growing aim of cybersecurity is already playing a role in protecting the banks.” attacks, requiring banks to invest and plan customers and payment service providers. accordingly. As with broader cybersecurity threats, “PSD2 helps to increase interaction panellists suggested that coordination In a session entitled ‘How do we solve between actors in a digital payments between organisations can increase the the identity crisis in a digital world?’, world,” Bayle de Jessé said. “This also ability of institutions and individuals to representatives from banking, payments, creates the necessity to strengthen respond in the event of identity theft. A market supervision and the legal world standards to make sure people are well recent Australian industry-wide review, considered the risks and possible solutions identified when they initiate payments or cited by Victoria Richardson, chief strategy to identity theft. circulate information about their accounts. officer at the Australian Payments There are already a range of authentication Network, highlighted the need for real- The stakes are high and the probability is techniques available; fintech can bring time sharing of actionable information, rising. Michael Bui, head of identity and more and we are open to that. As a central consistent incident response management The good guys have access management at Commonwealth Bank bank, we support innovation and believe and awareness generation. of Australia, noted that a person has a one that is good for the development of our to exert caution in 15 chance of having their identity stolen or economy.” “The good guys have to exert caution being a victim of a data breach each year. around who they share information with, around who they share In terms of innovative solutions, Nick I think we’ll become and the bad guys don’t,” Richardson said. “We are in a world where the opportunity Abrahams, global head of technology and “They share the information with everyone.” information with, and of identity theft is quite high,” admitted innovation at Norton Rose Fulbright, called much more comfortable To address this issue, the Australian federal Marc Bayle de Jessé, director general for facial recognition technology a “game government is leading an initiative to the bad guys don’t. market infrastructure and payments at the changer” to protect identity. with biometrics. support cross-industry collaboration and European Central Bank, noting also the secure information sharing through the Victoria Richardson, cross-sectoral nature of the threat as more “I think we’ll become much more Nick Abrahams, establishment of a network of Joint Cyber Australian Payments Network of our daily lives become digitised. comfortable with biometrics,” Abrahams Norton Rose Fulbright Security Centres (JCSC).

22 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 23 DOMESTIC PAYMENTS Cybersecurity: A problem shared …

Innovation in Asia: Asia’s great leap forward

Meshing new with old

As new technologies offer greater choice and convenience, the payment mechanisms of the past must also be accommodated.

To many, making a payment by cheque “As new technologies are introduced, the might seem as old-fashioned as travelling old ones don’t go away. The challenge on a steam engine or listening to a vinyl for everybody is: how do you build record. But one of the surprises of Sibos technology for diversification of payments 2018’s big issue debate on disruption in or systems; and how can you handle the domestic payments landscape was the legacy along with new products? We have revelation that personal cheques are still to start from what the customers want, widely used. In fact, 25% of respondents because they are demanding payment to an audience poll had written a cheque systems that are efficient, seamless within the past six months. and instant,” said Ulku Rowe, technical director of financial services at Google While the domestic payments industry Cloud. is gradually being reshaped by new technologies, from application In a debate that challenged payments programming interfaces (APIs) to professionals to think and work more distributed ledger technology, the poll disruptively, while respecting and #BigIssueDebate reminded panellists and delegates of the maintaining the payment mechanisms Sibos 2018: #Payments need to accommodate legacy payment on which customers still rely, panellists Disruption in the #MarketInfrastructures mechanisms when implementing fresh acknowledged that the pace of change has payments landscape #Cryptocurrencies innovations. not always been rapid.

24 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 25 Customers There is are demanding tremendous payment opportunity for systems that both incumbent are efficient, banks and non- seamless and traditional instant. players.

Ulku Rowe, Leila Fourie, Google Cloud Australian Payments Network

As the digital revolution took shape, – so the pricing and value that is attributed technology giants such as Apple and explained, speaking during a SWIFT quickly spreading from IT and consumer to payments might be fundamentally Amazon, which have thrived by developing Institute panel discussion. electronics to many other retail-facing different to the traditional banking model.” platforms that give third-party providers sectors, most banks were dealing with the access to a global customer base, while Optimising data aftermath of the financial crisis, which put Asked in a second audience poll to rate the also giving customers easy, standardised them on the back foot in embracing new most important feature of any changes to a and cost-effective access to a wide range For banks seeking to remain relevant in technologies. payment system, 46% of respondents cited of services. this fast-changing payments environment, ease of use, while security and regulation one of the core challenges is to extract “It took banks slightly longer to put a came in second with 30%, followed by The NPP was built on a similar premise with value from data in a similar way to their strategic focus on innovation, but we are stability and speed. a basic infrastructure, a fast settlement more nimble non-bank competitors. Just catching up and technology offers huge service provided by the Reserve Bank of as banks may have been slow off the mark opportunities,” said Michael Spiegel, global Australia has become something of a Australia that allows every payment to be in embracing technological innovation in head of cash management at Deutsche poster child for payments innovation, settled in real time, and an overlay that payments, they are also playing catch-up Bank. “We don’t know where payments will following the launch of the New Payments enables products and services to leverage with fintechs in leveraging and optimising land because the space is so innovative Platform (NPP) in February 2018. Informed the NPP to provide tailored payment customer data to refine and tailor their and disruptive. Settlement of payments by a core mission to provide domestic experiences. services. probably won’t change much, but the consumers, businesses and government communication and the way you get there departments with a means of making With eight banks connected directly “Banks have such a big amount of data but will change a lot.” payments faster and more efficiently, the and another 70 indirectly, the NPP has we have never exploited it, so it’s an asset NPP has become a reference point in the embraced the concept of open access, for the future, with respect to data privacy Ripe for change industry, demonstrating the transformative working with SWIFT to develop an legislation as a trusted third party,” said power of bringing new technologies to infrastructure that ensures availability to Fabrice Denele, senior vice president for Other payments specialists agreed that conventional processes. non-bank organisations. But keeping the partnerships and interbank relationships the proliferation of new technologies and barriers to entry as low as possible is not and head of customer solutions at innovative challenger organisations have “The most important thing in meshing always easy, said Adrian Lovney, chief Natixis Payments. “Banks have millions combined to create a payments landscape different technologies is making sure you executive of the NPP. of customers and this creates some that is now ripe for change. take a regulatory enabling environment, constraints; we cannot act as a fintech robust and scalable technology and focus “One of the challenges for us is to think and test and run a new product for a small “There is tremendous opportunity for on the customer,” said Fourie. “With about how we extend the ecosystem customer base. When we decide to launch both incumbent banks and non-traditional NPP, there was an enormous amount of in a way that allows as many different a product or service, it has to be reliable, players to take a role in the distribution collaboration between regulators and people to connect to that infrastructure dedicated to everyone, and it has to work and manufacturing of products,” said Leila participants, and between the fintech and as possible. Market participants were every single day.” Fourie, chief executive of the Australian banking industries.” looking for consistency, standardisation Payments Network. “The objective of non- and interoperability in terms of the access But other speakers took issue with the traditional players is to keep people on Acknowledging their impact on client methods. In response, we developed concept that banks cannot compete with their platform. Moving money is not always expectations, payments professionals have an API framework that provides this the same agility as fintechs, suggesting Sibos 2018 highlights: Banking central – payments happen in the periphery sought to learn lessons from consumer consistency and harmonisation,” Lovney that a large incumbent customer base

26 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 27 We see the potential opportunity to address challenges in the We don’t know traditional settlement where payments networks.

Lewis Sun, will land because HSBC the space is so innovative and

disruptive. How would a CBDC Michael Spiegel, make things more Deutsche Bank efficient and competitive?

Michele Bullock, should not be a barrier to innovation. Reserve Bank of Australia Thomas Nielsen, chief digital officer for Deutsche Bank’s global transaction business, argued that the industry is moving away from a model of ‘walled gardens’ – where banks owned and operated the entire stack of payments Industry urged to lead the way technology and services – towards an open access model. on digital currencies Nielsen illustrated his point with reference to the way that Nokia’s dominant position in the mobile phone sector was quickly The evolution of central bank digital demonstrate to us why what we have got still some way to go before they become overturned by the new partner-based currencies (CBDCs) is a positive example available in terms of payment systems widely accepted. Despite conceptual and business model introduced by Apple’s of the public sector embracing new and what is still coming onboard can’t practical challenges, discussions at Sibos iPhone and App Store, warning of similar technologies and disruption in the actually deliver that already. How would reflected a high level of interest in potential consequences for banks. But he insisted payments landscape, but industry a CBDC make things more efficient and benefits. that banks have the assets and capabilities participants also have a role to play in competitive?” to respond positively to the challenges demonstrating use cases and tackling “From a commercial banking point of ahead. associated challenges. Financial inclusion and the extension of view, we see the potential opportunity to banking to the world’s poor is one area address a few challenges we have seen in “What banks and financial institutions During a panel discussion on the prospects where session participants felt digital the traditional settlement networks. The can bring to the table is the knowledge for this emerging asset class, Reserve currencies might ultimately play a valuable ability to address availability, ubiquitous of a global network, customer experience Bank of Australia assistant governor role, by offering a more accessible and access to markets, no time-zone, and the and understanding how to do business Michele Bullock explained that while digital secure form of tender. A digital currency settlement mechanism can all be achieved. in multiple regions in a trustworthy and currencies are not expected to replace could have a more challenging impact in a However, to succeed technology must also compliant way,” said Nielsen. n standard bank notes in Australia, they future systemic crisis scenario, however, as be accompanied by other changes, such might still have a significant role in the large numbers of people might look to hold as a consistent approach by regulators,” payment systems of the future. value in CBDCs rather than withdrawing said Lewis Sun, regional head of product cash, which could put new strains on the management for global liquidity and cash

“We have more of an open mind on financial system. management in Asia-Pacific at HSBC.n Data is an asset for the future. whether or not a CBDC could play a role in assisting with supply chains and While some countries such as Sweden and Fabrice Denele, cross-border payments, for example,” said Singapore are already in the advanced Natixis Bullock. “It remains for the industry to stages of exploring CBDCs, there is clearly

28 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 29 INNOVATION IN ASIA Domestic payments: Meshing new with old

Securities: Asia’s entrepreneurs are Differentiation through data young, well-educated and inspired by the success of pioneers.

James Ma, JD Finance

Innovation is being “Mobile-wallet adoption in the Asia-Pacific via technology, Deora pointed out, simply Asia’s great markets is far higher than in the US, the didn’t exist until recently. “This is different UK and Germany. In domestic payments, from the West, where consumers have been fuelled by the the Australians have embraced contactless through several technology curves, from as a way of life. Objective academic desktop computers onwards; in Asia we dynamism of a new studies show that Asia-Pacific is a hotbed have leapfrogged all that.” generation, and aided of innovation. What’s the secret?” asked leap forward Oliver Kirby-Johnson, partner, advisory, The West’s relatively slow development KPMG, introducing Thursday’s big issue and adoption of new, digital technologies by a lack of legacy. debate, ‘The rise of Asia as a source of reflects embedded mindsets and practices innovation’. “Is it the availability of low-cost as much as legacy systems, suggested smartphones? Rising internet penetration? Peter Hiom, deputy CEO of the Australian A growing awareness of mobile payments? Securities Exchange (ASX). “With legacy I’m not sure it’s that simple,” he continued. comes legacy business models. It’s not just about the technology, but also the challenge Playing leapfrog of customers transitioning from old business models to new ones.” Later, Deora pointed Two significant factors were identified to the “intuitive expectation” among some early on. First, the situation in Asia is of PayTM’s merchants that money would unprecedented, and second, Asia has move instantly into their accounts rather “leapfrogged” the West. “On the consumer than over three to five days. “Going forward, side, this is a once-in-a-hundred-years, more than anything else, it is the culture perhaps unique, change. We have so of the company that will matter. You can much technology in our hands, and it is always ride the next technology wave; completely democratised. The growth has what’s going to matter is whether you can been absolutely phenomenal. Users have make fast decisions,” he observed. access to information and to banking that’s Sibos 2018: #BigIssueDebate relevant to them,” said Madhur Deora, Push and pull The rise of Asia #Banking CFO and senior vice president, PayTM, Pacific as a source of #Payments an Indian digital payments provider. The Noting the diversity of Asian markets, Kirby- innovation #SWIFTInstitute consumer market now accessible in Asia Johnson asked whether take-up of mobile

30 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 31 We’re really We have so much looking at technology in how we can our hands, and co-create, it is completely looking for democratised.

Madhur Deora, areas where PayTM people are innovating in

payments was predominantly attributable population,” she explained. In the session on ‘The Trade Finance drive big ways. to the ‘pull’ of consumer demand, rather plenary room, Ma emphasised widening towards digitisation’, the panel was than regulatory ‘push’, as exemplified opportunities: “Even a young person surprised by the outcome of an audience Lisa Robins, by Singapore’s Smart Nation initiative, without much experience, as long as they vote that indicated ambivalence. As Standard Chartered recognised as a driver of innovation. Lisa have good ideas, can easily get financial moderator Raphael Barisaac, global Robins, global head of transaction banking support from venture capitalists.” co-head of trade and market capital at Standard Chartered, said: “To generalise, solutions, UniCredit, put it: “There are the population is younger, and very used to Robins noted the scope for co-operation so many options in the market, but our mobile technology. Mindset is also perhaps between service providers: “When you clients just don’t use them.” Soumyo Dutta, a factor here: there’s the ability and desire look at what a big bank does, a legacy treasurer, Reliance Industries, explained the to change rapidly and put the work in to institution like ours, we’re really looking reservations of multinational corporates: get things done.” The needs and energy of at how we can co-create, looking for areas “Unless the whole ecosystem develops a new generation were also acknowledged where people are innovating in big ways towards this process, people are not going by James Ma, vice president, JD Finance, a and we can innovate together.” Exchange to benefit.” Nevertheless, it is clear that It’s not just Chinese provider of mobile-based financial and analysis of data is central both to these appetite is strong among corporate clients services, including consumer loans. “I see collaborative efforts and to delivering for greater convenience, transparency about the a rise in entrepreneurship in Asia. I meet a value to customers. “We look at data as and flexibility. “We’re seeing treasurers lot of new founders. They are young, well- the new engine. We see the whole industry wanting to use their mobiles to see real- educated and inspired by the success of becoming much more focused on how we time information and make decisions,” said technology, pioneers such as Tencent, Alibaba, JD.” can extract data to enable companies to do Standard Chartered’s Robins. “Why would what they’ve always done better. The better your expectations at home be different but also the The expectations of China’s consumers the information we can get, the better from what they are at work?” and entrepreneurs were explored earlier we are able to service our customers,” in the week, in ‘Quo Vadis? Fintech in Robins added. The theme of leveraging new Consumers are setting the pace, challenge of China versus the West’, presented at the capabilities to meet timeless objectives but perhaps we’ll see trade finance SWIFT Institute by Bonnie Buchanan, was echoed by ASX’s Hiom. Discussing leapfrogging in Asia in the near future. customers Howard Bosanko Professor of International market infrastructures, he said: “Lots of Last word on the rise of Asia goes to JD Economics and Finance, Seattle University. things remain true, regardless of these Finance’s Ma, who noted that the drivers Buchanan’s research indicated China is new technologies. We continue to provide of change are more deep-seated than the transitioning a “huge underserved market” in which infrastructure that enables our customers desire to get the latest upgrade on our expectations are changing, particularly to do business.” smartphones. “This is how we innovate. It’s from old among the millennial generation. “China not only about the technology; we’re trying

has an expanding middle class with an Strong appetite to build a sustainable business model.” n unprecedented tolerance for technological business models. innovation, particularly when it comes And what of innovation in Asia’s cross- Peter Hiom, to financial services. There’s also a border financial services to corporate and Australian Securities Exchange huge funding gap in part of the Chinese institutional clients? In the Wednesday

32 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 33 We see a lot of development triggered by new technology, enabling new business cases to arise.

Walter Verbeke, Euroclear

Low-income people don’t have credit and debit cards … but they do own phones.

Breno Lobo, Banco Central do Brasil

With Asian markets leapfrogging the West useful and interesting distinction to draw,” depository), plus collateral, plus fund potential new DLT-based systems. Several an internet connection,” said Lobo. The in terms of financial service innovation, said Hamilton. services, plus data – that we focus our initiatives in Switzerland have so far role of the central bank is to construct – Same tools, how should we re-adjust our world view? attention there. As a financial market concentrated on the core of the FMI; more or to allow the banks to construct – the “Let’s get some assumptions out of the Emerging markets might be evolving fast, infrastructure, market participants look could be done on the outer layer.” infrastructure and “let the players play way first,” said Chris Hamilton, CEO, but developed markets are far from static. to us to provide safety and efficiency.” the game”. different Banks for Africa, opening the session, Hamilton invited Walter Verbeke, global Technology impacts the core remit. With Hamilton suggested that emerging ‘Emerging and developed: terminology head of business model and innovation, these caveats in place, the session went markets will tend to place greater Maria Krasnova, deputy chair of the of the past?’ “The terms ‘developed’ Euroclear, to give his perspective on the on to vindicate Hamilton’s suggestion that emphasis on financial inclusion. Breno executive board of NSD, the Russian priorities and ‘emerging’ are no guide to the distinction. Verbeke said: “The way we the developed/emerging distinction is still Lobo, advisor, Banco Central do Brasil, CSD, suggested her domestic market’s level of technological sophistication in look at markets, the experience we have, useful. agreed, adding: “We are trying to improve experience and priorities were more akin a market,” he said, embarking on an is – they’re all developing. In our world, we our electronic means of payments and to Brazil than Switzerland. “Recently, the assessment of differences and similarities see a lot of development triggered by new First, there is a distinction in terms of give consumers the opportunity to use situation has improved a lot. There is a between the priorities of financial market technology, enabling new business cases priorities. Sebastien Kraenzlin, head mobile payments more than they do now. special cashless-economy programme, infrastructures across the globe. to arise that need to be accommodated. of banking operations, Swiss National We still have all the problems associated conducted by the Bank of Russia and the Technology drives change in our world.” A Bank, said: “When it comes to innovation, with cash.” Electronic payments – and Russian authorities, with the result that Probably the easiest consumer payment timely reminder: even developed markets we distinguish between the core of especially instant payments – can address more than 50% of retail payments are now experience in the world today is found aren’t static; technology innovation impacts the market infrastructure – the stock structural problems, said Lobo. conducted via mobile applications. There in China, despite still being regarded as all markets. exchange, the clearing house, the CSD, are still efforts to be made, but we have an emerging market. The largest issue of the RTGS system – and the outer layer, The technology is primed for service. reached the last mile.” crypto-assets is Venezuelan petro-dollars. Verbeke went on to make a thought- which is the interface between customers “We have to create an alternative for Thus, emerging markets can be at least as provoking point about innovation: it is and banks. Several central banks are people. Low-income people don’t have Emerging or developed, all market technologically sophisticated or innovative no longer about activity diversification. experimenting with new technologies credit and debit cards. They are not part infrastructures are leveraging technology as developed markets. “That said, I “Now, there is so much going on in our and on how to interconnect existing core of the financial system, but they do own innovation, but the way they do so is highly

suggest that developed/emerging is still a core activity – the CSD (central securities elements, such as the RTGS system, with phones. Everybody has a smartphone with informed by local economic realities. n

34 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 35 SECURITIES Innovation in Asia: Asia’s great leap forward

Compliance: AI stakes claim for supporting role

Differentiation through data

New cost pressures, technologies and asset the post-trade ecosystem?’, Teed cited an How are investment classes are applying such an eye-watering example in which Brown Brothers Harriman squeeze on investment managers’ margins worked with a US$400 billion global asset managers, investors as to warrant new business models too. manager operating across diverse markets, This phenomenon harbours inevitable segments and asset classes to streamline and service providers implications for securities service reconciliation using a hosted platform to providers, which must prove their mastery gather information from multiple systems responding to the of technology, data and other assets to and external providers. “We helped them Banks can have defend and grow their franchises. achieve a higher match rate – 95% – than growing status of data they could achieve on their own, using our as an asset? Buy-side clients are seeking best-of- subject matter expertise to solve one of a competitive breed approaches to provider selection, their biggest problems, without needing to according to Diane Teed, head of intelligent service every asset class for them.” automation and change management, Brown Brothers Harriman. Sinclair Scholfield, head of sector solutions advantage in and consultant relations at State Street, “Clients should always have a choice to work suggested that even the largest securities with whoever is providing the best quality services firms were no longer looking to be the data space. of service or the best capabilities,” Teed sole suppliers to their buy-side clients. said. “As business complexity increases, Diane Teed, Brown Brothers Harriman asset managers will want more specialist “The approach that we’ve taken is really providers and more ability to use a best-of- to ensure interoperability,” Scholfield said. breed mode. That’s how we’re positioning “Best-of-breed is fundamental. I don’t ourselves in an open architecture model think that organisations are trying to be that is provider agnostic. We think our everything to everyone. Certainly some role is to be the provider that can solve clients may wish to go with one provider client problems, rather than focusing on for everything, but the best-of-breed traditional segmentation.” mindset is pretty prevalent in the asset management, asset owner, and institutional Best of breed investor communities.” #Securities #Data In a panel discussion, ‘Inside capital In response to this trend, custodians are Sibos 2018 highlights: #MarketInfrastructures markets: Do new asset management expanding from their traditional areas Securities #Regulation business models have the power to disrupt of expertise. State Street, for example,

36 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 37 recently acquired order management processing, for example. The challenge lies regulators. Goffin suggested that the asset system vendor Charles River Development in standardisation. While we’re starting to management industry overall needed to as part of the firm’s efforts to provide see some pockets of standardisation in the improve its data management capabilities services across the front, middle and industry, many processes are still done very to take full advantage of new innovations. back offices, with a particular emphasis differently,” she observed. on management of data flows, Scholfield “Asset management firms don’t use data explained. Philip Goffin, global chief technology officer as a differentiator,” he remarked. “There Utility-based at investment platform provider FNZ, said have been a number of great data offerings We have a love-hate Utility plays there are potential opportunities to achieve in the asset management marketplace new efficiencies through securities clearing for some time. The problem is not that Speakers across the securities sessions and settlement utilities, but also expressed the offerings aren’t sophisticated, rather approaches at Sibos 2018 agreed that while costs are a degree of scepticism. the asset managers don’t understand the relationship with data. dropping, margins are also tighter. This value of their data and are not willing to Tim Lind, DTCC Data Services is leading asset management and asset “I’ve seen utilities fail massively in the look at how it can create value for their can bring a servicing businesses to apply a range of asset management industry historically, organisations. Traditionally, they haven’t strategies – technology integration, new because they tend to become an inefficient needed to do that because they haven’t product development and innovation, collective mechanism. But with clearing faced the kind of margin pressure and new and development of utilities – involving and settlement, new opportunities entrants as today.” lot of benefit collaboration to a greater or lesser extent. are being created, particularly around their increased business need and focus blockchain and tokenization. Both new Strategic significance on receiving and reviewing business data Utilities can increase disintermediation and existing parties may morph into new as close to real time as possible – including to the and reduce risk, but there are challenges, clearing and settlement models as part of In a separate session, ‘The Golden Age the ability to use such information to noted Stella Clarke, chief marketing officer the changing landscape over the next five of information: How can new technology make more informed business decisions,” at technology vendor Murex, speaking in years,” he said. break big data challenges?’, Shahmir Khaliq said. “These expectations have led the panel session ‘Capital markets: Is the Khaliq, global head of direct custody and to a growing recognition that meaningful industry. enemy within?’ The use of data as an asset could be a clearing, Citi, asserted that attitudes information delivery is now seen as a key differentiator for asset managers are changing, with data management primary strategic objective for many clients Stella Clarke, Murex “Utility-based approaches can bring a and securities services providers. increasingly becoming a strategic concern and partners. Our goal as a core partner is lot of benefit to the industry and could Scholfield said State Street is working for clients. to facilitate this key business requirement allow banks to accelerate their own on a sophisticated data provision service through an increased use of interactive transformation by outsourcing certain for multiple stakeholders, including “During our client meetings here, a number information tools, allowing clients to make ‘non-compete’ aspects of securities asset owners, other custodians and of financial institutions have referenced the most informed decisions possible.”

38 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 39 Protecting consumers, We look to identify how while driving regulation impacts innovation us directly but also the whole value chain around us.

Justin Chapman, Northern Trust

Since the Global Financial Crisis, the aim expectation that we are as precise as regulation that impacts both clients and of new regulation across the securities possible as regulators, but also are as the bank itself. markets has been to improve investor flexible as we need to be to enable new protection and reinforce risk management, ideas to be effective as soon as possible,” “We look to identify how regulation while also increasing transparency and said Harvey, citing regulation of initial coin impacts us directly but also the whole the overall safety level of assets, thus offerings as a case in point. value chain around us. That’s probably creating a stable environment for market the starting point for any opportunity,” growth and competition. To what extent Improvements like the shift towards Chapman said. “We’ve also tried to look have reforms succeeded so far? In a panel T+2 securities settlement sets a global not only at current regulation, but also entitled ‘Who is regulation for in securities standard, and takes a full day of risk out to position ourselves – on behalf of our markets? After all that investment, who has of the cycle for cash equities, said Robert clients and our organisation – for future benefited the most?’ experts were guided Palatnick, chief technology architect at US regulations as well.” through recent developments and toward post-trade services provider DTCC. That’s future opportunities by moderator Graham a benefit for the entire industry, both on Prompted by a question from Ray on how Ray, global head of sales and relationship the buy- and sell-side, asserted Palatnick, product innovation had evolved alongside management for financial intermediaries at who also spoke favourably of the wider service providers’ responses to regulatory The best-of-breed mindset is pretty BNP Paribas Securities Services. use of standards such as ISO 20022 in the reforms, Chapman added that regional post-crisis securities market ecosystem, regulatory initiatives – for example The panel’s regulatory representative took noting that regulation around transparency the EU’s Central Securities Depository prevalent in asset management. a cautiously positive view of the direction had helped to make platforms more Regulation – had led to greater account of travel. “The global community has stable and better able to recover from structure optionality, at first in Europe and Sinclair Scholfield,State Street sought to identify features of exchange- disruptive events. Further, standardisation then beyond. traded activity – namely greater data, initiatives such as legal entity identifiers transparency, and risk management in had improved quality and consistency of Chris Brycki, CEO of robo-advisor With growing strategic significance of data pace of innovation, incumbent service “We’ve worked in a highly secure and the post-trade infrastructure space – and data, thus supporting today’s efforts to Stockspot, registered as a financial comes a more urgent need to protect it, providers nevertheless believe that their regulated environment for hundreds of looked to impose that across the non- derive more intelligence and value from advisor in Australia, said the ultimate noted Tim Lind, managing director, DTCC domain expertise and legacy assets can still years so we have an advantage right exchange traded and non-securities transaction data, he added. test for regulation was its impact on Data Services, DTCC, in that same session. lend critical advantage when it comes to now. We know data. We originate relevant market,” said Oliver Harvey, senior choice and value for end-users. If the developing data services to serve evolving data, we have domain expertise as to the executive leader, market integrity group, Holistic approach combination of new technology and “We have a love-hate relationship with buy-side needs. meaning and potential uses of the data, we Australian Securities and Investments regulatory openness to competition is data,” Lind said. “The Facebook Cambridge have a better model for servicing data and Commission. “That’s a work in progress. Whilst reforms are broadly seen as making investment advice and other Analytica episode created a visceral “Right now, banks actually can have a we are expert in operating in a fiduciary Significant headway has been made. necessary and positive for systemic services more accessible and efficient, reaction amongst many people who viewed competitive advantage in the data space capacity.” n Almost every jurisdiction is now stability and consumer confidence, the cost lower in cost and with better outcomes, it as a violation of data privacy. Europe’s because we know how to custody assets undertaking trade reporting of OTC of implementing and complying with so a decade of unprecedented change will General Data Protection Regulation and and data’s an asset,” said Teed of Brown derivatives. That’s been a significant value- many rule changes in such a short space of have been worthwhile, he argued. other regulations governing the treatment Brothers Harriman. “The challenge add for us as an organisation.” time has taken its toll on individual market of personal information have resulted in a will be getting the data models, the participants, especially those operating Concluding, Ray noted that the whole real and good focus on privacy.” infrastructure and the value propositions Harvey also acknowledged the role that in multiple jurisdictions. Justin Chapman, industry could draw benefits from the to line up before the fintech firms face the regulators are increasingly expected to head of market advocacy and innovation regulatory overhaul, not least due to the While the highly regulated nature of the same fiduciary and regulatory obligations play in fostering innovation. “One of the research at Northern Trust, said his firm stable platform it provided for growth and securities servicing sector can stifle the that we have. things we constantly grapple with is an tried to take a “holistic approach” to innovation. n

40 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 41 COMPLIANCE Securities: Differentiation through data

Technology: Three keys to enabling digital migration The aim is to empower staff and refocus AI stakes resources on problematic claim for cases and risk assessments.

Adrien Delle-Case, supporting Institute of International Finance

The Sibos 2017 compliance stream applying machine learning and AI to about role Banks are beginning 35,000 of those alerts. We still have human in Toronto made a clear case for the deployment of advanced technology and intervention to work those final alerts, but to embed advanced greater collaboration with law enforcement that’s a huge step forward to ensure we can agencies to improve the efficiency and meet demand in real time.” technologies at the effectiveness of banks’ financial crime compliance efforts. In Sydney, the Accelerating momentum heart of financial compliance sessions at Sibos 2018 revealed that encouraging progress is being made Many banks are still in the testing phase crime compliance. on multiple fronts, suggesting good reason with new technologies, but momentum for a positive outlook. has clearly accelerated, thanks in part to the need to alleviate pressure on Taking sanctions screening as an example, human resources involved in transaction HSBC global head of correspondent monitoring and sanctions screening. banking Barbara Patow recognised that Banks and other institutions are bank processes are not always as efficient demonstrating increased enthusiasm for as they could be, and staff resources can AI and robotics to tackle financial crime, be drained very quickly without adequate panellists observed, noting also that such support from technology. But screening technologies can be bolted onto existing has become much more effective in systems, providing a fix to incumbent recent years, she said, and HSBC has seen solutions. positive results from the use of artificial intelligence (AI). “Most of the industry is working on use of machine learning as an additional filter “We’re now in the phase where we are to existing rules-based systems that are getting more efficient and there is greater producing false positives. The question is #Compliance awareness with regard to how we can whether one can use enhanced analytics #Technology actually do this,” said Patow. “At HSBC, we and machine learning to look at the Sibos 2018 highlights: #Data screen 1.2 million payments a day – we stop results and enhance the quality before Compliance #SWIFTInstitute 75,000 payments a day and we are now you put them to your analysts,” said

42 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 43 We can’t The difficulty continue to put for banks is to bodies against demonstrate to the enormous our regulators amount of data that we truly we have coming understand the in. risk.

Michelle Neufeld, Natalie Hall, Wells Fargo Commonwealth Bank of Australia

Adrien Delle-Case, policy advisor for Cloud, who said that while the challenges “Many global financial institutions are Natalie Hall, general manager for financial digital finance regulation and policy at the in banking might seem insurmountable, spending more than US$1 billion on financial crimes compliance at Commonwealth Bank Institute of International Finance (IIF). other sectors actually operate on a much crime compliance. We can’t continue to of Australia, emphasised the need to know larger scale with even greater volumes put bodies against the enormous amount your customer’s behaviour, rather than A survey of 59 financial institutions of data. Nevertheless, higher levels of of data we have coming in, so we need to concentrating only on standard know-your- (largely banks) published by the IIF automation did not equate to obsolescence, find solutions. One of the challenges here customer routines. prior to Sibos revealed that 69% of he reiterated. is that reasonable people can disagree on respondents are already using or the outcome of a scenario. There are a lot “We want to understand our clients’ policies experimenting with machine learning “Tool after tool is being built not just to of grey areas,” said Michelle Neufeld, head and programmes so that we can look at techniques in their AML-related analysis, simplify the automated work of identifying of compliance and operational risk for Wells our output from transaction monitoring while only 2% have no plans to do so. bad actors and criminal activity, but also to Fargo’s financial institutions group. and sanctions screening and check that it Machine learning will not fundamentally improve the work experience of every one aligns with what the client told us about change AML but rather it should lead of the professionals trying to solve those Real-time compliance their AML programme and their risk profile. firms to enhance and rethink their problems. Some of this is about replacing The difficulty for banks is to then verify processes, the report suggested. people, but it is also about augmenting Meanwhile, transaction banking as a that information in a meaningful way and people and giving them superpowers,” said whole is embracing new technologies and demonstrate to our regulators that we truly

“Financial institutions need to Ward. faster, more automated processes. With understand the risk,” said Hall. n communicate so that staff understand the current proliferation of new payment they will not be replaced by machines. In the near term, banks must continue to channels, the rise of cryptocurrencies These people are trained; they are experts test new technologies to determine their and the move towards real-time payments in their field and they know how to merits as well as exploring the extent around the world, the challenge of recognise suspicious activity. The aim is to to which human intervention will still be dealing with financial crime shows little empower them and refocus resources on required for efficient, effective compliance. sign of diminishing in the near future. problematic cases and risk assessments,” Handing over complete responsibility and If anything, banks will need to be even said Delle-Case. autonomy to machines might present stiff faster and more innovative in meeting challenges in the area of financial crime, their compliance obligations if they are Encouragement also came from Miles given humans can very often disagree on to maintain resources and budget at a Ward, global head of solutions for Google what constitutes suspicious activity. manageable level.

44 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 45 People with different Both in the private backgrounds have been sector and in law brought in to take this enforcement, some to a higher level. are more reticent than

James Freis, Deutsche Börse others.

Simon Norton, Strategic Policy Institute

Collaboration between law enforcement Following on the heels of the UK’s Joint other PPPs, people essentially get together the private and public spheres. During a agencies and financial institutions in the Money Laundering Intelligence Taskforce for meetings and then go back to their session dedicated to PPPs, for example, PPP 2.0 – fight against financial crime is far from a (JMLIT) and the development of PPPs usual roles, but we have co-location of details were revealed of how Fintel new concept, but the recent wave of public- in Canada, the US, Hong Kong and professionals, which is really important.” Alliance participant Western Union had private partnerships (PPPs) highlights the Singapore, Australia formally launched raised concerns about small credit card partnerships progress that has been made in sharing its own PPP, Fintel Alliance, to combat Norton believes the key criteria for transactions that it suspected were linked information and breaking down barriers to money laundering and terrorist financing an effective PPP include voluntary to child exploitation. By pooling data and catch the bad actors. in March 2017. participation – his report will feature intelligence among participants, the PPP yield results organisations that chose not to be involved identified previously unknown offenders James Freis, chief compliance officer at With the backing of AUSTRAC, the and explain their reasoning – and proper and made more than 20 referrals to law Deutsche Börse Group, referred to a PPP Australian government’s financial resourcing. In a highly-concentrated enforcement agencies. 2.0 model; a more structured way of sharing intelligence agency, and participation from banking market, the participation of information with greater resources than the the top four Australian banks as well as Australia’s four largest banking groups “There was a 316% increase in child informal entities that existed a decade ago. HSBC, Paypal, Western Union and other has also been critical to Fintel Alliance’s exploitation-related suspicious matter Such groups operated in a more ad hoc and official agencies, Fintel Alliance has been success, Norton added. reports and suspicious activity reports low profile way than the PPPs that have lauded for physically seconding experts over 12 months, but critically it advanced been established in recent years. from the public and private sectors, rather While there are inevitable legal and awareness of the issue within the financial than simply meeting intermittently to share operational issues that need to be tackled services industry and it got people talking, “The difference now is the resourcing information. A forthcoming SWIFT Institute to make a PPP work successfully, the because no one wants to see children and the structure,” said Freis. “We have report will explore Fintel Alliance’s role biggest challenge may be cultural. “We still exploited,” said Paula Chadderton, dedicated resources and better people, and structure in more detail, and provide have a cultural issue which is the risk and international counter-terrorism adviser there are 10 times the compliance staff guidance to jurisdictions planning to unintended consequences of information at the Australian Department of Home we had a few years ago, and people with establish their own PPPs. sharing – both in the private sector and in Affairs’ Centre for Counter-Terrorism

different backgrounds have been brought law enforcement, some are more reticent Coordination. n in to take this to a higher level. We also “Fintel Alliance is quite unique,” said Simon than others and this is something PPPs have better access to data than ever Norton, analyst in the strategic policing have to work through,” said Norton. before, we can look at data in a different and law enforcement program at the way, and in certain jurisdictions we have a Australian Strategic Policy Institute, and Evidence is already mounting on the wider clearer legal basis to share information.” author of the SWIFT Institute paper. “In benefits of information sharing between

46 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 47 TECHNOLOGY Compliance: AI stakes claim for supporting role

Innotribe: CEOs don’t care about Getting ready for a smarter world traditional business boundaries.

Ayesha Khanna, ADDO AI

Digital native businesses pose an existential practices, and to disseminate that Banks must not threat to traditional financial services understanding throughout the business. firms, giving banks a limited lifespan if they underestimate do not evolve. Artificial intelligence (AI) Eli Rosner, chief product and technology and distributed ledger technology (DLT) officer at technology vendor Finastra, said Three keys to the complexity of APIs and cloud should be viewed as the are transformative, offering competing new approaches to solving mission-critical means of building innovation capabilities, evolution, when problems. Cloud and APIs are force the starting point for firms to better multipliers, increasing data accessibility leverage data, regardless of function. “If responding to the and thus allowing business to scale. you have more users you have more data, if Understanding these capabilities can help you have more data, you can develop more enabling digital fourth industrial sophisticated applications,” he said. banks to pivot towards new client service and product development models. revolution. Taking a strategic view of technology is not “What is Amazon? Is it an e-commerce easy without reference to specific, practical company? Is it a rocket manufacturer? A applications that are supported by a bank? CEOs don’t care about traditional realistic analysis of the potential return on migration business boundaries,” said Ayesha Khanna, investment. There are many uncertainties co-founder and CEO of ADDO AI, in her as projects evolve along an extended time breakfast keynote. line. Typically, a firm will need to take a specific technology from the proof of Knowing that digital giants are capable concept stage to a working model before of deploying services rapidly, through going live, after which it may be adopted the application of lightweight and flexible more widely across other functions. technology, financial services firms need to respond. However, replicating the efficiency For example, JP Morgan’s adoption of and agility of fintech and big tech innovators DLT has begun at the point of information poses many challenges for institutions with exchange rather than exchange of value, legacy characteristics. To elevate every with a use case that will test the efficiency part of the business simultaneously, to of the system. “We ended up analysing manage migration onto new technologies, the factors that stopped cross-border and crucially to run the bank effectively payments in the correspondent banking whilst managing transformation requires the chain, and we found that information ability to handle three key dynamics. These exchange around payer or payee was were explored in depth across Sibos 2018’s a point to address,” said Christine technology-focused sessions. Moy, executive director and blockchain program lead, JP Morgan. “We recently Managing change moved our Treasury Services blockchain #Technology into production; this is the Interbank Sibos 2018: #DLT/Blockchain The first key challenge for senior Information Network, essentially a peer-to- Breakfast Keynote - #Data management is coming to terms with the peer network for correspondent banks to 24 Oct 2018 #ArtificialIntelligence way technologies can change working connect and exchange information.”

48 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 49 If you have more Data has gravity, which makes data, you can moving large amounts of it very develop more challenging. sophisticated Ramneek Gupta, Citi Ventures applications. (ASX), which in 2021 will move AUD2 trillion general manager of equity post-trade dollars of securities onto its localised DLT- services at ASX. Eli Rosner, based platform. The ASX is enabling its Finastra new system to interoperate with existing Communication and consultation are messaging technologies, so that firms that crucial as these processes provide migrate later are not disadvantaged. consensus around the end goal, even if users or clients are moving toward it at “For those that are not yet ready to different speeds. Ralph Achkar, managing director for digital “Many enterprises, including banks, set out that anyone in the firm who requests move and adopt distributed ledger, they product development and innovation at State to establish central data repositories referred information will be presented with exactly can continue to interact via messages “You have to have a clear view of where you Street, explained how his firm is engaging to as data lakes, yet what we see today are the same data regardless of where they based on ISO 20022. But those who want to go, across the product range, and with the use of AI around data capture. “We disjointed stores of data that I like to call data sit in the business. RPA, a form of AI, has are ready can take a node and interact then pursue it forcefully,” said Claus Richter, JP Morgan’s Umar Farooq discusses innovation are using AI in the review of legal documents, puddles,” said Ramneek Gupta, managing eliminated reliance on staff in this area. Doremus Deutsche Bank 601DOR0140 Sibos Issues Ad 2018 After 118x180mm Proof 01 26-07-2018 directly,” explained Cliff Richards, executive head of TxB solutions at Nordea. n and technology themes including contracts, for example,” he said. director and co-head of venture investing at “The other capability that we have today Citi Ventures. “The reason is threefold: first, “Today there are systems that have been is on the reconciliation of information sets, data has gravity, which makes moving large in place for decades, and they are built into spotting where there are breaks in the data.” amounts of data very challenging; second, silos,” says Achkar. “Historically, we have See you next year in London data has residency, which means it’s often had to use a lot of human intervention to Understanding data not possible to cross geographic boundaries try and pull all of that data together. So we We’re not just providing Sibos due to regulatory and other constraints; and are putting in RPA to pull information from transaction services. The second challenge is to lay the finally, data reflects organisation structure these silos more efficiently.” groundwork for change with data. High and can amplify the siloes of the parent. levels of process automation, whether Relatively new tech companies like Facebook Engagement across the board We’re helping create a new through robotic process automation (RPA) or Google have been built on a centralised or DLT, can only succeed if the information data architecture from the beginning, so The final challenge is to bring together all fed into the process is of sufficient quality these challenges seem to be more of an issue stakeholders impacted by a transformation banking ecosystem through to be used as the basis for decision-making. for incumbents who are competing with the project – when they are ready and on their Banks have wrestled with data management tech upstarts.” own terms, to make the change a positive cross-industry collaboration. and governance issues for many decades, one and to minimise disruption. but the challenges of cleansing, storing, State Street has been addressing these #PositiveImpact integrating and analysing are fundamental challenges by building a unified data This can involve a staggered migration, as to success in the digital age. architecture. The aim is to guarantee used by the Australian Securities Exchange

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where you want to go, across the This advertisement is for information purposes only and is designed to serve as a general overview regarding the services of Deutsche Bank AG and any of its branches and affiliates. The general description in this advertisement relates to services offered by Deutsche Bank AG Global Transaction Banking and any of its branches and affiliates to customers as of August 2018, which may be subject to change in the future. This advertisement and the general description of the services are in their nature only illustrative, do neither explicitly nor implicitly make an offer and therefore do not contain or cannot result in any contractual or non-contractual obligation or liability of Deutsche Bank AG or any of its branches or affiliates. Deutsche Bank AG is authorised under German Banking Law (competent authority: German Banking Supervision product range. Authority (BaFin)) and, in the United Kingdom, by the Prudential Regulation Authority. It is subject to supervision by the European Central Bank and by BaFin, Germany’s Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the Prudential Regulation Authority and Financial Conduct Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority and regulation by the Financial Conduct Authority are available on request. Copyright © August 2018 Deutsche Bank AG. All rights reserved. Claus Richter, Nordea

50 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 51 The disruption caused by geo-political purchasing policies, with firms potentially When market infrastructure operators there is robustness around the system so tensions can impact innovation within preferring domestic suppliers, thus adding engage in transformation it can impact an that when new ideas come along there is Geo-political banking on several levels, according to tensions to existing trade wars. Building entire industry, which potentially creates a very firm foundation through which they participants in Tuesday’s session, ‘The systemic risk. Faster payments projects operate,” added Eacott. Fourth Industrial Revolution & Geo-politics’. According to Josh Kallmer, executive are ongoing in many countries around the risks to If two countries are fighting a trade war, vice president for policy at Information the market world. In the UK, for example, the Faster Building the right governance must also their innovators may find themselves Technology Industry Council, there will be Payments infrastructure is being replaced take into account the time it takes to get among the casualties. There is the potential no higher legislative priority in the next at the same time as the country’s batch to market, argued Mehdi Manaa, deputy innovative for one state to harm the financial system US Congress than protecting the security infrastructure payments infrastructure (BACS), and as the director general of the European Central of another state via cyberattack. While of the country’s supply chains. “There Bank of England is replacing its real-time Bank (ECB), acknowledging the challenges that threat exists today, the importance continue to be concerns about countries gross settlement system (CHAPS). faced by major projects, such as the growth of data in a more automated environment seeking to procure advanced technologies of tomorrow ECB-backed securities settlement system, will create new challenges for banks to in a way that escapes review of national “The only way we will do that successfully TARGET2-Securities (T2S). manage. authorities … including proliferation of is to ensure all the participants in

things like blockchain,” he said. n the ecosystem have the right level of “The lesson we learned from the rollout “As machine learning models learn using representation,” said Simon Eacott, head of T2S is that running a project across a data, you have to be wary of the possibility We have built on the of payments innovation and business decade is not optimal. Now we are running that data might be corrupted,” warned development at NatWest. the roll-out of TARGET Instant Payments Norm Judah, CTO for digital services success of T2S – Settlement, and the consolidation at Microsoft. “If a virus is injected into As well as supplying utility services to of TARGET2 and T2S, as well as the an AI system, the signatures that you specifically its market participants, market infrastructure consolidation of collateral management There continue to be traditionally look for in cybersecurity are operators play a key role in providing systems, following a very different timeline no longer valid. If you get that level of governance – but have governance at the point at which new to T2S,” he said. “We have built on the concerns about how penetration, would you be able to rebuild players and technologies are introduced to success of T2S – specifically its governance and restart?” also tried to optimise the market. As such, they hold a pseudo- – but have also tried to optimise interaction countries procure regulatory role, with responsibility for with the market.” n There are also concerns about computer interaction with the systemic stability, which must be weighted advanced technologies. chips that can transmit data to a third in any upgrade or migration project. party, embedded onto servers which are market. Josh Kallmer, sold commercially. If these fears continue “Their purpose is ensuring the safety, the Information Technology Industry Council to rise, they could spark a reassessment of Mehdi Manaa, ECB security, the standards, and making sure

52 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 53 INNOTRIBE Technology: Three keys to enabling digital migration

Standards: We had better get used to Communicate, collaborate, co-ordinate AI and we had better get ready to adapt.

Brett King, Moven

We came to Innotribe 2018, and found linear thinkers, and technology-driven Past experience the future. “Welcome to 2030,” said Jane change is too fast for us, he asserted. Just Frankland, managing director, Cyber as once there were Luddites, so now there suggests humans Security Capital, opening the Thursday are Paris taxi drivers burning Uber drivers’ adapt slowly to morning session on ‘Securing the future cars. But change doesn’t stop happening Getting ready state’. By then, we had already fixed just because we resist it. “We have zero the crucial flaw in the internet, learned historical precedents for the proposition change. Innotribe how to secure our identities (and trust that we can stop AI from changing the way each other), got to grips with quantum we work and live, so we had better get used 2018 offered pointers computing and discussed the future role of to it and we had better get ready to adapt,” for those preparing artificial intelligence (AI) – so the challenge said King. By 2030, we will be living in “a for a smarter of securing the future state seemed well world that is smart”, and our jobs and lives within our grasp. “In 2030, there is more will have been transformed. “In banking, for 2030. peace, more stability and more distributed it’s not being a good bank any more that wealth in the world,” said Frankland. makes you competitive; it’s being good at the technology that underlies banking,” The week began with Brett King’s keynote. said King. world “I want to give you some disruptive themes,” said the author of ‘Augmented: Fixing a hole Life in the Smart Lane’, and CEO of mobile financial services provider Moven. “Make no No wonder Tuesday’s sessions on quantum mistake. Banking is going to get disrupted computing were so well attended. But by the technologies we’ll be talking about.” there was a lot more of Monday still to So-called ‘strong AI’ – machines with equal come. “The internet is fundamentally or superior intellectual capacity to humans broken,” said Monday’s day anchor, Ghela – is coming soon, and by the early 2030s, Boskovich, founder of Femtech Global. we’ll be outnumbered by robots. But King’s “There are certain things that do not work core theme was less about the “systemic and there are protocols that are missing.” shift” arising from the recent and ongoing Fixing the internet was the focus of the “infusion” of technology into society, and session ‘Beyond the bubble’ – and there more focused on the difficulties we create was an important reason for fixing it. for ourselves through our reactions to “The base-layer need for identity was not #Innotribe disruption. satisfied by an open protocol. Almost all Sibos 2018: #ArtificialIntelligence the problems we are seeing now emerge Innotribe wrap up #Data “In 200 years, we haven’t learned to accept out of this missing piece,” said Stephen video #Digitisation change from technology,” said King. We’re Berlin Johnson, author of ‘Where Good

54 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 55 Algorithms have parents.

Clara Durodie, A lot of the security solutions Cognitive Finance we have now will be broken by quantum computers.

Stacey Jeffery, CWI

Ideas Come From’, discussing the original deep into the present and future science, Explaining AI threats, and reached a reassuring, if architecture of the world wide web. and in the afternoon came a debate on perhaps surprising, conclusion. To secure the practical applications, during ‘The Hope, and perhaps also reinforcements, the future state, with all of its reliance on Solution: blockchain. “For the first impact of quantum computing on financial given the potential of strong AI. new technologies, we should look after our time now, we can create that massive, services’. Day anchor Leda Glyptis, chief Wednesday’s session on ‘The ethical side of people. “We need to be investing, training, decentralised database of interactions, of of staff, 11FS, asked about the time horizon AI’ offered a practical guide to working with having the career pivots. Technology offers trust, of identity, without any person or for financial service providers to start artificial intelligences – and understanding quick wins, but it makes sense in the long organisation controlling and owning the thinking about quantum. “It’s within the the perspective of regulators. “Computers term to focus on the people,” she said. We database itself,” said Johnson. Trust was realm of possibility that this will happen cannot be wrong; they can only do what need our people to be both clever enough the theme of the day, decentralisation the more quickly than we think,” said Stacey you ask,” said Tony Fish, founder, AMF to manage strong AI, and motivated. Will we route to achieving trust, and in the session Jeffery, senior researcher, CWI. “Maybe Ventures. AI is a system, not a finite piece be ready for 2030? In the closing ‘fireside entitled ‘If trust is in the network, what’s the first area where it will matter is of technology, the panel agreed, and the chat’, ConsenSys’ Lubin seemed to think the point of you?’ we began to learn what security. A lot of the security solutions people behind the technology hold the we are giving ourselves a strong chance: that means for us. “We’re coming from we have now will be broken by quantum liability. “Algorithms have parents,” Clara “This is an exquisite, beautifully curated a very governed, very structured, highly computers.” Durodie, founder and chief executive, experience up here. I think it’s incredibly regulated industry, and now we’re looking Cognitive Finance, reminded us. “Do encouraging that the finance industry is at a technology that asks us to completely Uh oh. Alejandro Perdomo-Ortiz, senior ask the hard questions at the point of exposed to this sort of innovative thinking.” revisit the value of centralisation,” said research scientist, Rigetti, was not fazed: buying an AI system,” Durodie added. Boskovich. Technology gives options; trust “This is the best time to throw these Explainability is key, panellists suggested, And that concluded Sibos 2018’s is contextual. “In a radically decentralised difficult problems to the scientists. We’re but it’s less about explaining precisely comprehensive introduction to 2030. context, blockchain fosters trust; it can also very excited to take the challenge and how an AI tool came up with a specific We’d had ‘Sensemaker’ sessions every be used in less decentralised contexts to work with you.” Overall, the day gave us a recommendation than understanding lunchtime, and in the late afternoon, foster trust. It’s incumbent on us to figure clear understanding of quantum computing the broader framework for the decision, ‘Curated Networking’, at which the day’s out ways to use the technology,” said and its role in financial services, but also including the data inputs. speakers were available for further Joseph Lubin, CEO, ConsenSys. a definite sense that banks and financial discussion. In the closing moments, as if institutions cannot and should not try to After all that, how on earth do we secure to remind us that we should be preparing On Tuesday, the technology under tackle its challenges alone. “We’re left with the future state? On Thursday morning, for Sibos 2019 before Sibos 2031, Innotribe discussion was quantum computing. In the a promise of hope,” said Glyptis, in her Cyber Security Capital’s Frankland detailed bowed out of Sydney to the sound of

morning and early afternoon, we drilled closing summary. a wide range of cybersecurity and related ‘London Calling’ by The Clash. n

56 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 57 This year’s ‘Future of Money’ session began “Here we have the consumption of easily and flexibly to customers and other with a hand-drawn animation. We watched experiences in which the financial products service providers – rather than in relation New as ‘Miss Tech’ entered the traditionally are embedded in the experiences. This is to regulatory-driven initiatives. When we talk about product-centric world of financial advice how many people see the future of money,” and, via the use of data, moved it towards said Goyal, indicating the happy-ever-after “Last year DBS launched the world’s strategy, we’re really friends, new an ‘experience consumption’ approach, closing scene in the animation – the well- largest API platform, without the regulator thereby growing first share of mind, and in advised family celebrates in their family- mandating it or telling us what to do. talking about user due course, share of wallet. In the digital size house with a family-size car parked Why? Because it’s good for business. We partnerships economy, “We no longer think about outside. As Goyal pointed out, nobody can have thousands of partners, staff and values. buying products, but about consuming decides to buy a mortgage; people decide clients helping to make us successful,” said experiences,” said moderator Udayan to move house. Cross. The future isn’t a new obligation Jie Song, Goyal, co-founder, Apis Partners. or cost; it’s where the money is. Invited to Ant Financial The end point may be clear but the give one piece of advice to the audience, We’re all customers of technology journey is far from straightforward. “All Cross added: “Make new friends, new companies, and those technology our industry’s IT, all the processes, all partnerships; your greatest asset is your companies have a massive amount of data the people are still product-aligned. A staff; look after your customers; run

on us. “What those companies are largely good first step is to mask that from the quickly.” n trying to do is customise experiences and customer with a new front-end, customer- provide those experiences to us,” said journey-based experience,” said Neal Cross, Goyal – thus, converting share of mind chief innovation officer, DBS. The past to share of wallet. “If you’re already a doesn’t have to hinder the future, and the customer of a big data company, the cost priority is to contextualise banking within of acquiring you, to sell you a financial customers’ lives. Jie Song, senior director, product, is close to zero. Think about how Ant Financial Service Group, said: “When they can price those products relative to we talk about strategy, at Ant Financial Your greatest asset is somebody who actually has to acquire you we’re really talking about user values.” as a customer.” your staff. A key route to the future involves open A sobering thought. How do incumbent banking, suggested the panel, but taken in Neal Cross, financial service providers and users its widest sense – using digital technologies DBS respond? One option is collaboration. such as cloud and APIs to connect more

58 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 59 STANDARDS Innotribe: Getting ready for a smarter world

Closing plenary: Innovation at scale Provide as much guidance as possible about how the new messages can be used.

John Jackson, Bank of England

Standards are at the heart of the ongoing MT messages will coexist with ISO 20022 Sibos 2018’s transformation of the global payments for a period of four years and SWIFT landscape that is being shaped by will provide a central utility to translate Standards Forum regulatory change, new technology and between ISO 20022 and MT standards, Communicate, fresh competition between incumbent enabling interoperability for the community. highlighted the players and disruptive entrants. This While the board recommended that SWIFT transformation touches upon the full provide an ISO 20022 capability for cross- need for industry- spectrum of payment services, from retail- border securities flows for institutions to led instant payments schemes and open use on an opt-in basis, it does not propose wide collaboration API-based payment initiation services, to set an end-date for the use of ISO 15022 collaborate, to new high-value payment systems, (MT category 5 messages). when preparing for and innovations aimed at improving the speed and transparency of correspondent As ISO 20022 becomes universal, it will yield migration of cross- banking. major long-term reductions in operational cost and risk alongside improved compliance border payment ISO 20022 has been adopted by market and transparency. MIs will be able to co-ordinate infrastructures (MIs) in more than 70 interoperate more easily, and banks will be messages to ISO countries, and further key infrastructure able to access ISO 20022-based MI services operators including the Federal Reserve, through a standard interface. 20022. European Central Bank and Bank of England will adopt the standard from 2021. Coordinated action Across the Asia-Pacific region, key markets such as Australia, India, China, Japan and For all this upside potential, migration is not Singapore have already adopted it for without its challenges. As Stephen Lindsay, all or part of their domestic payments head of standards at SWIFT, noted in ‘ISO infrastructure. Following an extensive 20022 migration: Will it be a marathon consultation, the SWIFT board approved or a sprint?’, the move to ISO 20022 for the facilitation of an industry migration cross-border flows will require stakeholders of cross-border payment messages – MIs, banks, SWIFT – to work together to (MT categories 1, 2, and 9) aligned with ensure interoperability. Recognising that the adoption plans of major high-value fragmentation of ISO 20022 deployments payments systems in the euro area, threatens to undermine the standard’s currently scheduled for November 2021. intrinsic value, SWIFT’s Payments Market #StandardsForum Understandably, given the scale of the Practice Group has been ensuring Sibos TV: #ISO20022 migration challenge, much of the Standards coordinated industry action to align and Adoption of ISO 20022 #Payments Forum at Sibos 2018 was focused on its enhance global market practices across - 25 Oct 2018 #Digitisation practical and business implications. countries and ISO domains.

60 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 61 Each community must find the best way to migrate.

Marc Bayle de Jessé, European Central Bank

Inevitably, local migration projects should be used – will be vital to the data services and the creation of new progress at different speeds, incorporating success of global ISO 20022 migration. products based on the flow of payments diverse priorities. Hong Kong’s newly information; and harmonisation, through launched faster payments infrastructure Outlining a clear timeline for any a common credit message for all payment uses ISO 20022 and its RTGS system will implementation is also an imperative. systems in the UK. do so next year. According to Stéphan Patricia McSweeney, director of Levieux, head of deposit, payments and industry relations at CIBC, underlined The project goal should be benefits for the cash management strategy at Hang Seng the importance of communication in whole market, not just direct participants, Bank, Hong Kong regulators are keen to general – including tools to be provided through harmonisation, said Jackson. move quickly beyond initial migration by MIs, availability of translation rules “That way, the cost of entry for your toward use of ISO 20022 to achieve and market practice guidance, and robust payments system is as low as possible, greater integration with mainland China. channels to keep banks informed from because people will be using the same a timeline and a service perspective. In standards that they have already built for When it comes to the migration strategy, turn, banks themselves have a key role in all the other systems they need to access. key lessons to draw from the experience communicating effectively with their own You also want to provide as much guidance of MIs include the importance of building customers and to relevant third parties as possible about how the new messages from the needs of business users inwards to manage required changes within their can be used – it goes beyond the syntax of to the centre, rather than the centre – the system infrastructures. the messages into the business processes message format itself – outwards; and that sit around them, and how those are participants should initially be prepared Market-wide benefits harmonised,” he said. to explore flexibility within the ISO 20022 standard framework. Difficult choices and compromises The inclusion of corporates in particular inevitably lie ahead, and engagement was highlighted by Sean Mouton, chief Marc Bayle de Jessé, director general for across constituencies will be critical to technology manager at ABSA Bank. market infrastructure and payments at ensure informed decisions are reached and “They bring a different view on how the the European Central Bank, stressed that the outcome of those decisions is accepted business actually happens. As part of there is no good or bad way of migrating, by all. When the Bank of England looked the MyStandards platform, we are now whether an ISO 20022 transition takes at moving to ISO 20022 for wholesale incorporating ‘South African standards’ for place in multiple steps, first on a ‘like for payments as part of its blueprint for corporates to communicate to the banks like’ basis and then only in a second step renewing the UK’s RTGS system, it adopted – we are looking to create a messaging to the full enhanced functionalities, or a community-wide approach to determining standards community involving many moves straight to full implementation: how the standard could change businesses individuals and banks and corporates, large “Each community must find the best and drive innovation. and small,” he said. way to migrate depending on their context, maturity and requirements. As explained by John Jackson, policy The bank’s decision to move immediately to We in Europe will move directly to full lead for its RTGS renewal programme, enriched messaging has given rise to some implementation to benefit from the start the Bank of England identified three key temporary interoperability issues when from the enhancements brought by this benefits: more structured data, ensuring dealing with entities outside South Africa, new standard.” Nevertheless, to ensure that transactions flowing through the added Mouton: “We expect to start seeing a harmonised migration and end-to-end payments chain are more standardised real benefits when everyone is in the same interoperability, observance of market and predictable, and hence easier to domain and exchanging the same data and practices – centred on a common set process; richer data via a bigger data using that data for ancillary services, which of business data and the way that data load, allowing the overlay of added-value will be around 2023 or 2024.” n

62 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 63 APIs are a good way for View APIs as a tool for customers to have real- the business to acquire time interactions when and service clients.

it comes to instigating David Andrzejek, Google payments.

Paul Franklin, National Australia Bank

The onward march of application “Now that we can do real-time payments decisions. APIs are just the same.” From an ecosystem of existing standards is a big programming interfaces (APIs) continues between banks, APIs are a good way for external perspective, “innovation happens plus, in terms of reassuring users.” Growing unabated in financial services. Multiple customers to have real-time interactions in the bazaar, not back in the temple – new service initiatives involve designing when it comes to instigating payments, standards designed in a locked room away Taking up this theme in the context of and exposing APIs, as institutions look making payment requests and receiving from customers struggle to survive in the the NPP’s API framework, Lisa O’Connor, pains to provide single points of entry across notifications of payments.” face of market forces,” he added. SWIFT’s head of standards for Asia diverse underlying systems and ensure Pacific, noted the tension between the interoperability across channels. However, the proliferation of APIs does Meaning and consistency creativity and agility of APIs in responding raise questions and challenges for the to client requirements and the need for APIs provide “building blocks for industry. A reappraisal of funding models While regulators globally are mandating interoperability through standardisation. new business functionality and user and KPIs – to reflect the product- or use of a relatively narrow set of open APIs, “The agility to deliver the right service experiences”, noted Deniss Kascejevs, API channel-based nature of APIs, rather than banks are putting pressure on development to the right people at the right time will product manager at SWIFT. APIs allow a traditional ‘project’ – were two aspects teams to quickly deliver APIs that solve remain important,” O’Connor said. “Within the creation of applications, facilitate the raised. Another was the need to reorganise specific problems, with less regard to the NPP framework, as long as you agree integration and organisation of business internal teams to create more cross- standardisation. on the business meaning of what is used flows between counterparties, and provide functional units, allowing technology and in the API with reference back to the ISO a unique opportunity to bring a number of business functions to work together in a “Standards help provide extra meaning 20022 dictionary, the API not only works elements together within a single concept more integrated fashion. and consistency and harmonisation to for NPP but can also be reverse compatible

– standards, interfaces and products. the data we are sharing with people back into the banks.” n The agility to deliver Kascejevs added: “It gives users the Consultation and collaboration are key, within our ecosystem via APIs,” noted opportunity to build their own value-added both inside and outside an organisation, Dan Chesterman, CIO at the Australian the right service to services around SWIFT’s offering.” noted David Andrzejek, responsible for Securities Exchange. His recognition of API ecosystems at Google. “There can be the need for standards was echoed by the right people at the Paul Franklin, general manager for resistance and suspicion about APIs at the Hans Tesselaar, executive director at the payments at National Australia Bank, business level, but they should not simply Banking Industry Architecture Network: right time will remain flagged the ability of APIs “to deliver a be delegated to IT,” he said. “View it like “Do we need standards? Yes. To increase richer interaction than is possible with building a physical branch office, which is a adoption rates, how do we persuade important. a message-based interaction”, which is tool for the business to acquire and service people to use our APIs? We fully aligned particularly valuable in the context of clients. The business should be involved them with ISO 20022, because people Lisa O’Connor, Australia’s New Payments Platform (NPP). in design and location and other technical know it – the fact we are linked into a huge SWIFT

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Sibos 2019 London

Innovation at scale

Throughout Sibos 2018, presentations and Sibos 2018’s closing panel discussions served to demonstrate that innovation is not only a case of plenary reminded us building the right technology stack and redesigning operational architecture, that we are only in but equally about the human aspects of the earliest stages of managing change. Innovation is a global phenomenon, noted the fourth industrial Alain Raes, SWIFT chief executive for the Asia Pacific and Europe, Middle East revolution. & Africa regions, in Thursday’s closing plenary. But, he observed, it is often more visible and perhaps growing at a faster pace in Asia Pacific, due to the “booming” nature of the region’s economics and demographics.

“Tens of millions are moving to the middle class,” said Raes, referring to a shift which is driving unprecedented demand for financial services in the region, preferably delivered by smartphone. In addition, governments are playing a key role in ensuring the finance sector delivers new #Plenary services, often to the previously unbanked. #Digitisation #Cyber “Governments and central banks are #Banking pushing for innovation. In India, for example, the government has been involved in creating a unique digital ID,” explained Raes. The roll out of digital IDs to 1.3 billion

66 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 67 The only way to survive in this new We are talking about environment is by systems that could be collaborating. ambient or invisible. Alain Raes, SWIFT Professor Genevieve Bell, Australian National University

people has paved the way for universal 75% of the banking community still feels Sibos 2018 also reflected the pattern recognition which can support voice access to India’s planned real-time payment unprepared to manage this threat. transformation of the payments industry, or facial recognition, to machine learning system, “which will create a lot more with recent entrants such as Alipay and systems to find patterns in data sets too innovation moving forward”, he added. “The single main pillar of the banking Tencent offering different models and large for humans to process. industry is trust,” he said. “Therefore user experience for consumers, while Innovation in action to me if the industry is not bringing simultaneously presenting threats and Closing speaker Genevieve Bell, the right response to this, globally and opportunities to existing financial services distinguished professor and director The closing plenary also provided a collectively, then trust will be under players. of the 3A Institute at the Australian live example of Asia Pacific innovation attack.” Raes suggested communication National University, believes it will present in action. Bill Doran, SWIFT’s head of would be critical to retaining customer Raes said, “The only way to survive in this challenges in our work lives, but also in our Oceania, helped Australian delegates to trust. “It’s about making sure that banks new environment, where you have fiercer lives as citizens and consumers. use the country’s recently launched New are changing and sharing experiences and competition from new entrants, is really Payments Platform to make charitable trying together to take lessons from what by collaborating and using those new Professor Bell’s initial interest in the space donations via their smartphones in real is happening in the industry.” technologies that have been discussed this began while at Stanford University, taking time. Thanks to the new instant payments week, such as APIs through open banking, her PhD in cultural anthropology. A chance service, delegates added AUD4,000 during In conversation with Raes, Stephan to reinforce collaboration, leading to new encounter with an Intel employee led to her the closing plenary to the AUD40,000 Zimmermann, SWIFT deputy chairman, innovation.” being employed in Palo Alto at a time when donation already pledged by SWIFT to noted the absence of a common global Intel was realising that innovation had to be Australia’s Girls and Boys Brigade, which legal framework for dealing with the Transformative technology spurred on not only by what is technically provides educational, recreational and cybersecurity threats faced by banks, possible, but also by what makes sense to other opportunities to disadvantaged making coordination within the industry Perhaps the most transformative human beings. children. all the more important. “Banks are already technology discussed at Sibos 2018, in in a trusted network and they know how terms of its range of applications, its “Listening to human beings and then As Raes acknowledged, “Asia also has to share information with each other,” he capacity to change how processes work, and infusing what it is that they care about into its fair share of challenges.” Alongside said. “We have to collaboratively get our the potential for scaling businesses up very how we make technology – that’s always the sheer pace of growth and innovation, act together and collectively answer to efficiently, is artificial intelligence (AI). As an been my job,” she said. cyber-security risk has steadily moved up these challenges. Collaboration is not only umbrella term, it captures everything from the curve of concerns for banks and their important now to fight cyber-crime, but robotic process automation, which enables Part of that process means thinking about Sibos 2018: Closing Plenary users. And yet, as Raes observed, some also in other aspects of our business.” efficient management of low-skilled tasks, to the kind of technical systems that need to

68 Sibos Issues 2018 Wrap-up edition Sibos Issues 2018 Wrap-up edition 69 Banks are already in a trusted network and know how to share information with each The safety piece and other. the scale piece are

Stephan Zimmermann, SWIFT where all the hard work exists.

Professor Genevieve Bell, Australian National University

be built, but also imagining the other skills the fourth wave to scale? “We talk about decide things for themselves. In that sense can be made autonomous, with a set of AI: advanced interactions? that will be needed to manage the future. the fourth wave of the industrial revolution: they will be autonomous within a framework. controls, there are further challenges that Most importantly for the finance sector, the internet of things, big data, algorithms, need to be resolved around risk, liability, The final set of questions will need to that can mean how to take those systems artificial intelligence. At the moment, those The second order of questions will be manageability and ethics. Those will also address how it feels for people when these safely to scale. “It turns out the safety are all small things, sometimes installed in around who gets to decide what autonomy necessitate that responsibility is given for systems exist. Humans will need to know piece and the scale piece are where all the a big way,” Bell asserted. “What will it take looks like and how it is manifested, deciding where the risk and liability sit. whether these systems are what they hard work exists,” Bell said. to go from AI as the steam engine, to the particularly within a business. appear to be, and may need a signal that metaphoric railway?” The fourth set of questions are focused the system is operating autonomously. From the first industrial revolution, “Who is regulating it?” Bell asked. “Who on the metrics used to measure AI, its “We are talking about systems that could which encompassed steam engines and Five steps to scale is setting the controls, who is doing the performance, success and failure. be ambient or invisible,” Bell said. “All the mechanisation, to the second which scrutiny, what will it mean to have these metaphors we have for human computer brought in electricity and mass production, We are on the brink of a world in which autonomous objects flow across different “For the last 250 years of the industrial interactions don’t scale that way.” to the third, which led to the proliferation autonomous, intelligent systems – boundaries? Autonomy in one place revolution we have proceeded with the of computers, industry has been scaling up including drones, self-driving cars and may not look the same somewhere else, notion that efficiency and productivity As such, Bell suggested that our as new technologies have evolved. smart elevators – will play an increasingly because you are conditioned to make sense gains are the most important metrics conversations around AI need also to be integrated role in our everyday lives. of one rule not another.” of a technology,” Bell said. “If it saved conversations about ourselves. “What it “Each one of those waves created a new According to Bell, this new robotic era you time, money, space or legwork, that means to think about that fourth wave of academic discipline: engineers appeared throws up five sets of critical questions The third set of questions concern the was excellent. It’s not clear those are the the industrial revolution isn’t just thinking for the first one; the second wave brought for society, starting with how autonomous transposition from one situation to another, metrics we want to use for the systems that about the next generation of technologies, us electrical engineers and also MBAs, these machines will be, and how autonomy and the role of common standards. are coming.” it’s thinking about the next generation of because it turns out when you have mass is defined in this context. human/social technical systems. It’s about production lines you make money in a Bell gave the example of autonomous cars Instead the future focus is likely to be thinking about who we are, the people who completely unexpected way. The third wave She noted that it is likely that these ‘robots’ being deployed in Australia having been around safety, risk and sustainability, when are going to help shepherd that world into necessitated computer scientists, but it will be autonomous, without being conscious developed for another market. Early models assessing the success of automation, said existence; what technologies, skills and was all about how to take a series of small or self-aware, which is not regarded as a lacked the capacity to anticipate that an Bell. “While companies like my own, Intel, regulations will we need? What are the pieces of machinery and get them to scale.” necessary logical progression. A closer object in the road might move vertically – are committed to decreasing the power checks and balances we will need? And, approximation of autonomy will be the as kangaroos do – as well as horizontally, budget, we are also increasing the density from where I sit, what are the conversations According to Bell, the question the industry capacity to make decisions without reference highlighting the importance of localising of devices. So how do we want to think we will need in order to be prepared for the must ask now is: what will it take to bring to an approved script, with localised ability to systems to different conditions. If machines about the metrics that we would use here?” world that is coming?” n

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