SIBOS is quickly shaping up to be a gut check for the financial services industry. As the event wrapped its second day some of the discussions checked the usual boxes like real-time payments, ISO 20022 messaging and cross-border transactions. These contained essential insights but were amplified when placed in the overarching context of the event: the future of payments. The prime sentiment seemed to be that all the payments technology in the world won’t matter if its deployment doesn’t slow down enough for banks and their business customers to catch up to the speeding train called digital transformation.

“When you think about how you move money around the world on behalf of your clients, so much has changed, there are a myriad of options out there,” said Wells Fargo Ather Williams. and sometimes we change our mindset and think less than we should about how bankers can achieve the outcome they want,” said Wells Fargo senior strategy EVP Ather Williams. “They don’t really want to know how the sausage is made, they just want to get the money there the way they want it with the information they want it to contain.” 

Williams spoke on a panel that dealt with instant and cross-border payments but quickly became a forum on innovation and the complexity that has made international banking a landscape full of new companies, new business models and new regulations. As we‘ve said for some time, innovation and technology advancements must be accomplished in the service of the customer. Banks are looking for new and interesting combinations of capabilities to solve their customer-centric business problems. As another Wells Fargo executive, Madhu Narasimhan said during Monday’s SIBOS event, technology is about making payments safer, smarter, easier and faster. 

Those features were front-and-center when the conversations turned to real-time payments and the ISO 20022 messaging format that enables rich data to ride along with it. As an essential part of any digital transformation, it also must pass the litmus test of customer adoption and satisfaction. As Visa Europe CEO Charlotte Hogg told the audience, she is hopeful that ISO 20022 can address the unnecessary complexities in various financial messaging formats. She noted that over the last year Visa Direct, the company’s instant payments platform, processed about 2.5 billion transactions over multiple methods, using multiple standards. It used 16 different card base networks, 65 ACH networks, seven fast payment schemes and five different gateways. As the industry moves toward the ISO 20022 standard, she said, the industry needs to remember that messaging standards can promote interoperability, which is the end goal. 

Standard Chartered CIO Michael Gorriz agreed. “There are still banks out there who don’t exactly know how to format,” he said. “They need to switch to ISO because they’re really forced to put higher quality data out there, which makes all kinds of processes easier. So therefore, I believe that ISO is a huge step forward. But I agree that it’s not the only solution to the problem. It’s an important ingredient and we are fully embarking on it and driving it within our network.” 

Other “gut check” items from SIBOS included a focus on data ethics and the ability for banks to absorb the digital shift caused by the pandemic. All of which are corollaries to the digital transformation that is so essential to competing in the current economic and banking climate. 

For example, EY Global Chief Innovation Officer Jeff Wong noted that his company’s recent research shows that 31% of US consumers named a fintech as their primary financial relationship in 2021, up from just 6% in 2019. Customers need to be “met where they are,” according to Wong, with embedded services and collaborative ecosystems. Wong added that EY has also researched historical periods of business disruption, such as the one the financial industry is experiencing. His group found that there are two types of companies and accompanying strategies in the aftermath of disruption. The first group insists on a business-as-usual approach, betting that legacy business models will outlast the new competition. 

“The second group, typically a much smaller group and the one all of you want to be,” Wong said, “is led by companies who understand that after a major disruption there is a unique window of opportunity to address changing customer needs through making bold decisions and investments that lead to a burst of innovation and productivity. I’ve seen the graphs, and it’s clear after only a few years, who made those bold decisions.”

Posted by Edward Ireland