Sibos Day One was teeming with people bustling from stand to stand, and was filled with informative presentations from some of the greatest influencers and companies in the payments and banking space, sharing their predictions, concerns and insights.

Renowned physicist Professor Brian Cox opened the conference at Excel in London with a reminder about trust as one of the central themes of this year’s conference agenda. His presentation focused on what science can teach us about wider society. As part of his presentation he made mention of a couple of physicists who worked on the Manhattan Project during WWII, one of which was Julius Robert Oppenheimer.  Oppenheimer claimed that nature forces us to look at the world in a particular way; it’s a harsh master says Cox to the extent that “there is no dodging what nature tells you.”

Oppenheimer, for example, said that a particle such as an electron can be seen in two different ways: one is as a point-like object as a building block of nature, the other as an extended object that fills the entire room that it’s in. Likewise, in politics there are many ways of thinking about civil society: libertarian views focused on the needs of individuals, as well as those involving people working together.

Cox says Oppenheimer argued that both views are essential for understanding how society works and how humans interact. Nature forces us to think like this. Because nature forces people to think in a particular context of cosmology, he adds that trust is about admitting that, as a human race, we are not always right. He stresses that this requires us to think in counter-intuitive ways.

Emerging from Silos

In many ways Cox is right because many speakers during the first day of the conference highlighted that the banks need to transcend their silos if they are to survive and thrive the onslaught of increased competition from non-banking players; such as the tech giants and smaller fintech start-ups.

Further to this competitive environment, there are ever-increasing regulatory pressures faced by banks – including the European Union’s second Payments and Services Directive (PSD2). Like the universe, there are many different particles or players in banking, so banks need to innovate by embracing innovation through the creation of collaborative ecosystems – and this will often entail working with fintech companies to remain competitive. Banks can therefore act to fill the room and to evolve how they operate digitally.  

There was also a call for banks to re-consider their business models today. Open banking will form part of this evolution – despite the fact many of the public don’t understand it, and consequently don’t yet trust it. Banks therefore need help to educate both business customers and consumers about its benefits. Appropriately, Imran Gulamhuseinwala, the Implementation Trustee for Open Banking Ltd and holder of an OBE for Financial Services, predicts that 2020 will be the year of open banking, suggesting that innovation can help to address many of the issues that face banks today.  

Oddly, many people may think that open banking risks the security of their bank accounts, and leaves them open to fraud. Conversely, he finds that 80-90% of consumers want open banking to be available from their smartphones and mobile devices.  In Gulamhuseinwala’s view this means the market needs to be rebalanced in favour of consumers to ensure that they feel they can trust open banking and the technology that sits behind it.

Common APIs

With legacy systems being quite a challenge to the development of open banking, there is arguably also a need to develop common application programmable interfaces (APIs). Crucial to this will be the harvesting, sharing and analysing of ‘smart data’ to enable new products, services and markets to be developed with improvements in customer experience and customer requirements in mind.  Gulamhuseinwala therefore thinks there is a need to “get the data right, and to share transactional data while focusing on customers.”

Financial futurist and author of Banking 4.0, Brett King, adds: “Open Banking ultimately is designed to give customers access to their data more fully when it comes to banking and payments. But the real winners may be the technology giants enabling these new experiences by combining their existing data with financial behaviour and transactions.”

Tony McLaughlin, who works in Emerging Payments and Business Development at Citi, went so far as to suggest in one session that big tech companies are lending better than banks when it comes to payments platforms. They are doing this by openly publishing their APIs. He argues that the global banking community should be coming together to develop common standards and standard APIs. He also warns that there is a need to fix the FIAT currency system to prevent alternatives from taking over. To achieve this, he thinks that banks need to be become the guardians of digital identification.

Coalition of the Willing

During the plenary session, the Chairman of SWIFT, Yawar Shah, said that advancements in the banking and payments sector requires “innovation with a coalition of the willing” – a global co-operative of SWIFT member organisations working together to effect change – moving away from focusing on driving efficiencies alone to investing in people, knowledge, skills and technology. His view is similar to many other speakers at the conference, who want to see payments being completed in seconds. To this end he claims that his organisation is making significant investments in payments security – including the implementation of GPI and ISO standards. He feels that the focus should remain on resilience, security and integrity. All of these are factors that create trust.

Shah also introduced SWIFT’s new CEO, Javier Perez-Tasso, who argues for global collaboration and co-operation in payments to develop the necessary infrastructure, which needs to remain reliable. To this extent Perez-Tasso believes that the focus should be on innovation and the ability to scale cross-border payments infrastructure. This requires the banks to play a central role. He adds that there is a need to trust the technology while helping customers to use its payments platform. However, there is no need for customers to be concerned about any payment platform’s back-end.

Cognitive Banking

Lloyds Bank not only believes that success is about developing its people, but also recognises that there is a need to create a ‘Cognitive Bank’, which unleashes digital Darwinism, leverages incumbent data, architects for change with hybrid cloud, and re-designs workflows with artificial intelligence to succeed. It believes the industry is in a cognitive era, which requires a multi-step journey that will inevitably be different for every bank. Yet innovation and change must start now.

Pulp Friction

There is ‘Pulp Friction’ to overcome too, which entails removing any friction from payments because it has an impact on clients, costs, reputations and it can increase risk. Consequently, the banking and payments sector – despite the challenge from fintechs – need to create an environment in which they can compete. Banks must therefore become more proactive and less reactionary. They can begin by working with others within the banking and payments ecosystem to ensure that it is interoperable. This may involve working with fintechs and investment in new technologies that bring value. As with IBM, there may also be a call for using artificial intelligence (AI) to better control financial risk. The basis of this must be about having the right information architecture, without which AI won’t work.

Bottomline Technologies (Stand X140) believes that, while there are many challenges facing banks, there is an overall need to help them on their digital transformation journey. The regulatory pressures and the challenges from new entrants to the market, as well as the opportunities that are being created by emerging markets, are some of the areas in which fintech providers can offer support.

Promising Future

So, while the financial crisis of 2008 led to a loss of trust in banks, there is much promise ahead. They can, even with the development of open banking, gain their customers’ trust by collaborating with both the traditional and non-traditional players within the banking and payments space. This will support their development of more secure payments platforms, prevent fraud, improve customer experience and engagement, enable better integration of payments platforms, and succeed in today’s digitalisation of the global economy.

With the help of fintech firms, banks now have the opportunity to truly embrace innovation in order to thrive in the new real-time open environment. By positively and proactively putting customers’ needs at the forefront of their minds, they will instil more trust which will reflect positively on their offerings, their revenues and their brands.  

Posted by Graham Jarvis

Graham is a freelance business and technology journalist, currently Bottomline Technologies' Roving Reporter at Sibos. He writes about I.T, fintech, payments, blockchain and crypto-currencies. His articles appear in FSTech, Banking Technology and Fintech Futures, Information Age, Global Banking and Finance Review and in many other similar publications.