This episode on the Payments Podcast features Ed Adshead-Grant discussing some of the key points of this year’s event, specifically on Open Banking, Machine Learning and Artificial Intelligence (AI) and the future of Banking.

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Podcast Transcript

Rich Williams: Today, we’re talking about Sibos 2019, a four-day event filled with some of the greatest influencers and companies in the payments and banking space. Hello, I’m Rich Williams, host of The Payments Podcast, and, today, I’m talking to Ed Adshead-Grant, General Manager and Director of Payments at Bottomline about insights from Sibos. Hi, Ed. Thanks for joining us today and welcome back to the podcast.

Ed Adshead-Grant: Thank you.

Rich Williams: So, Sibos is renowned for being the event which highlights the most important topics in the industry over the coming year. Could you give us a quick overview of why Sibos is such a key event?

Ed Adshead-Grant: For sure. This is the 41st Sibos we’ve just had, can you believe it, in London for the very first time? So, kind of, funny to wake up in my own bed and then commute into a Sibos, I’ve never had that experience, but records were broken. The official number is 11,572 delegates that registered this year, over 600 speakers, 300 sessions. 

So, really rich content, lots of networking, lots of sparking of ideas that come through Sibos and access to some of the leading CEOs and leaders that share strategies at the event, whether they’re financial services or fintech organisations. So, fantastic and efficient way to meet people and create some new ideas. Yes. So, a big fan of Sibos. 

If I was to pick out one other difference this year, do you know, it’s an odd thing, but we’re starting to dress differently. So, in previous years, it was very much suit and ties, all bankers, and it was very noticeable this year, for me, that there were a lot fewer ties being worn, even some jeans up on the panels and on the stage. So, there’s definitely a fintech injection of fashion as well into Sibos this year.

Rich Williams: Wow. So, content and fashion evolving simultaneously.

Ed Adshead-Grant: Very important items. 

Rich Williams: So, open banking and PSD2 are topics that are discussed in the industry on a fairly regular basis. How were these topics addressed at the event this year?

Ed Adshead-Grant: So, the great with thing with Sibos is it’s a global forum and a global practice for people to come together. So, I remember sitting in one session just 24 hours ago where we had the regulators from Canada, Australia, UK and the USA all together sharing their thoughts on open banking and a privilege to have it in London where, of course, open banking was started just officially last year, it went live, but there have been lots of years planning in it. 

So, the kinds of things that we pull from it are the differences, the similarities in the different market infrastructures. So, we talk about consent models, data rights, liabilities, the governance frameworks across different nation states. It’s very interesting the diverse approaches to open data, open banking, PSD2.

In fact, we ran our own panel on day three with a number of banks around the world and focusing in on the corporate benefits, not just consumer benefits. Probably the main conclusion from that I would say is simply that the genie’s out of the bottle, there’s no going back now on open banking. We are moving in one direction into this open world of data, which makes it very exciting.

Rich Williams: Yes. You used the term genie’s out of the bottle. Now, as we head towards the two-year mark with open banking, it definitely feels like it’s becoming more engrained in our society in general. How can we expect to this expand or adapt in the next year?

Ed Adshead-Grant: So, that interesting you say engrained. See, I don’t think it’s engrained yet. It is getting there, but this takes time. Someone quoted to me recently how electricity back in the 1800s took 45 years to reach just 25% of the population. So, it takes time for technology to disperse and the open banking model is in that same bucket. I think 2020 will be an accelerator, but there are still a lot of challenges. 

So, it’s not natural for banks to open up their data sets. They have been working for hundreds of years, in some cases, keeping and locking data away, it’s just their DNA. Their systems, some of them are legacy now, but they have been hard-coded to lock away the data because it’s a compliance issue and they need compliance to operate.

So, I’d say awareness is low, momentum has been slow. I do hope it speeds up in 2020. I think we’ll start to see some case studies emerging and certainly at the panel that we ran at Sibos, we were sharing some of the very early commercialised examples, for example an FX company that can see how open data helps them reconcile the movement of monies across currencies or an insurance company that wanted more real-time access to cash flow positions. So, they’re starting to emerge, but it’s taking time to diffuse amongst the user groups.

Rich Williams: How do you think the banks should be moving towards this more innovative stance on open banking, Ed?

Ed Adshead-Grant: Well, I think the invitation is to start moving away from a compliance mindset to an innovation opportunity mindset. So, there’s always a balance between the paranoia of data security and what open banking means, but it is a secure approach that has got regulated players involved. So, if the ownership can move into more revenue growth, rather than compliance deliveries, I think the banks will be in a good place.

The other bit that is worth looking at it is the partnerships. So, we’re working with one bank in particular, they just don’t have the bandwidth to look at the innovation behind open banking, so they’ve actually asked us to take on five of their corporate clients to develop some of the payment innovations, the PISP models, for them. So, we’ll see where that goes, but partnerships and focusing on the opportunities is the way to go.

Rich Williams: So, that links quite nicely onto the next topic, Ed. Thanks for that. You previously mentioned legacy systems being a challenge to the expansion of open banking. Now, how does this impact the development of common application programming interfaces, which we’ll call APIs from here on?

Ed Adshead-Grant: Yes. So, I’d say banks are getting there at different paces and in different ways. I like the comment from Wells Fargo this week at Sibos where they said, “Look, if you don’t give it up, it will be given up for you.” So, there’s this realisation that there has to be an opening up of the data, there has to be an embracing of API technology to link the world together and ecosystems have a strategic role in future success in payment operations.

In fact, the Sibos catchline was about thriving in a hyperconnected world. That hyperconnection is done today through API technologies and the standards that have certainly been set in the UK. We have a standardised set of APIs to help the adoption. A little different story in Europe where the APIs aren’t standardised under PSD2, they have left it to open market forces. So, we’ll see where that extra complexity goes, but, as a whole, APIs are here to stay and banks will look to embrace them further.

Rich Williams: Yes. As you mentioned there, Ed, the theme for Sibos this year was, indeed, thriving in a hyperconnected world and that’s closely tied to and including a focus on the impact of new technologies. So, let’s move onto a subject that’s a little more niche, which is artificial intelligence and machine learning. Now, in the blockbuster films that we all know and love, we always see these machines coming to life and taking over the world, but that’s probably not a fair representation of what we can expect. How are organisations using machine learning more practically?

Ed Adshead-Grant: So, I agree, it’s not quite the Terminator film yet in the financial services world, but, for me, AI and machine learning, it’s all about taking the guess out of the work, the operations. So, with the technology, you can be much more specific around certain computer routines and the item that’s often quoted is around reducing false positives when you’re running through payment files and transactions. That’s certainly where we’ve been putting a lot of investment in on our risk and compliance solutions and putting machine learning around those routines. 

It’s only a few years ago when I was listening to another personality at Sibos on the stage who works at Amazon, that their prediction and technology for just stocking the books in storage was taking the mean average of the books, multiplying it by two, and that was their smart algorithm for being in stock. Now, for all of us that love and use Amazon, they have much smarter algorithms to get the predictability and the supply chains completely nailed. 

So, there are a lot of areas where AI and machine learning can be used. Again, I think it’s a matter of picking up the best use cases and understanding the problems that are being solved, so we don’t fall into that classic trap of it’s just a technology looking for a problem, but we find the problem and then apply these algorithms and machine learning to it.

Rich Williams: With technology acting and making decisions for us, perhaps mitigating some of the risks of human error, are they always correct and how much can we trust them?

Ed Adshead-Grant: Trust is a big word in this industry throughout payments, for sure. Then, you put in these computer algorithms and it’s another level altogether. I view it as more accurate. So, almost like the driverless cars that are starting to emerge, who in the room or our listeners here are ready to go behind the steering wheel and trust that car to get you from A to B as you sit back and read a book or have a non-alcoholic drink during the journey? 

It’s going to take time, it’s not perfect, there are always errors and there’s a growing field of work around the algorithms which have been written by humans and, in themselves, have certain biases and prejudices. It’s an interesting area to watch, so interesting space.

Rich Williams: The event created a firm outlook on where the future is heading. So, moving on slightly, but still in the theme with that future discussion, where do you see the future of banking going?

Ed Adshead-Grant: The future of banking is one where I see real-time everything. So, data really is the new oil or the new gold, as many industry commentators would discuss. Taking that data, making the experience relevant and personalised to the user is a key puzzle to work through. So, that means innovation, that means this area of overlay services that’s being discussed, where once we have the basic foundation blocks in place for APIs and open banking, how do we then create the services, these overlay services to commercialise something for the users, be it a corporate or a consumer.

Interestingly, in Australia, we had sessions at Sibos around how they’ve gone beyond financial services. They take in the telcos, they take in the electricity providers, so it’s a complete 360 lifestyle view of open banking bringing value in for the user. So, I’d certainly like to see the banks being in this space, I’d love to see us clicking on those bank statements in the near future and up comes your payslip or up comes the invoice that got paid, so these documents come together with the payment and there’s just more value generated from the future of banking.

Rich Williams: Now, you mentioned real-time everything there and as things evolve and human beings inherently become more impatient and more busy, let’s look at real-time payments specifically. So, how close are we, Ed, to global real-time payments?

Ed Adshead-Grant: We’re some years away is the frank conclusion there, but momentum is building. So, there are now 46 countries that have real time systems and there’s a bunch more that are planning to come through with real-time payment systems. I recall HSBC this week talking about the last 18 months, to service their customers, they’ve had 10 countries go live with real-time payments that they’ve had to accommodate to get their banking services competitive and compliant.

So, open banking and real-time come together. To me, they’re skipping along as two developments that need each other. In fact, we did some research on this with our UK Payments Barometer just this year, where we now know corporates are adopting open banking and real-time payments. I think it was 90% of the corporates will be using real-time payments by the end of 2020. 

So, it’s happening, it’s building momentum. The challenge and the reason I’m slightly conservative on the speed of it is there still remains different regulatory frameworks, there are slightly different standards, different caps on amounts that can be sent, so it takes time for these new policies, procedures, technologies, regulations to standardise longer term.

Rich Williams: Whilst Sibos 2019 was taking place, Bottomline released a press release explaining how your powering faster payments for Vive via the Real-Time Express Service.  What does this mean for them and is it helping take that next step towards where the future of payments are heading?

Ed Adshead-Grant: Yes. This is another exciting ground to break for us with Vive, who we’ve worked with for a number of months. So, they’re a new digital entrant. They wanted access to the traditional payment and clearing systems, like faster payments. So, we’ve plugged them in, actually, with our partnership with Starling Bank in the background. So, we provide all the technology and secure processing and Starling Bank is our partner for the regulatory bank work. 

So, there’s no CAPEX involved, it’s a subscription model and, as a start-up, there is no barrier to entry, low cost and they can be up and running as soon as their banking licence is fully granted into the world of payments. API-led and fast to market. It will only take a few weeks to finalise some of this project once the papers are signed. So, another exciting acceleration in the future of banking.

Rich Williams: Well, thanks for sharing your thoughts there, Ed. It’s definitely giving us a great insight into the next year in the industry and something to continue to keep note of. Thanks once again for joining us again on the podcast.

Ed Adshead-Grant: Pleasure.

Rich Williams: Well, that’s all we have time for today, unfortunately. We’ll be back soon with some new podcasts and, in the meantime, you can listen to more episodes on all things payments at the touch of a button using your preferred provider. We’ll see you all next time.

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