Sibos kicks off; UK regulators crack on

Banking And Financial Messaging

Ed Ireland

Edward Ireland

Oct 12, 2022

It’s been a busy week in the business payments category with Sibos kicking off, and two major related developments from the UK: the Payment Systems Regulator (PSR) directing 400 more firms to introduce confirmation of payee (CoP) and the Financial Stability Regulator granting a reprieve from the November 2022 ISO 20022 adoption deadline. We will be aggregating all these developments into a “reporter’s notebook” style post today (Weds. Oct. 12) and tomorrow.

Sibos takes an instant approach: ISO 20022 and cross-border interoperability were the two biggest themes of Sibos day one and two. We will get to ISO tomorrow. Two of the more surprising panels for us came under the heading of “instant.” Instant treasury gathered some of the world’s biggest banks and payments processors to discuss developments in that area, as did the instant payments panel. However, while the instant payments panel surprisingly turned toward CBDCs as its main topic, instant treasury offered some options to banks who are struggling with keeping up with payments transformation demands.

Instant treasury plays nice: Most of the press around the “instant” or “real-time” part of anything in the banking industry these days comes with the caveat of deadlines and the consequences for missing them. Not at Sibos. The crew gathered to discuss treasury, which included Societe Generale’s Philippe Penichou, Deutsche Bank’s Christof Hoffman and ACI’s Craig Ramsey, painted a picture that was more given to flexibility than threats. For example, Hoffman positioned his company’s use of SaaS-based technology as the most efficient way to run a bank more than he used it as a precursor to doom and gloom for those who haven’t migrated yet to the cloud.

Ramsey stressed innovations when it comes to instant payments, especially for service level add-ons. The innovation is not in the high-speed rails that will carry instant payments, he said, but comparing payments to an actual railroad, it’s the trains that make the rails worth building.

“We've got over 70 countries now with the ability to do instant payments, but that's not the story,” he said. “The story comes in the innovation. On top of that, the QR codes, the proxy services, the directories, requests, repay services that potentially card payments have been passed over. And let’s not forget instant payments will reduce the cost of promotion, payment processing and speed up liquidity. Those are the services that will actually make a difference to our customers.”

Instant payments goes off the rails: Interestingly, the group assembled to discuss enabling instant payments went beyond rails and onto CBDCs, blockchains and other distributed ledger technologies. That direction of travel was established when discussing the need to disrupt correspondent banking, as we saw with the use of new rails and alternative networks at the beginning of the Russia-Ukraine crisis. The way to do that for the next crisis, the panelists seemed to be saying, is digital transfer (blockchains) and digital currency.

However, with most CBDCs at least three years off, some of the panelists stayed true to their beliefs that commercial banks are the best option to create a more efficient cross-border system for instant payments. “The question when you think about innovation is ‘what is the primary use case?’” said BNY Mellon’s Jennifer Barker. “And there's many different components of cross border payments…Will there ever be one standard infrastructure or once to one set of standards globally? Probably not. But there are some folks who are better positioned to help set that criteria and others. Commercial banks in particular are doing this today…I think commercial banks are best positioned to be able to offer an integrated solution.” 

And by the way … Anyone expecting Sibos keynoter Mairead McGuiness, head of the EU finance commission, to address regulations coming to instant payments on the continent might have been disappointed. McGuiness assured the audience that her office would make sure digital currency had a big tent before acting decisively on it. “We risk leaving behind people who aren’t as comfortable with technology and more vulnerable groups,” she said. “Consumers can invest more easily, but without the right guidance and regulation, they could take big risks and incur losses. In addition the reliance of financial firms on the same providers for digital services, could open them up to new risks. Our European regulatory agenda is about embracing the possibilities and guarding against the risks.”

ISO still front and center: It was hard to find anyone in the business who was optimistic about global banks hitting SWIFT’s CBPR+ (and other domestic schemes’)  November 23 deadline for receiving  ISO 20022 messages. This  sentiment was also reinforced by the Financial Stability Board where they used the Sibos platform to announce an extension of the deadline to ‘harmonize’ ISO until December 2023. “I think the change to the FSB milestone was really to give the Committee on Payments and Market Infrastructures (CPMI) more time to really get that guidance right,” Victoria Cleland, executive director, Payments, Bank of England, told a Sibos panel. “We’re seeing a lot of movement from the industry at the moment, but they wanted a bit more time to make sure the guidance was right to get agreement.”

Confirmation of payee gets a boost: The PSR used day one of Sibos to expand CoP to 400 more banks in the UK. It identified two groups of banks that will be required to implement the name-checking, anti-fraud system and has set out requirements for each. Group 1: (larger banks) will need to use the CoP system after 31 October 2023.  Group 2: All other firms that use unique sort codes, or are building societies using alternative reference information, have to use the CoP systems after 31 October 2024. The PSR has prioritized Group 1 because of the capabilities size of the financial firms, and because adopting CoP quickly in these firms is likely to have a greater immediate impact on preventing APP scams overall.

Ed Ireland

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Edward Ireland

Ed has more than 15 years of experience in payments and financial technology. His current role is to drive thought-leadership and solution development for ISO 20022 and the larger product set of Payments Transformation as a Service. Ed has a global remit for existing customers and new logo with areas of specialisation including operational resilience, security, compliance and regulatory change.
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