Sibos takes a SWIFT route to interoperability

Banking And Financial Messaging

Ed Adshead Grant

Ed Adshead-Grant

Oct 13, 2022

Continuing Bottomline’s Sibos coverage, reporter’s notebook style:

SWIFT builds on interoperability: One of things that struck me as Sibos proceeded into its fourth day this year was the energy of the experience. The last time the conference was fully live and attended in-person was London in 2019. So when I heard “interoperability” mentioned quite frequently by several SWIFT executives, I realized that the network is evolving fast with purpose to reinvent itself and Sibos is a natural stage to accomplish that. And it makes sense. Rather than carry on as a single payments network, it wants and needs to be part of the changing real-time global payments economy. Hence, they are embracing the API economy to ensure their future model is interoperable and leverages all the data opportunity from the ISO20022 enrichment programs. They want to be able in the flow of central bank digital currency (CBDCs) and all forms of cryptocurrency. They want to manage faster payment traffic and domestic transactions. They want to manage and add value to anything across the messaging and payment rails. They want to be the hub, the platform, the heartbeat of the financial system, and they want to stay relevant, well beyond the SWIFT messaging heritage. 

SWIFT, in my view, is becoming a form of universal aggregator that is API driven. Does it come from pressure? After all, Mastercard CEO Michael Miebach predicted its demise in a recent interview, and the Russia-Ukraine conflict showed not only how powerful the network is, but it uncovered the fact that other cross-border networks could play quite well to conduct cross- border trade even in its absence. But on balance, I don’t think that’s quite the case. SWIFT is still by far the biggest and the most convenient, mature, understood and embedded network. I was chatting with a journalist here in Amsterdam who undervalued the new SWIFT positioning. Interoperability, the journalist said, was just a dated buzz word recycled for the conference. I don’t see that. SWIFT is moving from an incumbent and defensive, ‘we are the king of the pipes,’ positioning and morphing through their new Transaction Manager, which launches in March 2023, into a collaborative player inside the global payments' ecosystem.

Open banking embeds itself permanently: Somewhat pleasing for me in Amsterdam was the amount of serious practical discussion around open banking. As an industry we’ve talked a lot about the potential user benefits to shared data and real-time account to account payments, but how do you commercialize it. Or read: how do you make money from it? One banking executive summarized it neatly this week as: Open Banking APIs is where the system of engagement meets the system of record. 

NatWest has been a leader in this area, mainly through its Bank of APIs leader Dan Globerson. At an interview before the conference, he said NatWest has been working with its customers to connect via API for data, payments (real-time and other types) and treasury. He is a fan of extending open banking beyond the financial services space and into other businesses.

“From a treasurer perspective, that (open banking) improves many things depending on the kind of business,” he said. “It reduces operational overheads, operational risks around manual processes and optimizes cash flow and liquidity in real-time. It can automate and digitalize everything around cash management, but the flip side of that is that corporate treasurers would have significant interest in how to improve their clients’ experience too. That’s the second derivative of this: what can a corporate do now with access to API services?”

Corrective compliance: The word ‘compliance’ showed up 17 times on the Sibos program for Wednesday. And with good reason. Runaway incidents of insider fraud and the continued increases in APP fraud made compliance a front-and-center topic. But here’s an interesting question: Is the word ‘compliance’ obsolete? HSBC’s Matt Brown, Managing Director, Group Head of Risk & Compliance Shared Services thinks it might be.

“We've spoken today in some other panels about getting rid of the word compliance and talking about the war on financial crime,” he said. “For me, when you can discuss compliance, you're really finding financial crime rates, and you've managed to establish that you can identify criminal activity. You found the needle in the haystack.”

But can you find the needle again? And again? Brown and other speakers at Sibos urged their respective audiences to move away from silos, use data as a detection tool and even work AI into the picture. Another common theme: don’t be intimidated.

“The important part of this (issues) for a bank is that it's the start of the journey,” Brown said. “If you can get a good start, now you're now in a position to tackle financial crime, to push back on the proceeds of financial crime and really start to make a difference, rather than just ticking a box and saying we're compliant.”

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Ed Adshead Grant

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Ed Adshead-Grant

Ed Adshead-Grant is an experienced Fintech expert in the Global Payments and Cash Management industry, driving secure business payment solutions in ACH, Card, SWIFT, Faster Payments, Blockchain, Cyber Fraud & Risk Management and more.
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