“Transforming the Landscape” – My learnings from SIBOS 2016

“Transforming the Landscape” – My learnings from SIBOS 2016

The fall conference season is a business time for us in the industry research business. I’ve finally recovered from a hectic week in Geneva, where I met with over 40 banks, technology companies, and consulting firms to discuss what’s happening in global transaction banking. This year’s Sibos theme was “Transforming the Landscape”, organized around four themes: Banking, Compliance, Culture, and Securities. A selection of Sibos session recordings is available on the Sibos website.

With my research focus of Corporate Banking, my discussions focused on three key topics.

  • SWIFT’s global payments innovation (gpi) initiative:  SWIFT announced that it had successfully completed the first phase of the gpi pilot, surprising some bankers with SWIFT’s ability to meet the first milestone so quickly. The initial objective of gpi is to improve the speed of cross-border payments (starting with same-day) and improve transparency with new end-to-end payment tracking. SWIFT staffers roamed the exhibition hall with iPads demonstrating the gpi’s new payment tracker. It remains for banks to integrate the new payment type into their corporate digital channels and to determine product pricing.​

SWIFT GPI

  • PSD2 and UK Open Banking:  Technology providers, especially those that offer core banking systems along with payments technology, are working closely with regulators and industry groups to enhance their product offerings to accommodate the third-party account information access and payment initiation provisions of PSD2, along with the UK’s Open Banking API Framework. Looking beyond mere compliance, both providers and banks are developing value-added services to capitalize on the significant disruption arising from opening traditional banking capabilities to third-parties.
  • Blockchain in Corporate Banking:  After publishing a Celent report on use cases for blockchain in corporate banking earlier this year, I was heartened to hear “real world” blockchain announcements from the big tech companies, touting their banking collaborations. Swiss bank UBS is working with IBM on a project to replicate the entire lifecycle of an international trade transaction. The FX settlement service, CLS, is building a payments netting service that will enable cash trades on IBM’s Fabric blockchain. Bank of America and Microsoft announced their intent to build and test blockchain applications for trade finance.   Although much progress is being made by blockchain consortia, banks, and technology providers, most people I talked to believe that significant adoption of blockchain for corporate banking use cases is still a few years in the future.

I’m off next week to attend the Annual Association for Financial Professionals (AFP) conference, hoping to bring back developments in the world of corporate treasury and treasury management.

Microsoft and Nokia: What Kind of Marriage Will It Be?

Microsoft and Nokia: What Kind of Marriage Will It Be?
Today Microsoft announced that it has purchased Nokia’s mobile phone business. According to the announcement, “Under the terms of the agreement, Microsoft will pay EUR 3.79 billion to purchase substantially all of Nokia’s Devices & Services business, and EUR 1.65 billion to license Nokia’s patents, for a total transaction price of EUR 5.44 billion in cash.” Both companies have been struggling to adapt to changes in mobile computing – Nokia has lost its leadership in handsets, and Microsoft was rather late in announcing its latest Windows mobile operating system, which remains a distant third to Apple and Android. So, what can we expect from this marriage? One of the commentators on The Times website summed up the question rather bluntly and concisely: “Interesting. Microsoft, who failed to anticipate that computers would become more like phones, merges with Nokia, who failed to anticipate that phones would become more like computers. So will they end up in a perfect partnership of complimentary skills and experience? Or will this create a behemoth that consistently fails to predict the future?” In many ways, the merger is a natural progression of the deep partnership that the two companies struck two years ago. It appears now that both agreed that the next step in the integration was required. Or was it perhaps a defensive move for Microsoft to make sure its main handset partner does not fall into competitive hands? Mobile platforms so far have been characterized by two rather distinct approaches. In the “closed” camp, there is Apple with its tightly controlled and integrated ecosystem, from operating system to handset to strict app approval process. In the “open” camp, we have Android – an open operating system available to multiple handset manufacturers. Microsoft and Nokia alliance so far seems to have fallen in between the two camps – it was neither as tightly integrated as Apple, and given Nokia’s dominance of Windows-based handsets, perhaps not as widely open as Android. While the merger is pointing towards increased integration, the question remains whether the combined Microsoft/ Nokia indeed want to fully emulate Apple’s closed strategy. One of the selling points of the latest Windows platform is its seamless integration across devices, from desktops and laptops to mobiles and tablets (a move Celent applauded when it was announced), and I don’t think Microsoft has any intentions of entering the hardware market in the traditional computing space. The outgoing Microsoft CEO Steve Ballmer described today’s announcement as a “bold step” and “a signature event in our transformation.” It certainly is. More competition in the mobile platform space is very welcome, so we wish Microsoft and Nokia’s marriage is a success.

Never Ending Excitement in Digital Payments

Never Ending Excitement in Digital Payments
It’s official – I can’t go on holiday anymore. Or at least, not if I want to keep up with all the interesting developments in digital payments. Vacation and business travel conspired to keep me out of the office for nearly 3 weeks and in that time, there were important announcements from Apple, Microsoft and Facebook. And that’s just the highlights – there plenty more. No, don’t worry, I am not under any illussions of grandeur that good folks at Apple or Microsoft are checking my holiday schedule to time their announcements. But it does highlight the incredible “blink and you’ll miss it” pace of developments in payments. Having kept everyone on their toes about their plans in payments, Apple has recently announced a Passbook app. While the idea at the moment is to store various “passes”, such as boarding passes, store cards, and movie tickets in one place, I do agree with others who view it as the first step towards the development of a full-scale mobile wallet. It is perhaps telling that one of the early examples of “passes” is a payments app – a Starbucks card which automatically appears on the phone screen when the customer walks into a store. For now, such a use of geolocation technology to automatically display passes is perhaps the most interesting aspect of the app. It remains to be seen what Apple does in payments more broadly. I and many others have long noted the potential for iTunes to become a payments wallet given the ever growing number of cards registered there (400 million seems to be the latest number.) However, despite multiple patents around NFC technology, Apple continues to be silent on its plans (or lack of) around NFC. One of the companies annoucing recently that it would be embracing NFC was Microsoft. At an event about its upcoming Windows Phone 8 mobile operating system, Microsoft said that it would be supporting NFC with a SIM card-based secure element. It will also include a new wallet app that will store credit and debit cards as well as loyalty and membership cards. As somebody said on the internet, Microsoft is taking on Google and Apple, while keeping the telcos happy. Orange, which is the launch MNO partner for the Wallet, praised the SIM move and said it was “important that Microsoft has aligned with the recommendations of the telco trade body, the GSMA, on the issue.” Perhaps the most surprising recent announcement was also the one with the least fanfare. Facebook posted on its developer blog that it would be dropping its virtual currency Facebook Credits in favour of local currency pricing. The phenomenal rise of Facebook Credits in recent years made many in the industry wary of potential implications of an unregulated global currency gaining mass adoption. However, while the central bankers looking after fiat currencies might breath a sigh of relief, I don’t think the new announcement means that Facebook is giving up on its ambitions in payments. In fact, it’s likely to be the opposite – by transforming its Credits platform into a localised standard-currency payments platform Facebook is positioning itself for opportunities beyond its own ecosystem. Add Facebook Connect as a solution for the identity problem on the net into the mix, and the opportunities become really interesting. Lithuanians have a proverb, “a silent pig digs the deepest root.” The quietest of the announcements here may yet prove to have the most far reaching consequences. What do you think of all this?