Key Takeaways from Sibos 2016

Key Takeaways from Sibos 2016

Having just returned from the whirlwind that is Sibos, I (along with many other industry observers) feel compelled to contribute my two cents on the top takeaways from the event, along with one observation on the mood. Nothing about Sibos can be exhaustive, but three key areas stood out: Cyber, PSD2, and Open Banking / APIs.

Cyber was the first topic mentioned in the opening plenary address. Its seriousness brought into stark relief by the $81mm Bangladeshi incident (something my cab driver in Boston asked about on the way to the airport!), Cyber was a focus throughout the conference. While it has long been an important issue, it has catapulted to the top of the agenda of every member of SWIFT’s ecosystem given the recognition that the system is only as secure as its weakest node.

PSD 2 is often thought of in a retail banking context, but its implications will carry over to the corporate side as well. There are two critical points: 1) Banks must make their customers’ data accessible to any qualified third party, and 2) Third parties can initiate payments. These changes will have profound second-, third-, and even fourth-order effects that can scarcely be imagined today. Banks are thinking through what they need to do to comply, as well as what their strategies should be once they’ve implemented the necessary (and not inconsequential) technology changes. For a primer on the current state of PSD2, see Gareth Lodge’s recent report on the subject.

Open Banking is enabled by APIs. While PSD2 is certainly accelerating the concept, it would have been gaining momentum even without the external pressure. There are simply too many activities that can be done better by third parties than by banks, and the banks have realized that they need frictionless ways to tap into these providers. APIs are a critical mechanism to enable this interaction. Technology, of course, is a necessary but not sufficient condition for success; banks must be culturally able to integrate with new partners quickly and flexibly.

On a final note, the mood was pragmatic. The atmosphere wasn’t one of consternation, panic, or confusion. Instead, the buzz was focused, purposeful, and businesslike. Bankers and their service providers are ready to roll up their sleeves and get the job done instead of wringing their hands about all of the possible ill-fated futures that could arise. We at Celent look forward to the progress to come in 2017. What are your thoughts?

Where Will We See You Again?

Where Will We See You Again?

When the leaves start falling, it usually means one thing for Celent analysts – the conference season is getting into full swing and it’s time for us to hit the road big time.

The team is already busy at SIBOS this week, with BAI and AFP coming in a few weeks. Personally, I am looking forward to speaking on customer authentication at Mobey Day in Barcelona on October 5-6, as well as attending Money20/20 in Las Vegas on October 23-27.

Such high profile events are always great places for catching up with our clients and other industry experts. They are also perfect for getting up to speed with the latest developments in the industry, or, as my colleague Dan Latimore says, “soaking up the zeitgeist”. Dan will also be joining me at Money 20/20.

This year, we will be keeping an eye on (amongst many other things):

  • Which of the latest initiatives look most promising to (re-)invigorate mobile payments? Will it be Apple Pay and Android Pay on a browser, the networks’ partnerships with PayPal, 'Merchant' Pay, or something new that will get announced at the events?
  • Adoption of and developments in payments security technologies, from EMV to biometrics, and from 3DS to tokenization.
  • Innovations that drive commerce and help merchants, from bots to APIs that enable deep integration of payments into the merchant’s proposition. Also, creative application of analytics, whether to help merchants increase conversation rates, extend a loan, or deliver the most relevant and timely offer to the customer.
  • Where will blockchain fit into payments world? Ripple continues to gather momentum with cross-border payments, the UK is exploring the use of distributed ledger technologies as backbone for a domestic payments system, while IBM is partnering with China's Union Pay around loyalty. What other payments-related innovations can we expect from the blockchain community?

What will you be looking for? If you’ll be in Barcelona, Orlando, Chicago or Vegas, we look forward to seeing you. If you haven't registered, now's the time. And because of your relationship with Celent, you are entitled to an additional $250 discount off the Money20/20 registration fee. Combined with the Fall Final special you save a total of $725. Simply enter promocode Celen250 when you register here.

Sibos 2015: banks reacting to the threat of blockchain and other FinTech

Sibos 2015: banks reacting to the threat of blockchain and other FinTech
Singapore hosted Sibos this year, and judging by the reported 8,000 attendees, transaction banking is alive and well. That also means there were 8,000 different experiences, impressions and takeaways. Here are mine: Banks are fully aware of the threat of posed by technology and are beginning to act on it. Two technology vendors I spoke to said that every single bank they met with asked about blockchain, an extraordinary change from six months ago when it was only beginning to be seriously discussed. It’s encouraging that banks have evolved their positions so quickly. While no one know yet what the killer blockchain uses will be, banks are ramping up experiments along all facets of the value chain. Celent will have more to say about that shortly. Another facet of technology change is the need for banks to partner with FinTech innovators. Based on my conversations with many of these vendors, banks were a lot more willing to discuss new ways of working together. There may even me some movement toward value pricing (that is, mutual sharing in beneficial outcomes), but it’s still very early days; banks seem loathe to give away upside and are unsure how to structure enforceable deals. Sibos’ ambivalence about innovation manifested itself physically with Innotribe. The space was relatively small, and every time I went by I was unable to get in because it was filled to overflowing. Innovation clearly needs to be given even more attention despite the threats it presents to the existing structure. Was this perhaps a physical metaphor of Banking’s relationship with and attitude towards FinTech? Having had four straight nights of canapés for standing dinners, getting home to digest the whirlwind that is Sibos was very welcome. On to Geneva next year!

Payments Innovation in the Middle East

Payments Innovation in the Middle East
In my previous posts about Sibos, I talked very much about Sibos itself. What I didn’t get chance to share was some of the interesting points on the panel that moderated there. The session was called “What global institutions could learn from Middle Eastern Innovations in Payments markets” I’d like to again my thanks to Paul and team at ACI Worldwide for extending the invitation to moderate. At Celent we’ve both helped clients in the Middle East, as well as helped those trying to sell into those markets, and so we have long been impressed with some of things we see, yet never ceases to be a source of interesting conversation. Much of what some of what we’d consider to be innovative banks in the US and Europe talk about innovations that Middle Eastern banks have done ages ago and don’t even realise are innovative! For example, many banks in the region can not only do instance issuance of replacement cards, but can do so at the ATM, and for EMV cards as well. Equally you can subscribe to IPOs at an ATM as well. How has this come about? The story is interesting and informative. Pre 2006, many of the banks were brokerage led, but a combination of issues in the market, and the regulatory response to those issues, saw the brokerage parts of the business spun out into separate, regulated entities. Within a year, one banks revenue fell from around 1.2bn Riyal per annum, to under 30m Riyal. As a result, the banks had to diversify and find new revenue streams, and do so rapidly. This perhaps was the silver lining to the story. Whilst  a painful process to go through, the resulting banks have none (or at least, far less) of the legacy or baggage that other banks. The IT systems span both retail and wholesale. Many banks have teams that act as a central resource – in one bank, for example, there is an analytics team that spans both the entire business and process – they are included in the design of the products from the start, and often it’s their analysis that highlights potential products initially. It’s difficult to condense our hours panel discussion into a short blog post, so I took the opportunity to ask the banks on the panel what they thought that banks outside of the region could realistically learn and implement. The first was Customer-centricity. My first thought was, isn’t that what all banks are striving for? But they meant it more as a way of working. Their bank meets with their key corporate clients regularly – at least monthly. These meetings aren’t just 1:1, but include fora where the clients collaboratively help design future products and services, based on their needs. I’m not aware of many banks outside of the Middle East who go quite that far. The second was acting with agility. With a tip of the hat to the company with the swoosh, “Just Do It” was the theme. When Windows 8 came out, they decided to build an app for the bank, and had it live in 6 weeks. We’ve all been on projects where its taken longer than that to organise diaries so all the stakeholders can be together to even start discussions! In part this was to do with organisational design, but also the attitude. It was surprising to see just how surprised the banks were when we relayed our experiences. For a number of years, we’ve pointed banks to Turkey when we talk about innovation. From my conversations last month, I suspect we ought to be looking to the Middle East as well.  

Sibos #2 – Your Weather Forecast for 2014

Sibos #2 – Your Weather Forecast for 2014
This is my second post on Sibos. The first focused on some of the impressions I took from my conversations at Sibos. This post is more on the impressions from Sibos itself. As regular attendees will agree, the event as a whole often serves as a good barometer of industry sentiment. The headline is that Sibos is back. Swift would argue that it never went away, but after the rather damp squid that was Osaka, the difference was clearly different, with the halls full and buzzing. Swift clam 7,648 delegates, which breaks out to roughly 44% Europe, 29% Middle East & Africa, 16% Asia Pacific and limping in last, 11% Americas. Considering the size of the delegations from the large US banks, the latter number shows that Swift needs to continue to make sure the conference returns to the US regularly. Great potential – but equally, perhaps not enough success so far. There are a number of factors of course. Europeans are (sadly) used to paying equivalent ticket prices for big conferences, but Americans often aren’t. For example, a ticket to AFP is roughly 1/3rd of the cost of Sibos ticket, and of course flights are cheaper (and the wifi works – what is it with Sibos & wifi?!) It was interesting to see the stands themselves. Many were much smaller in scale – though still very large if you’ve only ever been to some of the other trade shows – and the staff around those stands much smaller in number. You also have to remember that Swift control the stand sizes, with controls limiting how quickly a stand scale down down from one year to the next. One client, a vendor, told me they’d only brought 1/3rd of the team they’ve traditionally brought to Sibos. Another no longer has a stand at all, preferring to pre-book meetings. But those with stands were plainer, and with much more focus on meeting room space, than “drop by” space. That said, some stands were as big as ever. For those of you who haven’t attended, perhaps the following stat will give you a sense of scale. The Swift stand (and their stand alone) had over 7,500m of cat5 cabling! The focus was on pre-booked meetings, more so than any other show I attend. What was interesting was the lateness of the general invitations to have meetings. These emails started arriving en masse 4 or 5 weeks after the first set of requests from our clients. I’d be curious how many casual meetings were actually generated by this activity. And finally, perhaps the best indicator of all – the giveaways and the parties! There were few of the former, but there seems to have been a resurgence of the latter. However, the parties were smaller and more focused in audience, though it still surprises me how few parties even log attendance, let alone have branding at the events. So, let’s turn to the barometer. What does it tell us? I think the needle has moved from Change to Fair Weather, and all indications suggests that the needle is moving to Dry. The industry seems to be clear that it needs to do something, and that worst is behind it. Whilst perhaps not quite bullish yet, the banks recognise that there is plenty to play for, and that there is a danger in waiting for even calmer waters. Banks who remain cautious in their spending for much longer may find themselves lagging others. Not quite back to normal, but perhaps happier days. See you in Boston for Sibos 2014.    

Sibos Recap #1

Sibos Recap #1
So that was the week that was Sibos. Dan has already shared some of our thoughts from Sibos, but I wanted to add some additional insights and flavour. I’m going to split the posts in two. The second is a more informal view of the week. This post is more around content, and is based on what struck me as interesting, rather than what was necessarily spoken about most or was most profound. Those of you who know Sibos well will know the challenges of getting good dialogue in the sessions, and so it’s as often as what is not said that is interesting. Innovation 4 years ago every conversation was around innovation. This year, the “I” word didn’t come up once in any conversation I had. That’s not to say banks no longer want to innovate, but that they have a very clear view of what they need to achieve, and don’t feel they need to “dress” it up. Setting up an innovation team (again) costs money and will be slow to happen, but reducing “cost to serve” by 10% or improving STP by 5% makes a material difference to the bank, and will get funded. As a result, whilst there is innovation taking place, it’s very much rooted in the process and ways of working, rather than being called out separately.  Many of the activities we’re seeing continue to focus on the customer client interface – and rightly so. It may of course be that all the conversations around innovation took place in the Innotribe discussions – but that in some ways, that would be worse, as it would mean it was confined to its own little cocoon. I think the answer lies in what counts as innovation and to whom. There is a ripple backwards from those at the leading edge of things. For example, the closing plenary this year talked about the impact of mobile, but in effect replicated the Innotribe discussions of 2009 (as several in the audience were quick to point out in tweets). Yet the Innotribe discussion of 2013 replicated conversations we have been having around BitCoin and virtual currencies for over 18 months now. I guess my take away is that innovation is something rarely that you find at conferences, but the conference agendas act as a useful barometer to see how far that bow wave of innovation has travelled into the mainstream. Big data, little progress Big data is another recurring theme over the last few years, but that many believe that little is actually happening. Indeed, the title above is a soundbite from one of the sessions. I think it’s a classic hype cycle, with many firmly in the trough of disillusionment. But we are, I believe, seeing a number of smaller, successful projects that are having significant impacts. Many discussions around big data focus on combining the vast variety of data. Whilst not an area I follow closely, the examples I’m hearing are focusing on one of the other attributes – velocity. Being able to process data in real-time to influence outcomes is where progress in particular is being seen. It may not be sexy, but big data projects to provide teller prompts to guide the conversation is having a big impact in some banks. Whilst there was much talk about real-time at the conference, it was focused on real-time payments. In reality, real-time is a much broader topic, and will have far more profound impacts than many are planning for. Regulation It was the 5th anniversary of Lehman’s whilst we were at Sibos. Those of us who were at Sibos in Vienna will remember the events unfolding in front of us, and the palpable tension in the air, with many of us thinking Is This It? Roll 5 years forward, and the number of conversations about it were…well, zilch. A few mentions here and there, but pretty much it. What was talked about was the impact of the regulation that has happened as a result of it. We would expect much discussion about how to respond to the avalanche of new requirements, but two themes really stood out. Firstly, there is no co-ordination. Banks are feeling stretched by the regulation, and there seems to be a clear feeling that neither the banks nor the regulators have a clear view of the big picture. Regulators I can see, but the comments from banks, about banks surprised me. I don’t disagree, but then why aren’t they doing something about it? Secondly, that the regulation (or perhaps more accurately, regulators) is facing the wrong direction. Much of the regulation is about fixing the problems we have so we don’t have a recurrence of what just happened. But most agree that something else will happen, and just as we failed to foresee the circumstances that caused the last crisis, that there is little in place to identify what else could be the trigger for the next one. Real-time As alluded to in the big data section, real-time payments were all over the agenda. Australia is currently going through a large programme to implement such a system, and in the week before Sibos, the US Federal Reserve issued a consultation about the future of payments in the US. The preferred outcome of the paper was obvious – the creation of a real-time payments system. I’ve just finished a research project on real-time payments, and what is very clear is…well, it’s not very clear. Some of the systems held up as real-time, simply aren’t real-time, and even which bits need to be real-time need to be real-time for whom is not clear. As such, whilst the sessions were good, it’s clear that few are starting from the same position of understanding, resulting in some very different views of who needs to do what. Needless to say, I intend to write on this topic in the near future.