I felt honoured to be invited to moderate the keynote discussion of Polish Banking Innovation today. The speakers at this session included:
I felt honoured to be invited to moderate the keynote discussion of Polish Banking Innovation today. The speakers at this session included:
I just attended the big plenary debate here, talking about the cyber wars escalation and asking if banks are winning. The panel was chaired by Ben Rooney, Co Editor in Chief, Informilo, and comprised a panel including:
David Wagner, Digital Security, Entrust
James Kaplan, Principal, McKinsey
Kris Lovejoy, General Manager, IBM Security Services Division
Charles Blauner, Global Head of Information Security and Chair, Financial Services Sector Coordinating Council, Citi
This was an interactive session with audience voting talking about all aspects of preventing and fighting cybercrime.
One of the first votes was:
Where should the cyberdefence budget be spent?
I finish the first day of SIBOS by returning to the innotribe tent to watch the world premiere of the film The Rise and Rise of Bitcoin.
So we just had our opening plenary for SIBOS2014 from Jamie Forese, Co-President Citi and CEO of Citi’s Institutional Business.
This was OK but, like many bank CEO presenters, was an autocue read rather than a charismatic punch.
Nevertheless, there were a few key notes I took out of Jamie’s presentation.
So off we go to the Technology Forum, listed as a 'highlight of the day' session as we walked into SIBOS this morning.
It's an ok affair, not especially amazing, with a writeup from the conference program as follows:
"Technology leaders will crystallise the pivotal technology trends that are inexorably influencing the future of the financial industry, at a speed that is sometimes not in your control. Buckle in and find out what you are ready for and what you should be ready for."
Anyways, here's what happened.
Sounds like something to do with a toilet that doesn't work: the blockchain ... but no, it's all about cryptocurrencies and the future of money, our first innotribe session. It was a good meeting, with speakers including:
The session began with a chat between Gottfried Liebbrandt, CEO of SWIFT and Udayan Goyal, co-founder of Anthemis, about what had changed in the thinking since last year.
So here we all are, descending on Boston's seaport area for SIBOS 2014.
It seems strange to arrive here and be greeted by the Four Horsemen of the Apocalypse* …
We have a Financial Services Club meeting this Thursday with a panel previewing what we will be talking about at SIBOS. Therefore, I thought I would conclude my background on this to say that it will be all the usual stuff: regulations, regulations and regulations, as discussed in my last post.
Looking at the SIBOS website, it’s clearly going to be the main agenda, as per every SIBOS, but there are some other major nuances outside this agenda that are worth noting.
We have a Financial Services Club meeting this Thursday with a panel previewing what we will be talking about at SIBOS. Therefore, I thought I would provide some background by noting that, for the past few years, we’ve talked a lot at SIBOS about regulations, and this year is no different.
With Dodd-Frank, the Liikanen Report, European Banking Union, the Banking Reform Act and, of course, Basel III reshaping the industry after the crisis, along with specific change structures targeting pieces of the banking system such as the Volcker Rule, MiFID II and PSD2, there has been plenty to talk about.
These things do not go away so I thought that I would give you a quick preview of the regulatory highlights in this year’s agenda for SIBOS September 29 through October 2 in Boston:
This is my penultimate review of 2013, as we head towards the shutdown season, so here goes
2013 was the year of meditation.
Banks had the chance to think, reflect, plan and look ahead.
After five years of manic panic, hysteria, anger, fear, angst and doubt, 2013 was the first year we could actually have a breather and consider what’s gone before and what is planned ahead.
This was reflected by the feel-good buzz at SIBOS Dubai, along with the fact that we didn’t have any disastrous headlines this year.
No LIBOR (well there was an FX issue); no major money laundering or major fines of a bank (well, apart from JP Morgan), but that was for last year’s issue); no issues of poor bank management or controls (well, apart from the Crystal Methodist); and a much more stable market generally.
The reason for the breather is that we just went through what I would call the year in-between.
Still busy in the Financial Services Club world with meetings in Stockholm, Vienna, Warsaw and London all in the past two weeks.
The interesting theme of all these meetings, and those in our future plans, is the digitisation of banking.
Most notably, the Chi-x BAT effect noted in our Stockholm launch meeting of the Nordic Financial Services Club, and the presentation from Gottfried Leibbrandt, Chief Executive of SWIFT, at our London dinner last week.
Gottfried kindly indulged us with a view of where SWIFT’s vision now lies.
OK, OK, I was going to stop talking about SIBOS as it’s already history, but there was one outstanding matter, if not two.
Did I achieve the Mission Impossible, and get an update on the Investment Roadmap that would unite FIX, FpML, SWIFT, XBRL, FISD and ISITC? and
How come I haven’t talked about the final night party?
On the first area, the answer is yes
On the second, I’m going to now.
With the Investment Roadmap, the standards organisations announced three years ago that they were all working together in harmony to unify standards around ISO20022. I must admit some of us were cynical when we saw the announcement – having heard of PORT, UNIFY and ISO150022 – but then that’s just the cynicism of age and one should not knock the idea of try, try, try again. After all, if at first you don’t succeed … fail again.
And that’s probably my reaction to the Investment Roadmap. It’s not happening, or not yet anyway.
The idea of the announcement was to formalise the agreement of the different standards agencies to unify around ISO20022, and to ensure that they stopped redeveloping pieces of the puzzle. In other words, the roadmap carved out the territory for each agency, where they would specialise and how they would redevelop their core competencies and capabilities to the ISO20022 standard.
So what happened?
It was more difficult than they thought.
Not all the standards were developed to the same level and some had to spend a lot more time thinking about how they could ever get to ISO20022.
That does not mean to say it’s dead, as there have been many informal discussions behind the scenes on a bilateral basis and this has led to a new update that shows that the Investment Roadmap may not be succeeding but there is still a great enthusiasm to get towards a common approach.
There is a common construct and the ISO20022 Working Group IV have just published their results, and Working Group V are now focusing upon how to develop interoperability at the semantic level, overcoming the issues of different syntaxes.
This is a recognition that the outcome of one single business domain and one single syntax for all end-to-end standards is not achievable in the short term, but achieving a consistent syntax might be.
So there you go. The Investment Roadmap is not dead but, like a wet fish flopping around on the beach, it’s alive but floundering a little bit. In fact, perhaps this is more Mission Impossible than we thought.
Anyways, if you’re interested, here are the eight publications from the ISO20022 committee so far:
Now, on to my other statement, what happened at the SIBOS end of show party?
Well, it was a cracker with belly dancers, whirling dervishes and even the odd camel or two.
The only thing missing was me doing something rash, like wearing the Anonymous mask.
No, after last year, I decided to be far more respectful and drop the wigs, t-shirts and masks, and just wear what I would normally.
Due to the poor WiFi conectivity last week – did I mention that? – I didn’t post many photos of SIBOS. Usually, I would post a whole load, so here are some of my favourite memories of last week.
Obviously, there are the memories of Dubai itself, with Burj Khalifa and Burj Al-Arab mentioned in the my first blog of the week. Alongside these however, are the wonderful Dubai Mall fountains.
Styled on the Bellagio fountains of Las Vegas, the fountains dance all through the night to music that varies from Arabic to Operatic.
There are many other memories of this bustling and lively City, including all the views from way up high staying in the tallest hotel in the worldr (JW Marriot Marquis) or eating in the highest restaurant in the world (At.mosphere at the Burj Khalifa), but let’s get down to a few views of SIBOS itself.
The week began with the first session on Monday on the future of money in the innotribe.
A well attended session …
… focused upon the break-up of the traditional banking business model and the implications for the future …
At the end, the decision from the 300-strong audience is that we need to revolutionise our bank models, not evolve them.
This led to many other discussions and dialogues, from the need to increase cybersecurity budgets …
… to the fact that we would see mobile payments take off some time in the future …
Not forgetting that all of the mainstream sessions offered opportunities for the odd impromptu photo.
There were then the many hours spent walking around the exhibit hall. Much networking, meeting, greeting, wining and even dining was done. There was even a Gold dispensing ATM ...
And yes, it does dispense real gold coins, alongside the usual cash and currency.
Then there are the stands themselves from a bank with Pasha …
… to the banks with bling and ostentation, such as Al Hilal Bank who decided to just put a McLaren car on their booth …
Speaking of banks in the Middle East, I did stumble across the Afghanistan Banks Assocation. As you can see, they were a bit wary of me …
… but that might be because they’ve had so many folks surreptiously stealing their money.
This point was well illustrated by Scandinavian bank SEB, with a magician who could make money disappear faster than you could blink …
So, if you really want to keep your money safe, this bank NBAD …
… although this is one Helaba bank …
But, if you don’t like that one, you can go for an Aktif bank …
… or deal with the new banks, like the Agricultural Bank of China who are celebrating achieving their goals …
… which may be better than having bankers wondering whether this makes their bum look big …
It does by the way.
Finally, just when you think there are too many banks at the show, you can always find a Sberbank.
As you walk out of the exhibit hall, there are many other fine moments, such as the many people who were standing around waiting for a sign …
… only to find there were two signs at once!
Yes, these are the corridors of never-ending searches for a room, meeting, meal and magazine …
… where you could find the pure adrenalin of SIBOS TV ...
Then there are the evenings with fond memories of the night that Gottfried Liebbrundt got up to sing and dance with the Arabic band in my hotel …
As you can tell by the reaction of the guy on the bongos, Gottfried’s singing voice isn’t what it used to be.
Anyways, as we reached the end of the week, we all gathered around the campfire and sang songs …
… and said goodbye to our Emerati hosts …
… although the head of SWIFT for the UAE may have taken his responsibilities a little bit too severely as we all departed …
... giving SWIFT Chairman Yawah Shah a chauffeur service that, some might say, is perhaps a little too extravagant ….
See you next year!
As we leave SIBOS 2013, there are many good memories from the great conversations around innotribe, to the buzz of the exhibit hall – and yes, there was a buzz this year – to the immersion in the mainstream sessions to the fun evenings engaging in fine wine, food and dialogue.
That’s what SIBOS is all about, and this year was no exception.
From a business perspective, the main conversation seemd to focus upon financial inclusion through mobile technologies to a major focus upon governance and policing of the financial system by sifting through Big Data analytics to find small perpetrators of terrorism, money laundering and crime.
Sanctions control was a big meme this year, alongside cybersecurity as illustrated by the wrap up plenary yesterday.
But that brings in another perspective.
In the discussions of SWIFT over the past decade, a regular meme has been interference in the network from governments, and specifically the US government. Is the cooperative a political football or is it the globally independent network it claims to be?
This was the undercurrent flowing through the closing plenary session from Ian Bremmer of Eurasia Group, which made a nice bookend to the opening plenary.
In the opening session Yawah Shah, Chairman of SWIFT, called for the cooperative to stick to its “True North” of independent neutrality, and that’s what was reinforced by Ian’s discussions of geopolitical forces and issues yesterday.
But is SWIFT truly independent and neutral today, or is it a pawn of political gamesmasters?
Some might say the latter and with some just cause.
First, there was the breaking story back in summer 2006, when an investigative journalist found that SWIFT’s messages were being accessed by US investigators to track terrorism. This was seriously refuted by SWIFT at the time, but came to light due to the fact that the US Treasury issued subpoenas to get the data they needed and, as a company with offices in the USA, the cooperative had to comply.
More recently we had the Iranian sanctions being pushed hard by the USA in early 2012. In a final push towards compliance, the American government formally asked the European government to tell SWIFT they had to throw the Iranian banks off the network. Sure enough, the European Commission issued a legal mandate authorising such action and, as a European headquartered institution, SWIFT had to comply.
This action was soon followed by HSBC and Standard Chartered suffering billion and multimillion dollar record fines respectfully for money laundering – again involving Iran, as well as Mexico and other nations – and the US government, as the world’s superpower, has shown its strength.
But is the USA the world’s superpower it used to be, and will it still be in the future? What about China and, soon after, India, Russia and Brazil? Will these nations support such actions in the same way that Europe supports America?
Of course not, and there’s the rub as this is why we are now concerned about the political minefield that SWIFT could become. In the nightmare scenario, the interest of one nation’s concerns about criminal and terrorist activities could be used as pure excuse to gain access to individual and corporate transaction records, to look for tax avoidance or even just monetary movements against their national interests.
That is the extreme, and one that some nations believe is the focus of others as they interfere with SWIFT’s neutrality.
SWIFT is not an instument to be used for one country's interests, or it shouldn’t be, and that is the concern as we see nations muscling nations today.
That was quite clearly what Ian Bremmer's presentation was saying, and making clear that America has historically had the muscle to force actions upon the SWIFT community that it might not want to take but, as other economies become dominant, that attitude has to change.
SWIFT should be independent of such political manoeuvring and, a little like the United Nations, needs to sit above local, national and regional agendas.
As we leave Dubai to head for America next year, we also leave a Middle East that has been embraced by the SWIFT community. That embrace will only last as long as SWIFT can maintain its True North, and that is the hope we all walk away with as we head for Boston in 2014.
So we just finished the day with the closing plenaries.
Yes, plenaries plural.
First there was the innotribe closure and then the SIBOS closure, and these were very different affairs.
The two were very different as you can probably tell from the innotribe opening where Innes Macleod of the innotribe team entertained us with a soulful song at the start:
The innotribe attracted about 200 people to share on reminiscences from the week, ably articulated by JP Rangasami of Salesforce.com and Andrew Davis from HSBC.
The conversation covered many things from infrastructure is now sourced from the crowd to the inclusion of everyone on the planet who is unbanked thanks to mobile.
Although there is a disjoint between the innovation group and the mainstream, there is also a conjoin as more and more of the mainstream agenda reflects the dialogue of the extreme agenda: Big Data, Cloud, mobile and social.
I kind of summed it up as moving from the them and us to the thus. The thus is what happens next, thus we move forward and onward.
Having said that, some of the innotribe team were obviously feeling a little bit tired …
… so maybe we fall over and backward?
Either way, we then moved on to the mainstream plenary which began with Stephan Zimmerman, Deputy Chairman of the Board of SWIFT and Michael Fish, CIO, discussing the week’s highlights.
Michael related it to Charles Dickens’ Tale of Two Cities.
The book opens with the words: It was the best of times, the worst of times.
For Michael, this related to financial inclusion for the wealthy in the banks and exclusion for those who aren’t banked, and how mobile technology is bridging the gap.
It was the age of wisdom, it was the age of foolishness is obviously about Big Data, and how we may be fooling ourselves to think it is as powerful as we hope it is.
It was the epoch of belief, it was the epoch of incredulity is all about cloud computing with so many believers and disbelievers at the same time.
It was the season of Light, it was the season of Darkness is all about cybersecurity. Money is just bits and bytes on a computer and the darkness is the criminal fraternity trying to steal it.
It was the spring of hope, it was the winter of despair, relates to the mobile workforce, where the young with BYOD despair at the older brethren who give them desktops to work with.
The hottest tech topic was apparently cybersecurity, with everyone talking about it in the sessions, hallways and lunchrooms. This is the key topic of discussion because cyberwars are escalating, with attacks increasing in frequency and severity. All of this contributes to making us feel unsafe and, in an industry built on safety and trust, that makes us uncomfortable.
Regulators see it as systemic risk issue and everyone is looking to their CIO to ensure they make infrastructures 100% safe. That’s the wrong view however, as we are engineers in the IT engine rooms of banks. Engineers take things extremely complex and make them safe and functional, like aeroplanes, bridges and buildings. Then, once in a while, a plane crashes or a bridge collapses or a building falls down. Then we have to ask what went wrong to make sure they don’t go wrong again. That’s what we need to do in the world of cybersecurity. The more we share information about cyberattacks the stronger we will become.
Stephan backed up Michael’s summation, saying that there is a recognition of past mistakes but, at this SIBOS, we are building for the future.
There has been five years of crisis and four years of regulatory change, and those regulations are now kicking into implementation. The industry is reconstructing slowly but surely, in a positive way.
Having said that, there is the fear that another big crash could happen, and we are all looking at the technology to be that crash waiting to happen. That’s why cybersecurity is the top concern, and it’s about reliability, security, protection and privacy of systems. Our concerns are that we think that may fail. That’s our concern and the question is then how much do you invest to make things more secure, and what are the returns in doing so.
Mobile payments is the other big theme, as over a billion people in Asia do not have bank accounts, but they do have mobile phones. About two and a half billion people worldwide do not have bank accounts, and that is a big untapped market. Most of these people are in low income countries but even in the developed world ,a lot of the population do not have bank accounts. So how do you include all of these people, especially as its low value, small transactions. The phone is helpful, but who enables and guarantees the payments and the revocation and repudiation requirements therein. That’s still a gap that some firms are trying to take, but not the established banks as it does not work at the margins we seek in the established world. So how do you create a service model that meets the needs of these clients?
Then there’s the new mobile workforce and an age divide. We grew up in a world where businesses had computers to automate everything and we accepted what we were given whilst the new generation have grown up in a world where they automate everything and are not happy to take a desktop or laptop when they do everything on their own mobile devices far more effectively. There’s a friction there between the Facebook and non-Facebook generations that needs resolution.
Finally, Big Data was discussed in many sessions and this shows unfulfilled potential Put aside structured data and how that is organised, but let’s talk about big unstructured data. We all agree that if we could manage that data better we would have better processes, better commercial opportunities and better internal management. The problem is how do we get there. We have different standards, different business models and different technologies, many of which lag behind. Then there are issues in governance, custody and organisation that needs to catch up and, perhaps the most important aspect of all, in an industry that is heavily regulated, how do you share data across silo’s that have to be separated due to regulation?
Big data has therefore seen little progress. There’s a lot of hype and a lot of data around, but we have not seized the opportunity yet. And the real question is: what can you derive from all that unstructured data across all of those silos. Can we find patterns that have never been seen before and what will they mean? I hope it will mean that it will give us a third eye to see the risks in the system that we didn’t see before 2008 when we hit the wall.
Then Stephan introduced Ian Bremmer, President of the Eurasia Group.
Eurasia is a global political research firm founded in 1998, and now has a network worldwide. Ian has published many books, such as the end of the free market, and was named young global leader by the World Economic Forum.
Here’s my summation of Ian’s message:
Politics around the world is not attractive.
Geopolitics is an issue and China is rapidly becoming the world’s largest economy, with the state playing a far more important role in the economy.
Syria – how did we get in such a pickle?
America has no appetite for engagement and then the Brits did not support action, so how could we get involved?
There are plenty of reasons why the USA does not want to be the global policeman and maybe doesn’t want to make the occasional citizen’s arrest. Why should America be the lender of last resort or the fuel of globalisation?
But this issue is far broader than America.
It’s about all of us.
Angela Merkel has been trying to revive Europe, the Brits are trying to turn around their economy and the Japanese have had 18 leaders in the last 22 years, an Asian record.
So the old countries are distracted.
Then you have these new economies that are different. They have different values, systems, politics and structures.
That’s because they are at a different stage of development.
New Zealand has four million people whilst India has 1.2 billion, but they have the same number of diplomats. We don’t expect much from NZ, but expect a lot from India. Maybe we shouldn’t?
China’s diplomatic background is nascent. They don’t have humanitarian and infrastructure to be the world’s policeman.
It’s new for them.
You put all that together and you don’t have a functioning leadership, but you have a G-zero, an absence of global leadership.
That is where we are with Syria.
This is a period therefore of geopolitical creative distribution.
That goes on all the time, as particularly demonstrated by the financial systems,.
If you are a small bookstore and Barnes & Noble come along, you adapt or die. If you are then Barnes & Noble and Amazon comes along, you adapt and die. That’s creative distribution and we celebrate that because it creates growth, unless you’re too big to fail,
That doesn’t happen often geopolitically and the last time it happened was in World War II when we got the World Bank and United Nations
But then the World Series sounds global, and it’s not.
The World Bank is an American institution with American allies and capital and priorities. It wasn’t’ bad but it is not global.
We lived with that for decades but are not in that situation anymore.
This G-Zero with America wanted to do less, the allies distracted and the emerging markets different in processes and capabilities, with lots of countries to co-ordinate with, delivers creative destruction due to an absence of global leadership.
Do we despair?
No, but going forward you will no longer have US-led global institution.
You will have global institutions that have the leadership or institutions with the leadership that are not global.
There are examples of both.
We love talking about climate change and have conferences everywhere but have achieved nothing, so how many more global summits do we need on climate change before we realise something wont’ happen?
Similarly we have lots of meetings on trade.
We will never get agreement on global trade but should we stop having meetings about global trade therefore? No.
That’s because we do get progress, with regional pacts and agreements in Africa and Asia.
You may not get all the countries in there, like China, but you can get lots of the small countries together in those agreements.
Geopolitically, that’s where we are and geopolitically, that’s why Syria is a humanitarian tragedy.
We agreed on Libya, because everyone hated Gadhafi. You don’t have that with Assad.
Then there are other factors we need to consider, particularly the emerging markets.
When we think of emerging markets, we thank heaven that they were there in this crisis because we could sell to them and their growth is supporting our stability.
Turkey, Brazil, Cambodia, Russia, Mexico, Colombia … all are helping us get through these tensions and some made it whilst others, like Egypt, will not.
The world is vastly more unstable now, and becoming more so however, because of this.
Does that make emerging markets less worthwhile to invest?
No, but it does mean you have to have far more risk management.
Finally, we have China, soon to be the world’s largest economy.
When it is, it will still be poor.
It will still be authoritarian
It will still be run on state capital.
That has worked well for 35 years, with 10% growth year-on-year because of the Chinese state and state capital.
I would not tell them to embrace the free market therefore.
Do not welcome Google, Facebook and Twitter.
You should have Chinese control of that data not be my preference, but by their preference.
We have zero agreement between China and America therefore, because of political differences.
Xi Jinping is the most popular leader of any world economy, but no one voted for him.
China is not going to change it and they will continue to move forward with their existing model.
The uncertainties about this economy will be greater than any other economy too, but it will continue to grow and grow and that will not easily co-exist with the economies that used to control the world.
Those are the three reasons – geopolitics, emerging markets and China – why politics increasingly matters to outcomes in your sector.
There are three categories of countries that will do very well in this new environment.
First, those that can work with many different political models because they hedge and balance between all. Ukraine tires this, but fails between Russia and Europe. The Emirates does this well, as does Singapore, as odes Indonesia, Turkey, Brazil and more. They pivot geopolitically and hedge in this G-zero environment.
Then there are groups that take advantage of crisis as they occur. For example, Japan is in a horrible geopolitical position with China. They don’t trust each other and this is an environment that tis not good for them, but because of the creative destruction taking place the Japanese are moving. Due to the Chinese threat, it forced Japan to move.
Finally, in an environment of greater risk and uncertainty, stability really matters. You want to be large and you want to be safe. You’ll take one but want both and, despite all the problems in the USA and dysfunctions of Congress, in a G-Zero environment the attraction of US real estate and markets will continue to be strong.
This is a dangerous moment as the world order is changing and we don’t know what will come out the other side. That’s not good and makes us uncomfortable, but you can do things to ensure success as you’ve just heard.
Gottfried then closed the conference and referenced the famous tale that, before former US President Richard Nixon made his groundbreaking visit to China in February 1972, Secretary of State Henry Kissinger told him that Chou En-Lai, then the Chinese prime minister, was an ardent student and expert on the French Revolution.
Nixon landed in China and, in an effort to break the ice, asked Chou what he thought the French revolution’s impact was on western civilization to which Chou replied: “It’s too early to tell.”
Five years after Lehmans the outcome is still too soon to tell.
The world is changing, times are difficult and nothing is simple.
It is the best of times for many and the worst of times for more.
That will only change if the planet includes everyone, especially the millions of people living on less than a dollar a day.
Things can only get better when we all have a chance to shine.
Or that would be our dream anyway, but world peace is only ever going to happen if Miss World becomes President of the World.
In the meantime, we’ll all just do our best to get by.
Before I get too cheesy, it’s probably best to sign off for the night and go and enjoy the end of SIBOS party.
A final summation from yours truly tomorrow then and now off to the Arabian nights.
After the brain challenging discussions of T2S, I revert to type and slip into a few sessions that seem to be of interest on the surface but turn out to be no more than advertorials.
This is a new thing for me at SIBOS this year, in that I don’t remember previous years having sponsored sessions that were quite as overtly sponsored on the main agenda, or is that subvertly.
Sure, if you go into an open theatre session with ACME Technologies Ltd, then you know they are going to talk about ACME Technologies Ltd, but I’ve accidentally attended three or four sessions this week that I thought were SWIFT sessions only to find they are talking about ACME Technologies Ltd (a purely fictitious firm).
That’s something I’ll watch out for in future, and make sure that I stick up a session called: “How to decimate your banking competition using killer apps”, or something like that, and then get 1,000 attendees only to tell them about my Angry Bankers app download (just $0.99c from your
nearest Android shop).
That meant another trudge around the exhibit hall before lunch and it’s thinning out. After all, this is day four and many of the most important VVVVVIPs are now back in their offices enjoying their iPads and other gifts from the vendors.
Sniffing about for good gifts is always one of my SIBOS hobbies, and my favourite so far is the Wells Fargo cuddly pony.
My little pony.
Guess I’ll have to find some young lady to give that to ... or maybe not as that sounds too much like something that could get me into trouble.
I’ll share all these gifts with you on my posting on Monday as, you guessed it, I can’t get any of my photos off my iPhone and onto the network (which explains why a lot of my postings are so picture free this year!).
Even if I could get the iPhone onto WiFi, I would be challenged getting the photo on the blog as there are many restrictions here about what works and does not work on the UAE internet.
In fact, most of the folks here tell me they can’t even access the blog in UAE. That’s nothing to
do with the network, but relates to the UAE controls over access to blogs generally, e.g. unless the government authorises it, then you cannot access it.
I learned some time ago about how to get around these things with VPN software, but most people have not.
Apologies to all you SIBOSers who cannot read what’s going on, and hopefully you’ll have to time to digest these diatribes once back in your denizens.
Anyways, off for some chow now and back with an #innotribe closing plenary with JP Rangaswami, an amazingly innovative visionary, and Andrew Davis of HSBC.
More later …
After a great cappuccino from Franco, it’s off to the first session of the day which is a different one to my norm. It’s T2S time!
Yes, I do talk about and have many links with the investment and post-trade community thanks to my work on MiFID and EMIR, but I just don’t blog about it too much as it gets a bit technical.
But T2S or TARGET2 for Securities is important as it’s a key backbone for European trading, and also the discussion that will launch the Financial Services Club Nordic on 24th October in Stockholm.
So what is T2S?
Well, the ECB has kindly given us a cartoon to explain it:
Oh, some of you cannot watch the video? Well, here’s a simple overview.
T2S is Europe’s new engine for securities settlement in central bank money. It will change the
architecture of Europe’s securities settlement landscape and offer CSDs (Central Securities Depositories) a centralised service for the settlement of securities transactions.
The service works on a low cost basis, irrespective of whether transactions are domestic or cross-border, and is not just for European players but anyone trading with links to Europe. This means that CSDs in T2S will be the new gateway to Europe’s financial market for non-European players.
To find out, SIBOS gathered a great panel of speakers:
ably chaired by Marc Bayle, Principal Adviser, European Central Bank.
The panel began with a discussion of collateral management, a big challenge in this new world
of lower risk and greater transparency.
At the CAS-WG we’ve already discussed in depth the need for real-time collateral management and this was underscored in a discussion around the velocity of collateral movements that will force banks to create real-time collateralisation dashboards.
What that means in plain English is that banks will only be able to trade if they can show they have enough cash to be good for it, but that means they will have to move their cash around rapidly to back their trading activities, or they won’t be able to trade as they used to.
The good news about T2S is that it means a common pool of collateral and view of where it’s
moving across the European landscape. That is why this is a key change to European trading.
T2S is not just about collateral management for euro however, but is also important for non-euro management. For example, Denmark sees that T2S will provide benefits in the long-term for all trading, and that adapting to support the program is therefore important. The Danmarks Nationalbank sees this as not a euro project therefore, but as a trading project with Kristian saying that the aim of T2S is to improve trading, not just euro trading.
In other words T2S is a cross border, cross currency, cross CSD platform.
Right now, trading is fragmented across disparate and separated systems, and T2S is the key to harmonisation. That is a core motivation for change as, harking back a decade ago, T2S is a core part of removing the Giovannini barriers to trading in Europe. At their core, these barriers represent nationalistic protection of member states through demands for Corporate Actions and other legal and taxation issues to take place at the domestic rather than regional level.
T2S is the first step to overcoming these barriers in a constructive fashion by wiping out the
domestic protectionism almost overnight. Not entirely, but certainly pan-European CSD capabilities is a key at the heart of T2S.
For issuers outside Europe, T2S is also good news because issuers can just place their securities
for non-EU and non-euro instruments through T2S. That is why JPMorgan has signed a deal
with London Stock Exchange Group (LSEG) to manage all their collateralisation for trading in Europe, as a single settlement mechanism so to speak, sitting on top of T2S. In order to achieve this, LSEG has created a new CSD in Luxembourg.
As the press release states:
This development is in response to the European Market Infrastructure Regulation (EMIR), which requires margin and default contributions posted to a central counterparty (CCP) to be held with a securities settlement system, where possible. CCPs will become subject to this requirement when they obtain authorization under EMIR. LSEG’s new CSD, subject to regulatory approval, is expected to be operational in the first half of 2014, in order to provide services to CCPs when they become authorized.
Similarly, BNY Mellon talk about T2S as a regulatory change, even though it has no mandate. The reason for this is that as a custodian and SSS (Securities Settlement System), the only way that a bank like BNY Mellon can provide full service capabilities is to migrate and work with T2S.
Equally, as Nadine emphasised, it is a very complex migration that cannot be done alone but needs partnership and collaboration, another key point that has developed this week.
Joel from Euroclear agreed, and talked about co-opetition being the new model for banking in Europe. This will require far more openness, flexibility and collaboration, as well as speed and agility to operate in this new environment. That is not just a need from T2S but also EMIR, and Euroclear has built their strategy on that basis.
This is because we should not forget that harmonisation is the objective here, with less fragmentation and more simplification of post-trade processing. That is the vision, and that has to be held at the core of all bank activities as they migrate to T2S.
It will lead to consolidation as well, not just of the infrastructure but of the players in all aspects of clearing and settlement, and especially the intermediaries in the process. Otherwise what’s the point of deploying pan-European services?
You can read a lot more about T2S on their website , which includes glossaries of terms used and more explanation of the background behind the project which is scheduled to be live sometime in 2015.
Waking up on day four, the final day of SIBOS, I am greeted by yet another hazy sunny morning and a complementary hazy head.
So finishing off day three was a wonderfully relaxed experience.
First, congratulations to the winners of the Innotribe Start-up Challenge at #Sibos!
The top Start-up is KlickEx (who gave everyone free WiFi during the vote, so not a bad move) and the Best Innovator is Waratek.
Second, thanks to the Financial Times we had a nice start to the evening up the top of the Jumeriah Emirates Tower Hotel. As with everywhere in Dubai, great views and great service.
Then it was up to the top of the JWMarriott Marquis, the tallest hotel in the world, for a dinner high in the skies with some friends and finally dropping into bed relatively early in order to be prepared for tonight's end of show party.
SIBOS Daily Issues asked me to write a piece for them, so I thought I would share that with you, to kick of the morning if you have not seen it already:
SWIFT goes broad and deep, but is it broad and deep enough?
It amazes me how every year the reach, depth and breadth of SWIFT goes further, broader and deeper than ever before, but is it enough or is it too much? Can SWIFT be all things to all people, or does it need to focus on the core competency of its origins: moving messages between banks globally?
I only ask this question because when I first started coming along to SIBOS too many years ago, it was a payments conference and exhibition. Then it became a payments and securities show. Now it is a panacea of all things related to banking, and the opening plenary and announcements showed the further expansion of this panacea into sanctions controls.
If you didn’t see those announcements there were two sanctions related activities. The first is a sanctions screening service for small to medium sized banks and the second a sanctions testing service for large banks.
Admittedly, on the back of the HSBC and Standard Chartered fines from the USA for breaching money laundering rules, this makes sense, but it doesn’t go far enough.
Samir Assaf, HSBC's Head of Global Banking and Markets, made a plea in the opening session for SWIFT to do more and remove the need for banks to reinvent wheels. Those wheels included KYC, Know Your Client, requirements for client onboarding.
Now this is an area that’s been a big issue for all banks for years. Every time an account is opened anytime, anywhere, the client has to provide documentary proof that they are who they say they are, and the bank has to check that this individual is not a PEP (Politically Exposed Person) for AML (Anti-Money Laundering) purposes.
The question is: when this has been completed once, why should the client and the bank run this check every time thereafter. Couldn’t we just hold all that client data in a shared global database that all banks could then verify credentials against?
That may sound like a dream, but PayPal get around KYC by using the bank account behind the PayPal account to check you are who you say you are. If you have a bank account, then they know that you completed KYC checks at account opening and if it’s good enough for the bank account opening, it’s good enough for the PayPal account opening.
Why can’t we all do the same?
So this is SWIFT’s next big challenge: to create a global central database of client documentation to manage the KYC and account opening processes for the bank constituency.
That’s a big project, but SWIFT is up for the challenge as they’re already working on it. Talking to SWIFT representatives around the show, they confirm that there will be a global KYC database provided for corporates.
Any global or international business will therefore be able to open accounts in new territories without having to go through the hell of the KYC/AML process every time.
That’s the dream anyway and, as we have this dream, the only question that remains is whether the global objectivity and neutrality of the SWIFT cooperative can be retained, or whether the institution becomes even more of a geopolitical football. That’s a theme I’ll come back to tomorrow.
So now to the big half day final of innotribe, where new and innovative firms are recognised in the Start-up challenge.
There are two categories: start-ups and innovators. Start-ups must be less than three years old and innovators qualify as anything innovative. This year, the SWIFT innotribe start-up challenge is sponsored by HP, Sberbank, Invest Northern Ireland and Level 39, and the winners get a cheque for $50,000.
Not bad, but they also get a lot of visibility and recognition.
Launched by SWIFT in 2011, the Challenge travels around the world, with three regional showcases in the US, Asia, and Europe. It provides participants with the unique opportunity to get together and create smart company pitches, facilitate insightful discussions on emerging innovations, and participate in useful networking events.
I’m one of the judges along with many other smart and bright people from around the world, and this year’s contest has been fought heavily between contestants across the world.
This year there are nine start-ups and six innovators selected from over 175 applicants in the Grand Final here in Dubai.
The first company up is Azimo, who offer a social remittance platform. The average cost of a
remittance is 9% whilst Azimo’s is 2% or less. Azimo already offer services to over 190 countries in 85 currencies, with 150,000+ cash locations. Azimo spend around $35 to acquire each customer, via social media and social networks, and the average customer sends $300 per transaction.
Next up is Growth Intelligence, a real-time data sales tool. The company is based upon lead generating for sales and has clients in all sectors. In banking, they have Barclays, Lloyds and a few others and used Barclays as a reference, saying that one salesperson calling all day to leads generated would typically make one sale per day; now they get 22 sales per day. The way it works is that you tell them who you’ve sold to in the past, and their solution will scan for companies like
them and look for buying triggers, such as new offices planned, and that will spark the lead. It’s all based upon taking the granularity of big data and siphoning it down to narrow leads, usually around corporate data.
KlickEx are now on stage – they got my vote by giving away free Wi-Fi to all attendees! – and they offer CLS for everyone. In other words, they are offering a new global, multicurrency central bank facility to tap into the $600 billion of unbanked money around the world. They’ve already got 100,000 users and are voted the #1 low value payments system by the World Bank in every market they service. They’re regulated in every market and have completed over a million transactions.
The fourth firm to jump onto stage is P2P Cash: Send Cash Home Free! The idea is that banked senders in rich countries send money to their unbanked recipients in emerging economies for free. This is because the company is buying swathes of cash wholesale and then charging consumers FX at retail rates that are as good as or better than Western Union’s. Once money is sent, the recipient
automatically get a mobile wallet created for delivery, and can get cash out by using that mobile wallet. P2PCash makes the money from the FX rates, which they share with the banks that use
them. The good news for the banks is that each transfer created two new customers: the sender and the receiver, with a 20% market share of remittances estimated to be worth $100 billion a year, which would create a $1-$2 billion new revenue stream for the bank.
Pocketbook arrive on stage next, and talk about how we work so hard for our money but have no idea where our money goes, because we have so many accounts that we use for so many different purchases. Pocketbook is a PFM app that can work with every bank an account to show you how you spend. It also, using pattern recognition, tells them what bills are upcoming, which users love.
IT takes just sixty seconds to set up and runs for any bank, any account and it’s free! 35,000 users have signed up so far tracking $6 billion of spending (just in Australia alone!). CNET voted it the best app they’ve ever tested. That’s because Pocketbook created their app by asking: if a Google or Amazon created a bank, what would it look like?
Realty Mogul is crowd funding for real estate. The idea is that investors can pool money online
to buy houses, apartments, stores, offices or anything, and is the Kickstarter of property. The idea is that you find properties you like and make a part investment in that property with the view to getting a high return on the rental yield. It works with real estate firms applying to work with Realty Mogul and, once Realty Mogul does their due diligence, their properties are then offered to
investors. Real estate firms pay for the service on the basis of giving them an immediately qualified investment pool. With zero advertising, they already have $400 million in investment fund leads after five months, generated through investment workshops presented at campuses like Microsoft.
They’re now looking for investment partnerships with banks to take this global.
This led on to ‘the most boring subject of the afternoon, we’re going to talk about SEPA’. At this point, the room almost emptied, but Twikey carried on and talked about the solution for SEPA direct debit mandates. From 1st February 2014, 500,000 Eurozone companies have to switch to the new rules and they have no idea how. They can go back to paper, implement the EPC’s eMandate model or just implement Twikey. It solves the pain points of SDDs (SEPA Direct Debits), especially the acquisition of manatees for new and existing customers, as well as providing easy implementation of SEPA B2B mandates. The service is being sold to banks to offer to their customers and it works, because creditors pay the mandate and storage fees, not the bank.
The penultimate start-up presentation comes from XYverify, an authentication service aimed to reduce fraud. It uses cell antennae’s to check the location of customers with their mobiles to authenticate, and uses the mobile telecom towers, rather than the handset, to ensure it’s not spoofed or false positive, e.g. using the mobile towers to locate the customer is far more robust. Nice figures used: 542 million sensitive records compromised since 2005 and $110 billion in direct consumer hacking costs this year. The model is provided under SaaS monthly access fee subscription and is expanding internationally.
Our final presentation of the Start-up Challenge came from Z-CRD, a new payment network that provides a modern alternative to Visa, MasterCard and AMEX by taking out the middle man. Z-CRD uses the mobile app to communicate direct between the issuing banks and point-of-sale, saving 65% of the transaction costs as a result. By cutting out the middle man, the transaction fee is reduced from 3% to 1% flat fee, plus referral fees on top. To use it, all that’s required is for the cash register to have the Z-CRD app running and configured, and that’s it. Receipts are stored in the cloud and can be retrieved anytime. That means any transaction can easily be disputed using the app too. Finally, rewards are based upon easy methods such as recommending a hotel you stayed at on Facebook. If one of your friends then stays at the hotel, he gets a discount and you get
cashback. It’s simple and easy, and no waiting. The company has six people and $3 million funding.
It will be interesting to see who gets the vote here and the theme is very much about mobile disruptive models. My vote goes to P2PCash, for having the most slick presentation, and KlickEx for giving us all free Wi-Fi in this session so that, for once, I could post this blog without having to leave.
The second part of the Start-up Challenge is for innovators, any company that has an innovative product or service. The six finalists this year are:
|Have a look at the Semi-Final pitch.|
|Have a look at the Semi-Final pitch.|
|Have a look at the Semi-Final pitch.|
|Have a look at the Semi-Final pitch.|
|Have a look at the Semi-Final pitch.|
GIEO operate like a Google map of people, places and events within a bank, interconnecting the four main pillars of banking operations: visualised business processes, screen simulations of IT systems, ebooks of regulations and business performance.
Quantum4D provides a visualisation tool of data applied to anti-money laundering.
EFT is the Entrepreneurial Finance Lab, an emerging market credit-scoring technology that uses psychometric principles and non-traditional data to generate highly predictive credit scores.
Virtual Piggy is focused upon providing global payment services for the online spending of under 18s in a parent approved manner.
V-Key simplifies mobile application protection and unifies enhance customer experiences via mobile devices.
Finally Waratek has solved the problem of how to use Java in banking for virtualisation and private clouds.
I'll be interested to see who wins out of that lot.