Navigating the Transaction Banking Landscape: Sibos
2023 Highlights

Another Sibos comes to a close.

As a proud exhibitor at Sibos 2023, The iGTB Intellect team had some very insightful meetings with Bankers, industry analyst and marquee media houses, We met acquaintances and long-standing friends last week in Toronto.

This year’s conference brought together more than 8500 business leaders, decision-makers and topic experts from across the globe to discuss the current hot topics such as Instant treasury, SWIFT GPI, Payment Networks Interoperability, Cross-border payments, the ISO 20022 messaging standard, CBDC and digital assets, sustainability, and generative artificial intelligence.

SIBOS 2023 round up & our inference on some of the key topics of discussion

1. Instant Treasury is still not fully realized more because the entire ecosystem is not real time due to batch based ERPs and lack of any global e-invoicing standards. However banks should continue to invest in solutions such as real time sweeps, event based sweeps, investment sweeps and instant payments to atleast help the corporate treasurer go “nearer” instant treasury.

2. Swift GPI and Swift Pre-Validation were spoken off very highly this SIBOS as enablers to remove friction in payments. Of Course all banks need to make their accounts available for pre-validation. Intellects view is banks need to implement schemes such as confirmation of payee where available in the market as this removes friction in the payment execution process. As per SWIFT Friction in the payments system costs the industry more than $2bn every year, affecting over 700 million transactions and much of this friction is the result of avoidable errors, such as typos and formatting errors. Doing this pre-validation upfront at the time of beneficiary setup is even better.

3. As Volumes of Real-Time Payments are on the rise, Debopama Sen of Citi spoke of the importance of real time fraud detection at scale. WISE mentioned how 57% of their x-Border payments credit the beneficiary in under 20 seconds (using EXISTING technology) and Lloyds bank shared data that as part of CPMI 89% of their x-border payments were received within the hour and 62% in 5 minutes. Achieving real time settlement and providing access to global payables and receivables to corporates does not necessarily require any new technology. With smart alliances and solutions for partner banking this is very much possible.

4. Instant Payment Interoperability was discussed at length and will be a game changer to achieve the G20 targets of faster, cheaper and more transparent. The ASEAN project which links instant payments across India, Thailand, Singapore and Malaysia was lauded. Swift GPI instant was mentioned as well as BUNA in the Middle East. It was also mentioned that ISO20022 as a common standard has helped somewhat (though even within the same market US TCH RTP and FEDNOW have variations in ISO20022!). Today most of these initiatives are based on bilateral agreements. Project Nexus in the ASEAN region is trying to create a multi-lateral hub and spoke model. Within Europe the One leg out Sepa Instant goes live in Nov. Banks which are early adopters in this space will be able to capture the market share that was lost over the last 5 years to fintechs such as WISE, REMITLY. Banks need to also consider how this can be used by corporate clients over due course as the payment limit goes up in due course.

5. ISO20022 was a bit muted this SIBOS. Only 15% of all SWIFT traffic is in the ISO 20022 format and it is still too early to talk of materialized benefits. The Gurus postulated that after the banks, now it is the turn of the corporates and their ERP / TMS providers to get ready for ISO 20022 to realize in the long term, benefits such as better reconciliation, improved cash flow forecasting, ROBO, POBO operations. Banks need to include in their technology roadmap solutions for Remittance Data Management which can create both an ISO Repository and a Remittance Data repository of structured and unstructured data and then use that to derive insights for both the client and for internal stakeholders such as Relationship Managers and Operations.

6. Generative AI was a huge topic this SIBOS. The pundits opined that it has tremendous impact on banks P & L across Front office customer experience on the revenue side and Operational/Employee productivity on the cost side. It was also highlighted that the Financial Services sector is still worried of the risk of hallucinations and lack of consistency with Gen-AI.

iGTB Intellect's Gen-AI-Co-pilot launch with Microsoft Open AI was a huge success as Intellect was the only company showing a live demo of Gen-AI on top of an ISO 20022 remittance repository and real payments data.

7. Partnerships are Important
a. Do not try to build everything in house
b. Wise - Swift partnership announced this SIBOS will be a game changer. Banks can reduce the costs associated with correspondent banking as WISE can provide liquidity and access to many currency corridors
c. Visa B2B Connect and SWIFT also announced a similar partnership

8. With Financial Crime being a $6 Tr. problem and cyber criminals earning $1.5Tr annually and fraud being a $250bn problem; (30 to 40bn fraud cases with 4 to 6 $ of spend / case for investigation), the INNOTRIBE session on “SWIFTS FEDERATED AI PLATFORM” to tackle global fraud covered the
a. Importance of COP / Swift Pre-validation
b. Swift Payment Controls where Clients can create rules where it breaks their operational behaviour (Amount, currency, timestamp, character string etc.) to stop an outgoing payment
c. Importance of monitoring payments in real time
d. Adding AI on payment controls can improve accuracy by 40%

9. Ransomware As A Service is a cybercrime business model!! Companies and their supply chains are being attacked at scale and companies pay to get the keys (to the encrypted data) and may not disclose to avoid losing face. Key takeaway is to invest disproportionately in immutable, restorable backups and data security.

10. On the Technology Front, it was interesting to hear Microsoft Azure persons speak of Azure confidential compute where data is encrypted even in the RAM in compute. (We have all heard of encryption of data at rest and encryption of data in transit. But this is one level higher!!

11. DLT and Blockchain initiatives on the wholesale side were commended and highlighted as being by and large successful. JPM spoke of the Partior initiative along with MAS, Temasek, DBS and Standard Chartered Bank for USD-SGD wholesale settlement on ledger. Citi TTS announced the creation of Citi Token Services for cash management and trade finance. The service uses tokenized deposits on blockchain and smart contract technologies to deliver digital asset solutions for institutional clients. They spoke of a use case with Maersk where when the commercial arrangements were met, the smart contract automatically released the payment.
With MICA and other guidelines, larger FIs feel more comfortable playing in this space (of course Basel 3 has a big capital charge if banks play in the crypto space). The regulatory space is still evolving and once the legal, compliance and regs are sorted on a global scale, at least wholesale DLT seems to have a bright future in 3 to 5 years.

12. CBDC was a highly discussed topic this SIBOS. The SWIFT sandbox has made progress with 3 central banks now interlinking their CBDCs via it and another 30 showing interest. Project Icebreaker of the BIS Innovation Hub to interlink retail CBDCs across 3 banks has also been a success. ANZ spoke of the success of the CBDC pilot in Australia which tested 3 scenarios
a. Buying and selling of Australian carbon credit tokens and distributing CBDC via commercial banks
b. Financial inclusion where the CBDC could be fully offline and
c. Programmability where Pension payments which took 7-15 days with Fiat took 1 minute with CBDC
d. However, we feel that the CBDC uses cases are on display and it’s a wait and watch game till scale kicks in CBDC, cross bank holdings are permitted and it helps central banks achieve their policy objectives on Monetary Policy, Fiscal policy etc.

13. Account Opening across Jurisdictions is still a broken / elongated experience for businesses and solutions like global IDs, global KYC, EBAM need to come back into focus

Lastly - The 2 key successes for iGTB Payments were of course
• The BAFT award for Intellect Transaction Limits Management. (aka Funds Control) as the "Best Treasury and Payments Solution"

• The launch of "iGTB CoPilot" in collaboration with Microsoft Open AI where Intellect showcased a live demo of an AI Chatbot querying live payments and remittance data to generate insights and find payment patterns for a bank relationship manager.

Credits

This content above is compiled from multiple of sources like SWIFT LinkedIn, The Banker, HSBC LinkedIn post of Tapan Agrawal (iGTB – Payment Product Management), Tom Anthony (PayCash-CX Product management), and complied by Yusuf Bhanpurawala (iGTB Product Marketing)