Sibos 2019: Banks still need to be future-ready

  • Posted on October 9, 2019
  • Estimated reading time 3 minutes
Sibos 2019

For the first time Sibos, one of the biggest banking events globally, was held in London – and it didn’t disappoint. There were over 11,000 attendees (highest ever), as well as 600 speakers and 300 exhibitors. Sibos has its roots in payments but has expanded to cover all aspects of banking, including AI, cybersecurity and ethics through to climate risk, digital transformation, Gen Z and the future of FinTech/BigTech.

As you’d expect, Accenture and Microsoft had a strong presence and we were able to work together effectively. Paul Bowen (Avanade UK COO and FS EU lead) co-facilitated a Microsoft session on Open Banking on the Sunday - a special pre-Sibos Industry Readiness Day for Microsoft customers and partners. Accenture and Avanade hosted a networking reception on the Microsoft booth as part of our Accenture Microsoft Business Group activity. Nic Merriman (Avanade UK FS CTO) also participated in a video on risk management as part of Microsoft’s TED-talk style in-booth sessions.

So what were the key themes emerging from Sibos? Here’s a selection:

BigTech and FinTech
According to McKinsey, ‘banks are no longer capturing payment revenues’. Ant Financial (a Chinese tech firm) is the largest FS firm in the world. In the US, 38% of unsecured personal loans come from FinTechs and in Sweden 60% of consumer finance is from specialists. Revenues based on fees will disappear – BigTech will make sure of it. This theme was picked up by the UniCredit CEO, Jean-Pierre Mustier, who commented: ‘We need a level playing field. We have to give data to third parties (due to Open Banking/PSD2), but Amazon or Google doesn’t have to do that.’

However, the rationale was that BigTech (Amazon, Ant, Facebook) do not want to become full service banks, due to the regulatory and compliance overheads. Mark Carney, Bank of England governor, reckoned regulation costs UK banks between £2 to 4.5 billion each year and meant ‘every supervisor has to read the equivalent of the complete works of Shakespeare twice every week.’ And in case you think FinTech are making waves, I spoke with international writer, speaker and advisor Chris Skinner who gave me a great stat: ‘JP Morgan Chase’s IT budget for the last 2 years ($21.9bn) is greater than the whole of European Fintech investment.’

Payments are not about ‘plumbing’ any more – thanks to the rise of devices (watches, mobiles) and real-time systems. BCG reckons 46 real-time payments systems are now live. Interestingly, the Bank of England is rebuilding its Real Time Gross Settlement system (RTGS) – but it is not using blockchain. However, it is allowing non-banks to join RTGS and is the first central bank to do so. Transferwise – the first non-bank to join RTGS - started life with cross-border payments via the correspondent system. It now works with local payments systems for each country and claims they are much faster (citing FPS in the UK). Although their CEO Kristo Kaarmann, commented darkly: ‘There’s a banking system for the rest of the world and a banking system for China’.

Lloyds Bank CEO, António Horta-Osório, in his session on ‘Transforming through People’, had a neat phrase: ‘Let machines do the ordinary, so people can do the extraordinary.’ But there are still issues. AI needs lots of clean data. Banks need to explain the ‘black box’ to the rest of the bank and the regulator. There is still bias due to gender and race. And what ethical system is it based on? In addition, AI experts still spend a lot of time doing manual work looking for false positives. To increase AI staff productivity, IBM Research suggested sharing models (rather than data) and building models on encrypted data. Where possible, combine data via consortia: this is already happening in credit card fraud. Regularly review AI outcomes for trust to grow and give humans – not machines - responsibility for the final decision.

As business becomes more global and supply chains get more complex, cybersecurity is more difficult to manage. Cheri Maguire (Standard Chartered) spoke about the need for secure APIs as Open Banking becomes more pervasive and lots of third parties have access to your systems. She mentioned the ‘Myth of GDPR’: ‘You cannot share data’. You can if you need to protect your business and ecosystem.

Sir Rob Wainright (Deloitte, ex-Europol) talked about the need for industrialisation. At Europol he pulled together over 1,000 organisations in over 40 countries on one platform. Sian John (Microsoft) noted that banks are using old controls for new approaches, such as Open Banking, and that strong ID management and multi-factor authentication (MFA) would stop 90% of cases. However, only 3% adopt MFA.

One thing struck me. There wasn’t much talk about digital transformation. Not because it’s not happening, but because it’s become ‘the new normal’. Becoming future-ready is not an option for banks. It’s fundamental to their existence.

See you at Sibos in Boston in 2020!

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