Insights for Procure-to-Pay and Finance Leaders

Views from SIBOS 2018: banking on an evolution

It’s hard to not feel inspired after attending SIBOS, SWIFT’s annual banking and finance conference. Last week’s event at the International Convention Centre in Sydney brought together 7,000 finance professionals to discuss the transformation taking place in the industry and how it can best enable the digital economy. Here are a few of my takeaways from the event and thoughts on the state of the banking industry right now.

Working for the customer

Banks haven’t traditionally provided a great customer experience for their corporate clients. Their proprietary systems are unwieldy and require clients to step out of their processes. Corporates haven’t liked this, but obliged because there was no other way.

In recent years, however, Fintech firms have proven there is another way. By using new technology, such as APIs, Fintechs have embedded themselves into their customer’s ecosystems, creating a more streamlined user experience. Banks are now looking to replicate this by creating their own APIs and partnering with Fintechs aggregators.

Much of this activity is happening because banks worry they’ll lose customers if they don’t improve. In fact, Gartner recently suggested that by 2030, 80 percent of heritage financial services firms will, as they struggle for relevance against digital platforms, Fintech companies and other nontraditional players. Regulators are also pushing for this through initiatives like PSD2 in Europe.

Because of these factors, I expect to see lots more activity in this space in the years to come. Banks need to focus efforts on creating a multi-enterprise API connectivity set to drive more efficient and closer connectivity between all parties.

Making the most of the data

Another big topic of conversation at SIBOS centered around how banks can start using the mass of data they have to support decision making, better serve customers, and create new opportunities to increase revenue.

One of the most beneficial use cases for this data is with trade finance. By using data, banks can move away from static risk pricing models and build dynamic and automated risk models that give bespoke offers to clients seeking finance. Doing so will unlock significant opportunities for the bank to provide financing earlier in the transaction, creating new revenue opportunities and go a long way to closing the $1.5 trillion finance gap that currently exists.

My one concern is that there’s too much focus on DLT at the moment. The banks were talking about DLT like it’s the solution that will give them access to all the data they need overnight. This is not the case. Somebody still needs to populate the ledger with accurate data, otherwise it’s useless. Banks need to think more about where the data is coming from and how to populate the ledger if they’re to succeed.

Simplistic banking

Banks are complex organisations. This complexity limits their ability to innovate and drives customers crazy because they must manage multiple touch points at every bank they work with.

In recognition of this, banks are thinking about how to become more integrated and agile organisations. Some banks have taken the encouraging step of combining their cash and trade business into a single integrated organisation.

Although this is a step in the right direction, there’s a lot more work to do. Banks have a massively complex technology infrastructure that binds disparate solutions with very little integration. With no integration, banks can only offer solutions, rather than a complete banking platform. Not until banks solve this issue can they offer a platform service where clients can access all the services they need at the click of a button from a single window. In other words, not until they learn more from Fintech innovations.

Positive steps

SIBOS underlined the fact that banking is an industry in the midst of a revolution. And the direction the industry is heading in is clear: it’s toward connected, simple to use platforms, not overly complex solutions. The question is: can the incumbents evolve fast enough to enable the digital economy? The answer is yes, but not alone.

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