Published: October 01, 2009
The last two Sibos conferences have suffered turmoil of different sorts: 2008 saw the collapse of Lehman Brothers on day one, this year saw a typhoon. Somehow, despite climactic events of all sorts, the event seems to go on regardless. This year, like most international conferences, Sibos saw lower numbers of delegates than usual, but the sessions were of a consistently high quality with good interaction amongst participants in panel discussions. Indeed, although Sibos is largely a ‘single issue’ event from a corporate treasurer’s point of view, namely exploring SWIFT Corporate Access, there were some excellent panel discussions which addressed issues of more generic appeal. Consequently, we will be sharing comprehensive content from the event, together with presentations from the BNP Paribas’ Cash Management University, in the next two editions of TMI.
Last year, with everyone distracted by rapidly unfolding market events, the messages and key themes of Sibos were rather swamped. This year, just as the rainbow that appeared as the typhoon passed was particularly striking, there seemed to be a universal perception that the financial crisis is also coming to an end. As David Blair, now VP Treasury at Huawei warned, however, “Recovery will not be V-shaped” and companies will still be under pressure to cut costs as well as grow revenues.
It has been widely believed that the banking market would need to, and be forced to go through radical reform to avoid a repeat of the crisis. While these discussions are still ongoing, the impression at Sibos was that little has changed in reality, except that the regulatory burden continues to grow. This in itself is important. A few years ago at Sibos, I remember a panel discussion in which one participant (from a very large bank) suggested that to mitigate the ever-increasing cost of compliance, collaboration between banks would reduce the overall cost burden without compromising each bank’s differentiation. At the time, this suggestion was received mutely by some and negatively by others, who responded rather archly that this was simply a cost of doing business and would prove a catalyst for the survival of some banks and not others. Today, the situation is very different. Every bank has more cost pressure than at any time. Increasingly, banks of all sizes have recognised that while there are some investments that are critical to maintaining a bank’s competitive position and delivering value to customers, there are others, such as the cost of compliance and establishing infrastructure in new regions, that are currently replicated by every bank, adding no competitive advantage or benefit to customers. Given the choice between the two, clearly a bank will invest in value-added services that generate revenue, so it makes sense to collaborate more closely.
This year there seemed to be a universal perception that the financial crisis is also coming to an end.
Collaboration doesn’t come easily to competing organisations, but SWIFT is an example of how co-operation can and has worked. With the success of SWIFTNet as the definitive interbank communication channel, it makes sense for SWIFT as an organisation which is owned as a co-operative by the banking community, to play a larger role in facilitating greater collaboration.
The growing emphasis on collaboration can only be beneficial to the huge number of corporates which work with more than one bank for a variety of reasons. Whether cash management will become easier, from the ability to establish liquidity structures across banks more easily, remains to be seen; however, the prospect of greater co-operation and commitment to common standards for corporate-to-bank communication is very encouraging. For example, we are now increasingly seeing a common commitment to standardisation initiatives such as ISO 20022. Lack of critical mass and insufficient support from market players has hindered previous attempts at standardisation, but there is now recognition amongst banks that barriers to communication will compromise their competitive position. This applies not only to the format of financial messaging, but also to the channel through which messages are passed. Banks have given their support to SWIFT Corporate Access at different times and with various levels of enthusiasm, but those that were the least in favour now seem to be lending their active support to SWIFT.
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This inclination to collaborate, not only within the banking community, but more widely with corporates and vendors, together with the maturing and steadily growing corporate client base on SWIFT, is leading to some exciting developments which were discussed with enthusiasm at this year’s Sibos Corporate Forum. For example, the pilot phases of eBAM (electronic bank account management) which will enable the opening and closing of accounts, together with authority mandate management, are now being completed. Therefore at Sibos next year we would expect to see some client testimonials on eBAM. Many corporates, and indeed banks, are observing the developments in eBAM with interest as the tangible benefits for both parties are considerable by replacing lengthy manual processes with more efficient, secure electronic messaging. We will be featuring a joint feature between SWIFT and one of the corporates that have piloted eBAM in the December edition of TMI to explore this topic more fully.
A related initiative to eBAM is the personal digital signature, which is being developed in tandem. Again, the benefits to both bank and corporate are considerable, as documents can then be transmitted through FileAct (SWIFT’s file-based transmission capability - see the TMI SWIFT Corporate Connectivity Guide 2009 for more detail) with a personal digital signature as opposed to having to send back-up documentation via mail or fax.
Could this year's Sibos mark a tipping point for the payments industry?
The ability to exchange legally binding documents in a secure and automated way, together with greater interoperability with related systems, brings significant potential not only for bank account administration but also in trade. Corporates are already exchanging trade documentation with banking partners using FileAct, but digital signatures will add considerably to the value proposition of SWIFT from a trade perspective. Even more significant is the Trade Services Utility (TSU) which we will feature more fully in the November issue of TMI, but briefly, the TSU is a service provided by SWIFT to their banking clients which banks in turn can use to provide improved, automated trade-related services to corporate customers. Corporate spokesmen such as David Blair, Group Treasurer at Huawei (formerly Group Treasurer at Nokia) who has been an active supporter of initiatives such as SWIFT Corporate Access and standardisation of financial messaging, was vocal in his enthusiasm for the TSU, and we will bring you the transcript of this session in the next edition of TMI.
So could this year’s Sibos mark a tipping point for the payments industry? Will we see the statements of support for collaboration come to fruition? I think the answer will be yes, although the window for progress through greater collaboration is relatively short as the inclination to collaborate is not likely to be quite as strong as banks’ fortunes improve and the pressure on budgets eases. The better the quality of collaboration, however, the better position that banks will be in to invest in value-added services rather than basic infrastructure and compliance, which can only bring benefits to corporates. Consequently, co-operation must be encouraged with a focus on delivering early benefits, to cement this behaviour for the future. From a corporate perspective too, the development and certain success of corporate-led initiatives, such as eBAM, are a triumph in an industry that has for so long been dominated by banks’ interests. It would be fanciful to see this extending too far, however. SWIFT is a co-operative owned by the banks, not corporates, and every initiative must logically bring value to the shareholders. For example, many corporates hope for a time when SWIFT will permit corporate-to-corporate connectivity to enable processes and communications throughout the financial supply chain to be rationalised and automated. It is unrealistic to expect this to take place through SWIFTNet, but it is not at all inconceivable to anticipate a central ecosystem for all financial communications, of which SWIFT is one part. The partnership between SWIFT and SunGard that was announced just after Sibos, together with SWIFT’s increasing focus on the financial supply chain, both bring considerable potential for the creation of this wider ecosystem, leveraging the commitment to collaboration and standardisation on behalf of corporates, banks and vendors alike.
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