This year's Sibos was all about collaboration. Once feared as rivals, fintech and big tech are finally being embraced by banks as the best partners to provide better, more effective, more efficient services. Darryl Proctor reports
Not so long ago, much of the banking world was nervous – even fearful – about the future. Big tech and fintech seemed out to eat their lunch, leaving traditional banks with just a few crumbs for consolation. But at this year's Sibos, in Toronto, there was a palpable change in sentiment.
With Amazon Web Services now present at the conference, the big takeaway was that big or small, established or start-up, if you have a good solution to a real problem, the market wants to know. Collaboration between the financial services industry and technology companies is the way forward.
This shift was presaged by our recent report, 2017 Transaction Banking Survey: Challenges and Imperatives of Real-Time Payments and Liquidity, in which more than two-thirds of respondents, of the 100 banks and 100 corporates surveyed, said they thought trusted third parties would help improve their existing bank payment services.
It comes down to the fact that no one bank can hope to do it all. The global nature of financial services, the scope of digitization (Artificial Intelligence, data analytics, real-time payments and more), and the speed of changing customer expectations mean that banks need partners to implement change. It's too expensive and the risks of going down the wrong path on your own are too high.
Instead, Sibos drove home the idea that today, banking is about ecosystems. It just makes more sense for banks to hook up with different market players and software providers to achieve the best possible solutions to customer problems. Banks want to know how to leverage specialists to allow them to focus on their core offering and make sure it is as good as it can be. Hence Amazon's presence. We can thank open banking for this. It comes as no surprise then that open banking was a major focus this year at Sibos. In fact, three big topics stood out during the event: Artificial Intelligence (AI), open banking and real-time (often referred to but not restricted to instant payments).
At Temenos's own break-out panel discussion on AI in Payments, our industry experts concluded that a successful solution would be a jigsaw of partners, each fully aware of how they fit into the big picture. Panelist Vincent Brennan, Head of Group Payments at Bank of Ireland (BoI), stated this would require a big cultural shift within banks. They will have to accept that they are no longer the biggest, most important piece in the puzzle, but rather, that every piece contributes to the overall affect. Lose sight of one and the big picture is diminished.
For open banking and real-time payments, it is a similar story. Our survey showed that in regions with real-time payments infrastructure, 80% of respondents said it had improved their risk management, 77% their liquidity, and 76% their cash visibility. And while real-time payments clearly are the future, it was acknowledged at Sibos that challenges remain with associated security and regulatory problems. This, too, will demand careful investment. The way ahead here, it seems, will be to work with specialists.
In terms of open banking, it is finally being seen as a catalyst for innovation and industry changes by the majority of banks. Sure, this will require investment to enable 24/7 support for open application programming interfaces (APIs) and messaging, and achieve the scalability to deal with the higher and less predictable query and transaction volumes that will result. Better risk management and security are also part of the solution. But at Sibos, the penny had dropped that the end result will be better banking. And this interest was further reinforced within our survey where a large majority of banks (67% – as opposed to 55% of corporates) – see trusted third parties (TTPs) offering improvements over bank services, and 63% of banks believe that TTPs will drive bank innovation.
Banks realize they are no longer islands, but part of an ecosystem that delivers financial services how and when their customers want them. And if customers are the end point, the conversation at Sibos showed that collaboration is the route to reach them.