Fintech disruption, real-time payments and the ‘customer journey’ top packed agenda as 1100 attend fifth annual event.
How incumbents – and challengers – harness change in financial services was the key theme of this year’s SWIFT Business Forum London, which took place on 23 April at The Brewery. The event attracted a record audience of more than 1100 people, featured 23 sessions with 89 speakers, and was supported by 31 exhibitors and sponsors.
During the day, delegates heard about the opportunities and challenges across financial services – in funds and investment management, compliance and corporate banking, among other areas. The financial crisis of 2008 was a seismic change and brought the era of universal banking to a close, Arun Aggarwal, Managing Director, UK, Ireland & Nordics, SWIFT, told delegates during the opening session. New ‘challenger’ banks are emerging in an environment of low interest rates and falling margins. He posed the question, “How far will the fintech disruptors truly transform the industry from the outside?”
Aggarwal suggested the key to success for incumbent banks will be to take a holistic approach to product innovation that is informed by customer centricity and operational excellence. This was a theme picked up throughout the day, as speaker after speaker reminded the audience that client service is the key to success.
Innovation and the customer experience
In any business, customer experience matters – not the “technological wizardry behind it”, said keynote speaker Sir David Clementi, Chairman of Virgin Money and World First and Former Deputy Governor of the Bank of England. “Financial services companies must recognise that customers are individuals first. Technology has a role to play in creating customer experience, but a clever technologist does not lose sight of the customer.”
Usama Fayyad, Chief Data Officer at Barclays Bank, estimated that banks were “10-20 years behind” in terms of using new technology to deliver services to customers. If banks didn’t act by adopting new skills and new ways of delivering services, they could be disintermediated. “We should leverage the trust we have with clients and create new products and new revenue models,” he told delegates.
Disintermediation by new financial technology companies and challenger banks is a concern for many incumbents. Gottfried Leibbrandt, CEO, SWIFT, said fintech would “change banking as we know it” but would not cause the demise of banks, because they have a good record of adopting new technology.
There are challenges, of course. Craig Donaldson, CEO of challenger Metro Bank, said large legacy companies such as banks are “ripe for disruption”. By trying to be “all things to all people”, banks have stretched their technology systems and other organisations are able to deliver better service and processes in specific areas. Donaldson also stressed the importance of culture: “It is the culture of the organisation that defines what is delivered to the customers.”
Daniel Marovitz, President, Europe at Earthport, agreed that fintech companies won’t kill banks, suggesting that banks should view such companies as a “pool of innovation”. Marovitz said often an innovative spark within a bank can be smothered by the weight of regulation and sheer complexity of processes and procedures.
HSBC is taking a partnership approach to innovation, as explained by Christope Chazot, Group Head of Innovation at the bank. “Fintech is essential to the development of a bank. We are partnering with companies and investing in them in order to develop our business and help us to deliver better services and be more efficient.”
Seeing fintech companies as a useful resource, rather than as a threat, was an approach all panellists recommended.
The real-time payments opportunity
One area where banks need to hold their own against fintech companies and deliver the customer centricity that is seen as key to success is that of real-time payments. Alain Raes, Chief Executive EMEA and Asia Pacific at SWIFT, told delegates that 18 countries are operating real-time payment systems while another 12 are exploring real-time. SWIFT is working with Australian banks to develop the New Payments Platform, a real-time payments solution that will go live in 2017.
The effort required to deliver such real-time capabilities should not be underestimated, he said. “Real-time payments are not about building a new platform. They are about integrating all of the moving parts into a real-time system.”
Real-time payments can deliver positive results for banks, which can take the lead in developing offerings, and the ultimate winners will be consumers, delegates heard. UK consumers, for example, now have the PayM system for mobile faster payments, which was built on the infrastructure of Faster Payments. Craig Tillotson, Chief Executive of Faster Payments, said consumers have recognised that the way they manage money is changing. “Real-time is now a must have, rather than a nice to have.”
The compliance challenge
Increased automation, collaboration and more intelligent use of Know Your Customer (KYC) utilities will enable financial services firms to better navigate higher regulatory hurdles, according to a number of speakers during the Compliance Forum.
Customer service is also an important element in compliance. David Deane, Group Head of Client and Data Services at Deutsche Bank, said: “The biggest change we have to make is being able to focus on our highest risk customers – about 20% of our total.” By automating as many processes as possible in the low-risk space, the bank can deal more effectively with high risk clients. Partnership can also help in compliance: by engaging with business partners, banks can better understand their customers. SWIFT, for example, can help firms to map client behaviour and identify patterns that can assist banks in investigating KYC issues.
Technology has a role to play in creating customer experience, but a clever technologist does not lose sight of the customer.
— Sir David Clementi, Chairman of Virgin Money and World First
Funds and Investment Management: a rapidly changing landscape
How innovation can affect customers was a focus during the opening session of the Funds & Investment Management Forum. Just a couple of weeks on from the UK’s Pension Freedom Day, Jeffrey Mushens, Technical Director of TISA and the forum opening panel’s moderator, said the reforms were something the government didn’t really understand the impact of, and “terrifying” for existing industry participants.
Jamie Jenkins, Head of Pensions Strategy, Standard Life, said the biggest change for consumers to come from these pension freedoms is to move the point at which they need to make decisions about their retirement income. “Three years ago you had to be engaged enough to join a pension scheme and at retirement most people took an annuity. With auto-enrolment, people don’t need to be engaged at all to save for retirement, but at retirement they need to be very engaged,” said Jenkins.
Are corporates getting what they want?
The first session in the Corporates Forum posed this question. Neil Garrod, Treasurer, Vodafone was adamant that banks were not meeting corporates’ risk needs. While the traditional FX and interest rate risks were well catered for, bigger picture risks such as cyber attacks and a repeat of a global financial meltdown were not well understood. “Quantitative easing is a big experiment and no one knows what the outcomes might be. There are no products being offered by banks to hedge any macro or cyber risks. And counterparty risks with banks are still very high on the agenda of corporates,” he said.
The shape of things to come
This year’s Business Forum London illustrated just how challenging it is for members of the financial community to tackle regulatory and operational issues while also keeping an eye on innovative developments that very often occur outside of the financial industry – and at the same time delivering the best customer service.
Good businesses will harness technology and a desire to simplify experience for customers, Clementi told the Forum audience at the start of the day. “There is a threat for established businesses with legacy systems and long-serving staff that they will be overtaken by companies with new technology and young staff.”
The level of attendance – and engagement – at the SWIFT Business Forum London 2015 suggested that banks are taking these threats seriously and are assessing the opportunities that exist in the constantly changing landscape of financial services.
Download the full report to find out more detail about discussions during the event.
Real-time payments are not about building a new platform. They are about integrating all of the moving parts into a real-time system.
— Alain Raes, Chief Executive EMEA and Asia Pacific, SWIFT
The agenda in brief
|Opening keynote||Sir David Clementi, Chairman of Virgin Money and World First|
|Opening panel||The impact of technology disruption on wholesale financial services|
|Financial crime compliance – In conversation
The future of KYC
Sanctions compliance in securities
|Funds & Investment Management Forum||Pensions reform
|Corporates Forum||Are banks meeting the corporates’ needs?
Trade & Supply chain (in association with Lloyds Bank)
|Special Interests Sessions||Collateral management (Clearstream), MiFIR and MiFID II (CME Group), Intraday liquidity management (Planixs and Vodafone), DB funding code (KAS BANK), Open APIs (Innovate Financial, Payments Council, BBA), Future of Money, Innotribe Startup Pitches|
|SWIFT Auditorium||SWIFT for Corporates, Business Intelligence, ISO 20022, Cloud|
|Closing panel||Real-time payments|
Sponsors, exhibitors and trade associations
Clearstream, CME Group, KAS BANK, Lloyds Bank, Planixs, Vodafone
AccessPay, Altus, B2Group, Bottomline Technologies, Broadridge, Cor Financial, Salerio, ExCeL London, London & Partners, FircoSoft, IBM, Intercope, Intix, RDC, Smartstream, Trace Financial, WTSS
AFB, AFME, BBA, CISI, CSFI, Innovate Finance, TISA, TheCityUK