Sibos Lessons - Banking transformation too fast for most

Last week the multilingual Swiss of Geneva bid au revoir and aufedersein to nearly 10,000 bankers. The attendees of Sibos left knowing just how much technological change is facing the banking industry. These lessons are starting to be translated in banking boardrooms from Azerbaijan to Australia, Qatar to Quebec.

Most boards will surely conclude that technology, despite causing some of their current woes, will also have a major role in helping banks stay ahead of the serious threats their businesses face today. These range from industrial levels of cybercrime, to increased regulatory discipline and the disruptive digitalization modern customers demand. Here is a little more of what we saw at Sibos 2016.

Simple Cybercrime solutions

Cybercrime is high on every bank’s agenda. It is also highly relevant to Sibos’ organiser, international payments network, SWIFT. It issued a new ‘name and shame’ guidance for SWIFT members after fraudsters stole $81m in an international cyberheist earlier this year. As those at Sibos know, the consequences of cyber attacks are now greater than ever, but previous efforts to date have clearly been largely ineffective.

A fascinating session featuring ABN Amro and PWC showed how banks today need to tackle the issue of cybercrime both ‘bottom-up’ as well as ‘top-down’. The panel offered practical advice on how to reduce risks, many of which were cultural changes to deal with the technology in play. 

Practical ideas discussed, ranged from installing mirrors on doors equipped with electronic access, preventing criminals from ‘tailgating’ legitimate employees as they access bank premises, through to setting up ‘Phishing hotlines’ to nudge employees into reporting attempts to breach security with convincing, but fraudulent, emails.

Smarter compliance

Banking regulators are technically ‘on the same side’ as bankers as both aim to protect customer funds. However, the regulators were not very popular with certain large institutions exhibiting prominently at Sibos. In the week that scandal once again hit UK soccer, Standard Chartered hosted former England manager, Kevin Keegan. A few exhibition stands away, Wells Fargo, had its own mis-selling issues to contend with having already paid an estimated $10bn out in recent years.

While tougher regulations such as Know Your Customer and anti-money laundering begin to bite, banks need to connect up the silos within their organizations. It is clear that multiple unconnected systems contribute to a lack of transparency into the actions of individual bank employees, often the root cause of costly fines.

However, given the competition in the marketplace and the need to spend and innovate, the increased need to stay compliant, can be a competitive pressure on banks just looking to develop new and relevant customer offers. The temptation for incumbents, who due to their size, face larger sanctions on for instance capital requirements, but face growing criticism from Challengers, means that in many ways ‘playing it safe’ could be a very risky strategy for their businesses long-term.

Really Fast Payments

While the increasing regulatory burden on banks is unlikely to be resolved soon, the day-to-day work of moving payments between customers can never cease. Here too the game is changing for banks, who are seeing sharp demand for faster payments. While in Europe this means faster payments, measured in minutes or hours, the fragmented international payment systems mean customers in the US, for instance, can expect much slower levels of services.

The market clearly wants Real Time payments and it wants them for free. This pressure, plus the need for open APIs under PSD2, opens banks up to ‘native digital’ competitors who may lack the finesses of banks in nurturing customer relationships, but can deliver solid customer experience which over time converts to customer satisfaction.

Whilst much of the talk at the event was of ‘blockchains’, as related to payments, this is clearly neither the only use case for distributed ledgers, not is it the only wave of digital transformation affecting the sector. There are more fundamental challenges to concern the Sibos crowd before they reconvene in Toronto, Canada, next year, where the banking executives hope will offer a little more respite than the ‘Ripples’ on Lake Geneva. did this year.