Payments professionals from across Europe are gathering in Stockholm this week for EBAday 2019, hosted by the Euro Banking Association and Finextra. We're liveblogging events here.
17.30 That's a wrap for day one of EBAday 2019. We'll be back for more debate first thing Wednesday morning.
17.15 Ransome bills blockchain as the most promising new technology for banks, principally because it has forced institutions to engage in an intense amount of soul-searching about what tomorrow could bring. "It's about understanding the art of the possible," he says. Above and beyond that, DLT and tokenisation in peer-to-peer markets will fundamentally change the industry, he believes.
17.05 At ING, blockchain technology has been found to be particularly useful in the repo space, says de la Villa, because it is a niche market with a limited number of participants to drive adoption. "We are on a journey, which will not happen overnight," she says.
16.50 Why has the introduction of new technology in the banking industry yet to have a noticable impact on cost income ratios, asks the chair. ING's de la Villa says that there will never be a meaningful return within the early years of implementing new technology. Sometimes, a cultural change is needed as well. IBM's Hager says that its not just down to technological change, its about looking at the business case and then understanding the impact on end-to-end processes. Sometimes a long-term vision is needed. USC's Ransome points out that it really is hard to replace legacy infrastructure. For instance, NatWest has just created a new entity, dubbed Bo, a greenfield digital-only bank for millennials with no legacy backbone.
16. 45 Into the final straight with a session on the value of AI, DLT and predictive analytics in banking. Bearing Point’s Ammar Jamal sits in the moderator’s chair and is joined by Eleni Coldrey of Equinix, ING blockchain lead Mariana Gomez de la Villa, Olaf Ransome of the Utility Settlement Coin Project, and IBM’s Thomas Hager.
16.30 Meanwhile, over in the API session, Deutsche Bank tweets:
16.25 Lindsay says Swift's motto is not to neglect the long tail, as the laggards can make or break the project. There needs to be a constant process of awareness raising and education. This is not just a back office project, he says, it's about a fundamental change in business practices.
16.20 McDermott cautions that a lot can still go wrong even among the best-prepared institutions, particularly around operational readiness and standardisation. "Any migration that involves dependencies around others implies some disruptive element," she says. "We can only do our best, and put plans in place to handle contingencies and the worst case scenario as a back up."
16.17 Another poll finds over 70% of the audience view lack of budget and resources as the biggest migration challenge. Roels says support of senior management is also critical as this is not a regulatory-driven change.
16.15 Von Poser believes that while the big banks are on track, smaller banks remain on the periphery and are somewhat confused by the implications of the switch. Lindsay also points out that the strong showing from the earlier poll may be simply a result of audience bias.
16.10 Paula Roels believes the biggest beneficiary will be the corporate customer struggling with reconciliation issues. "It's a unique chance to transform what we do into the digital area," she says. McDermott agrees, billing the initiative as a catalyst for simplification at both the bank and the corporate.
16.05 Lindsay says a working group within Swift is supporting the large number of high value payments infrastructures moving to the new standard to ensure harmonisation. He says Swift will move to a rich format within day one, over a four-year parallel migration period.
16.00 Starting with a poll: 'How well prepared are you for the various migrations to ISO20022 that will affect you in the coming years?' Reassuringly, fully 75% claim to be on track.
15.55 Santamaria says the three largest market infrastructrures in the world are migrating to ISO20022 and Swift is moving to the satndard for message processing. "If this is not a perfect storm, I don't know what is." Says the aim of the panel is to instill a sense of urgency around the project to banking delegates.
15.45 Talking us through the measures required for a successful global migration to ISO 20022 are Swift’s head of Standards, Stephen Lindsay, Laura McDermott, NatWest’s head of European payment schemes, Paula Roels, head of Swift and market infrastructures, Deutsche Bank, and PPI board member Hubertus von Poser. The moderator is Javier Santamaria, chairman of the European Payments Council.
15.10 Berzins believes banks have big problems if they are relying on regulators to bail them out from the threat of disruption. "We must decide and understand what newly-created value we bring into this world. Constant creation of a new value for customers will be a key driver. We should be really careful and look closely at what Facebook and others are doing in digital payments."
15.05 An interesting live poll: 'As a customer, how often have you used a fintech service for your payment/banking needs'. Up to 50% of the audience have never used an alternative service provider, with just a quarter 'fessing up to using a third party service multiple times a week. Bit of a shocking indictment your correspondent thinks, implying a high level of complacency and, dare I say, entitlement.
14.55 Rastogi from Temenos says the disruption is already happening, and it's not necessarily being driven by Big tech but a sweeping change in technology. Banks have to deal with a host of fierce, uncomromising competitors. Ayuso from Banco Sabadell says PSD2 is making it possible for new competitors like Revolut to cherry pick payment business from banks. He believes that regulators need to take a closer look at these companies, understanding the bigger compliance burdens carried by banks. "Is Gafa the disruptor? No the diruptor is regulation ," he says.
14.50 Swedbank's Berzins says big disruption is coming. Banks may have over-estimated the impact in the long-term and underestimated it in the short term. Banks will have to adjust their business philosophy and open up to new models of business based around connected companies. "There is a perfect storm at work," he warns. "Every component of every business is being revisited. Our task is to find out what we can bring to this new connected world."
14.45 Bingo! Billing brings it up as he introduces the panel. Describes it as a potential "game-changer" for the industry.
14.40 Has the news of Facebook's launch of its own cryptocurrency this morning filtered through to the panel I wonder? Let's find out.
14.30 Tough call for the second session of the afternoon between a panel looking at instant payments and open banking and a Stream 2 take on Big Tech – disruptors of or pace-makers? I’m opting for the latter, moderated by EBA board member Krister Billing. Joining him on the podium are Banco Sabadell’s chief innovation officer Alfonso Ayuso, Girts Berzins of Swedbank, Shrey Rastogi from Temenos, and Savings Bank of Cologne director Henry Rehkuh.
14.20 Ripple's Delatinne makes a pitch for banks to use XRP as a bridge currency to make real-time payments with instant settlement, thereby reducing exposure to breaks in the chain. Points to a recent agreement with Moneygram as a use case for the transformation of how banks can handle the risks involved in nostro/vostro processing.
14.05 Deutsche Bank's Araskin says if instant payment is the new normal, banks will heavily depend on cash buffers to cover all payment flows - even those which come outside of normal working hours. "Is this really meaningfully achievable?" he ponders. Schwartz points out that in Australia's new real-time payments scheme, banks are mandated to pay interest on payments which are not processed instantly. "We have to challenge that view," says Schwartz. Ripple's Delatinne believes that the way in which liquidity management is handled today, as seen through a prism of purely managing risks, does not make for a viable long-term strategy.
13.55 Langfeldt says the move from batch processing necessitates the development of new tools to help the bank better understand its capital buffer. When payments are coming in real-time, the time span for processing becomes more free-flow and difficult to predit. Ripple's Delatinne says many banks are suffering from the limitations of their own legacy systems and may be unable to keep pace in a more dynamic environment.
13.45 JPMorgan's Schwartz says there are lots of new tools available to banks but in terms of a shift from interday to intraday liquidity management, everything becomes much more complex. Elena Langfeldt from Danske Bank says the same needs apply to bank treasuries as it does to corporate treasuries. The better we understand how our own treasury team are manging their jobs, the more we can apply that learning to our clients, she says. Equally, feedback from clients can also help our own internal business. Swartz agrees: "It's a mutually beneficial relationship".
13.40 How can banks remain relevant for corporate clients who have to manage their own liquidity? All corporate treasuries do it differently, but as everything becomes instant 24/7 it becomes much more difficult for banks to anticipate their needs. Technology will be the great differentiator in enabling clients to see, control and optimise the use of cash.
13.35 Round of applause for EBAday and Finextrea crew to start the session. Tempted to take a bow, but modesty forbids.
13.30 Refuelled by an innovative brown bag lunch and now sitting in a panel session on the changing intra-day liquidity management ecosystem. Moderated by Joost Bergen of CashDynamics, panellists include Koral Araskin, head of liquidity, investment product and portfolio management at Deutsche Bank, Ripple’s global head of banking Marjan Delatinne, Elena Langfeldt, chief product manager at Danske Bank, and JPMorgan’s head of liquidity solutions Lori Schwartz.
13.00 Women in Payments session underway
12.20 Back on the floor and InvestStockholm is drumming up business from banks in search of fintech partnerships.
11.55 Banks need to change their mindset, accept the uncertainties and new realites and react fast when sensing that the foundations of the business model are crumbling beneath them. "It's a feeling that you get from looking at the world around you. Timing is everything," he concludes. "The name of the game is not if it is right but when it is right."
11.35 Big Tech companies are behaving like nation states, creating a world of new enterprises.They are changing all the rules and setting the price points. They will change banking as well, Garelli asserts. Market cap of the ten biggest tech companies is more than double the size of the equivalent top ten banks. They are swallowing up smaller companies and attracting massive investment from sovereign wealth funds, generating what Garelli defines as a "black hole economy".
11.30 Garelli takes to the stage with a sweeping view of geopolitcal risks to growth and business. Banks may understand these traditional risk factors. However, moving on to technology and in particular the dominance of Big Tech, Garelli asks: "Who will be our competitors tomorrow and where will they come from?" The future will be defined by unexpected competitors he says, using new business models to blindside banks.
11.20 More innovation will come from ISO20022. Recker describes it as a huge opportunity for providing value added services, in so long as it's not implemented as a like-for-like replacement for existing messaging specifications. All the same, it's another great example of the benefits of a collaborative approach across the industry.
11.15 In terms of innovation, the conversation turns to initiatives like Swift's gpi and JPMorgan's own propositions for blockchain and digital coins. Recker asks whether other banks will be invited to collaborate with JPMCoin. Hunter says that the consortia approach is too slow to get projects off the ground (witness JPMorgan's retirement from R3 in favour of pushing its onwn enteprise blockchain Quorum). In the digital coin space, JPMorgan wants to set the pace, own and run the business, but invite banking partners to have a say in governance.
11.05 Big turnout for this morning's session
11.00 Another poll: 'How should banks think outside the box in order to win in transaction banking'. Revisiting new client different value propostion scoops 32% of the live audience poll ahead of finding new partnership/utility options. Bother Hunter and Recker agree that new revenue pools are where banks need to be investing their time and budget. Says Hunter: "Where we're making money now is not where we'll be making money in ten year's time. The big question is how are we going to make ourselves relevant."
10.50 First live poll of the day on the biggest threat for the global correspondent banking industry today. Almost a straight tie between margins disappearing and competition. Regulation and cybersecurity relegated to third and fourth spot. Hunter says it's cybersecurity that keeps him up at night. Also worried by the high fixed costs of the business. "The future has to focus on figuring out where scale sits. Today the business is too expensive for each of us to build our own infrastructures. It cannot last." For Recker, the regulatory aspect is a threat. Sees the divergence between tough regulations on banks and looser restrictions on non-bank competitors as an issue which banks need to lobby regulators about.
10.45 Onto the strategic roundtable. Recker beleives the transaction banking business is in a positive stage of its lifecycle as real-time payments combine with open banking initiatives to enable the creation of innovative services to solve client problems. Hunter cautions that at the same time the industry is in a precarious situation, as the business evolves. Calls for a "coalition of the willing" among banks to resolve common pain points for customers and remove friction.
10.35 Da Silva references the Nordic banks' P27 project, which aims to make cross-border payments simpler and more efficient. Likewise the Nordic KYC utility project is breaking down barriers to customer onboarding by providing a single shared utility. Collaboration will be the way in which banks can take a front seat in the ongoing digitisation of finance.
10.30 Da Silva takes a bow. As a transaction banker, da Silva begins her talk with a focus on supply chain effciency in trade finance and logisitics through the use of real-time tracking of shipments by rail, freight and road, and by information gathering from onboard IoT devices "Every single one of these activities will need a payment. We need to be there in the future, providing banking services at each stage of the journey."
10.15 Talks up APIs, DLT, request to pay, AI and PSD2 as the main drivers for disruption in the coming years. While innovation is important, implementation is key. "We may have to evolve news skills in order to successfully drive and support change," Ehrmann tells the audience.
10.05 Ehrmann arrives on stage heralded by a banging techno soundtrack..
10.00 The main event kicks off with the traditional welcome from EBA chairman Wolfgang Ehrmann. He’ll be followed onstage by keynote host Paula da Silva, head of transaction services, SEB. Next up is a head-to-head between John Hunter, global head of clearing, JPMorgan and Marc Recker, global head of cash market management at Deutsche Bank, moderated by Oliver Denecker, expert partner, McKinsey.
The morning’s conference will be closed out by this year’s challenge speaker, Stéphane Garelli, founder of the IMD World Competitiveness Center and Professor Emeritus of World Competitiveness, who will - appropriately enough – talk us through the tough task of ‘how to stay competitive in a changing market’.
09.50 The EBAday 2019 conference programme is split into two streams, one of which will focus on first-hand practitioner insights into payment trends, with the other investigating new alternative payments and technology. New additions to EBAday this year are two lunchtime sessions crafted to shine a light on the rising stars of fintech and women in payments.
09.47 A message from the exhibition floor
09.45 In other news, EBA Clearing has won the backing of 24 financial institutions from 11 countries for a new pan-European Request to Pay (R2P) infrastructure solution. EBA Clearing says it has had strong positive feedback from its multinational user community during a consultation over the last few months on an R2P blueprint. Once again, Finextra has the full story.
09.30 Artificial intelligence and machine learning tools were tipped as the hottest breakthrough technologies for financial services firms at last year’s EBAday. So it’s no surprise to see the Euro Banking Association releasing its first report on the subject, suggesting that jointly developed AI systems hold great potential for tackling common security issues. Published on the eve of today’s conference, Finextra has the full skinny on it here. As we're in Scandinavia, two of the Nordics' biggest banks, Nordea and Danske Bank, yesterday alluded to plans to significantly reduce the number of staff employed in their compliance and financial crime departments and instead turn to robotics and artificial intelligence.
09.15 Queues are building for another record-breaking EBAday, which this year plays host to over 1000 delegates and 67 exhibitors.
09.00 It's all hands on deck for the hardworking Finextra team. Ace reporter Madhvi in her second job:
08.50 The days will be long and the nights short at this year’s EBAday, as we arrive in Stockholm just days before the Summer Solstice. During this time, the sun never reaches further below the horizon than 7.3 degrees. This gives the sky a bright blue colour in summer once the sun has set, because it does not get any darker than nautical twilight.
08.45 it’s a pleasure to be back in the Nordics after previous EBAday outings in Helsinki. The Scandinavian countries and their financial institutions have a just reputation for applying new technologies to re-invent the banking experience, which will be a key theme at this year’s event. So while you’re here, be sure to visit the Fintech Zone, a dedicated space in the auditorium that will showcase innovations from sixteen startups cutting across a range of hot button topics in finance. From 9.30am this morning, each of the firms will take part in the FintechLaunchPad competition, pitching to delegates and a select judging panel of experts in the exhibition open theatre pitch area. We’ll be expecting to name a winner at approx. 2.30pm tomorrow, so stay tuned.
08.15 Building on the success of last year’s congress in Munich, EBAday 2019 will set out a vision for the future of the European payments industry as new technologies and trends reshape the business. The conference programme comprises keynotes, panel discussions and debates featuring more than 80 speakers.
.jpg)