Hardtalk : SWIFT & Banks: balancing act in digital times?

SWIFT is moving towards an “account-2-account” positioning. What will be the impact for banks, businesses and ultimately the positioning of SWIFT as service provider? 

 

Watch our “APC Hard-Talk” with Alain Raes, globally responsible for Business Development at SWIFT. Alain is based in Singapore.

 

Harry Smorenberg:

Welcome to Asia Payments Connect Hard Talk. And I’m very happy to welcome Alain Raes. Alain is Chief Business Development Officer at SWIFT and based in Singapore. He’s also a member of the group executive committee and responsible for all business developments worldwide. So Alain, welcome, very happy to have you here. SWIFT is heading for new directions. We will discuss this a little bit later. But first, I’d like to discuss SIBOS. You just finalized SIBOS 2020. This edition in a virtual way. In your view, what were you’re the key messages? What were the lessons learned from this exceptional SIBOS?

Alain Raes:

Well, first of all, thanks for having me Harry, a great pleasure to participate in this talk. Yes, I mean, we’ve got out of SIBOS just two weeks ago; our first virtual SIBOS. It is a very first offer cyber pursuit, as you know. But in this very difficult environment where we operate now, we’ve managed to organizing this and actually reaching the amazing number of about 20,000 participants to this virtual event. It’s actually far above the number of participants that we’ve ever had. SIBOS – last year in London -had about 11,000 participants physical, but here actually we’ve managed to getting about 20,000 virtually. It was a great event. It’s difficult to say, I mean, coming back to your questions, difficult to really mention some key outcome of the SIBOS. Of course, it’s been many topics we’ve been covering. Of course, the pandemic has been very much present in our discussions, digitalization, all over the place was about payments, how the payments industry is evolving with all the new participants, how eventually the difficult environment we are operating to will actually favor even more digitization. In the future, accelerating this whole movement in the payment space, in the safety space, but also in a trade space where obviously, you know, there’s still a lot of papers around and they’re clearly what is happening can really further accelerate the digitization. So clearly a lot of things happening, obviously, we also talked about new technologies, CBDCs, many new developments happening in industry without forgetting, of course, what is happening, the regulatory regimes of different countries in the world, what’s happening in there, what’s happening in terms as far as cyber-defense and cyber-crime is a concern. So it’s many different topics we’ve covered, I think, ultimately, still some key points, right. I mean, clearly the industry is synchronizing, that there is a need for further digitization, the act to accelerate all of this, they also recognize that in order to achieving this, they need to be a global regulatory framework that authorizes that make this possible as well. And then obviously, this further call for collaborations and collaborations not only within the financial industry with all the different actors that we have in different regions, but also in between the financial industry with the latest with all copies of the world as well, what is really I mean, a global effort that we need to do to make this possible.

Harry Smorenberg:

Let me break in in this part as well, because, you also announced a new strategy, which we discussed, as you’re moving from bank-to-bank to more account-to-account, which will bring about another question:”Are you moving into the territory of the banks?”Are you not becoming ultimately the transaction bank of all banks, because you are positioned to do that then also with richer data, ISO20022! This willenable you to do a lot of front office and back office work for the banks.

Alain Raes:

So yes, indeed. I mean, we’ve taken the opportunity of SIBOS to announcing the new strategy that we do have. And obviously, we’ve taken the opportunity of SIBOS to elaborate a lot more about the plans that we have, and what we think to be the benefit that is the new strategy will be bringing to the industry. Let me be clear, right? The intention is not about a key replacement of the bank. That’s not what we do. I mean, let’s not remember that we are a banking incorporated society. So what we want to do, and we’ve always wanted to do is helping the banks to be more efficient, right? And we stand to do that 45 years ago by helping demand the banks to dematerializing all the data that are necessary for settling, clearing and settling transactions, in payments, in treasury, in securities, transactions and also trade transactions, right? That’s what we’ve been doing. But we believe that nowadays, there’s ways in which that we can go further and really help the bank to provide and enable even better customer experience to their own clients. And that’s why we think that big partly based on the GPI agenda that we’ve developed over the last four years, we can get to a situation whereby all transactions being domestic like it is actually in many instances nowadays, but also international all transactions can become real time and account to account.

And, of course, you know, in order to do that, we need to remove a lot of frictions. Frictions that are about foreign exchange, about sanctions, that are about many things that you have on the way to actually to make these transactions real time. That is the objective we have. GPI somewhere had already somehow that as an objective is to help the banks moving transactions and therefore making this function of payments transactions first, more efficient, faster, I think we’ve done already a lot of progress in order to do that about 38% of all GPI transactions nowadays are being delivered end to end in about three to four minutes. And so these are already an amazing transformation we’ve realized over the last four years, but now we want to move to the extra mile by removing even more frictions, frictions that are also about data. You mentioned in your question ISO20022. We believe that by migrating our messaging systems on 2003 to over time, it will also help removing the frictions and therefore enabling transactions to become retime over time.

Harry Smorenberg:

But nevertheless, and you remove from, you know, banks to banks, servicing banks to large corporates, which is all actually taking place now. And they have access to SWIFT back office, as an ease are doing almost the same as treasury and cash managers of the larger corporations, and perhaps even smaller businesses might, you know, enter this space. So this forward integration on data and you know, servicing these clients directly, will in a certain way, bypass banks or am I mistaken?

Alain Raes:

But let’s be clear. I think when it comes because you’re talking about the corporate world, right? We’ve always serves our corporate clients through the banks. We don’t really serve the corporate directly.

Harry Smorenberg:

But virtually doing the same, so the banks are an intermediate party, and actually, I just want to raise this point. I did a transaction of $190 to from Singapore bank to a Dutch bank using SWIFT. They charged $150 just for fees.

Alain Raes:

Yes. And I think we’ve talked about that already, as some occasions, right? It is a fact. But you know, I think we also believe that by helping the banks to remove the frictions that we’re talking about, right, it’s also important thing in a responsible way, because we also want to make sure that in doing so, all the banks are participating to the delivery of that payments remain compliant to all the regulatory regime where you operate, which I’m not sure, if it’s always the case with alternative payment systems. So we need to do that in a responsible way. But we are there to helping the banks removing those frictions, making the systems more efficient, but also materializing more of this function simply as SWIFT, we can help the bank to reducing the cost that they have to bear to delivering these payments.

Harry Smorenberg:

So what are the expectations looking at Transferwise and other new players around the block? They will influence, of course, and put pressures on the existing banks and your position to offer a really low cost fast and smooth way to do international transfers. But they are so pricey.

Alain Raes:

I think that the ambition is clear, right? I mean, we believe that by developing this strategy, and by delivering that strategy, we can help our banks to become more efficient and therefore recuperate some of the market share that they’ve lost against those alternative payment system that have come up in the horizons in the industry over the last few years. And that’s the objective, we don’t want to start actually replacing the bank in the country. We want to help them to become more efficient, to better servicing their own clients being at the time historically, for sweeping the very large corporates of the world, the top 500 forces companies and over time, we’ve moved to about servicing more than 2000 largest corporates in the world, but also now moving to SMEs. And also moving to helping the banks with better servicing and the consumer business, which is something by the way, which is not entirely new at SWIFT. I mean, we are doing this already, in some circumstances in real time, domestic payment systems. You know that in Australia, we servicing the Australian community in doing so, we know that in the European community with a TIPS platform, we have the urban community to doing so. So and we want to do this more in the future.

Harry Smorenberg:

Right, I think that’s completes the impression on the new strategy and the developments we foresee and we’ll keep in touch on these developments. Thank you so much for this hard talk and we’ll stay in touch with SWIFT and the developments that are on. Thank you very much.

Alain Raes:

Thank you. Thank you very much.