With more than 8,000 delegates descending on the RAI Convention Centre in Amsterdam, it was clear that the Sibos community was keen to get back to an in-person event after two years of virtual conferences. However, for 2,000 additional attendees, the virtual option was a practical alternative.

“It’s great to be back, and fitting to be here in Amsterdam as the Netherlands knows what it is like to collaborate, innovate and adapt,” said Javier Tasso-Perez, SWIFT’s CEO, in the opening plenary session. Mairead McGuinness, European Commissioner for Financial Stability, Financial Services and the Capital Markets Union, reiterated the “uncertain” and “challenging” economic environment and the “vital role” the financial system has in supporting the wider economy. “Our challenge is to understand and manage all the risks and to make our way through,” she reflected. And, as keynote speaker, HM Queen Máxima of the Netherlands (and the UN’s Special Advocate for Inclusive Finance for Development) reflected, digital innovation holds tremendous promise for financial inclusion and financial health. “Use this conference to build a secure, trusted and efficient economy that really works for all,” she said.

With 24% of the 11,500 attendees of Sibos London 2019 stating their primary focus was payments, it was hardly surprising that this was a dominant theme at Sibos Amsterdam three years later. Maintaining and upgrading market infrastructure that ensures payments are faster, cheaper, and impenetrable to criminals, while remaining accessible to the financially excluded, remains a top priority. Drawn from a packed four days of more than 150 conference sessions across eight stages, arranged under the broad theme of “Progressive finance for a changing world”, this article is the first of three post-Sibos 2022 reflections and takes a closer look at payments. Subsequent articles will report on securities services, trade finance and lending and how sustainability and digital transformation are reshaping these businesses.

Financial messaging standard ISO 20022, having been something of a fringe discussion 11 years ago at Sibos Toronto 2011 (with give-away copies of the large yellow self-help book ISO 20022 for Dummies), stood out in terms of session frequency as by far the most popular topic at the 2022 conference.

With the November 2022 migration deadline for Target 2, EURO1 and CBPR+ payments looming large, discussion focused on managing the coexistence period – when various market infrastructures will be live with the new data-rich format, while others will continue running legacy SWIFT MT messages.

“ISO is coming, we need to adopt it”
Christian Fraedrich, Head of Business Architecture at Deutsche Bank, Corporate Bank

Importantly, the learning points of SEPA migration have been taken on board with ISO 20022, as the community replaces a patchwork of legacy standards, makes incremental step-by-step movements – but at the end of it all, a mandated end date was necessary. The whole ISO 20022 process has created a template for banks’ broader data architectures – offering the structure and standardisation required to process and share data more effectively.

Connecting instant payment systems across borders

As formats and standards align, the barriers to faster cross-border payments reduce. One of the major talking points at Sibos was the collaboration between The Clearing House and EBA CLEARING on the new Immediate Cross-Border (IXB) solution, which links together the US RTP and EU RT1 instant payment systems, together with key components from SWIFT. The pilot programme for the service is under way and the collaborators announced just ahead of the conference that it is on track for commercial roll-out in 2023.¹

Outside the traditional market infrastructures, however, disruptors continue to plot their own course towards instant cross-border payments using distributed ledger technology (DLT)-based rails. One of the key challenges here is to create safer and more regulated DLT rails, but many market participants are optimistic that this can be addressed and excited about the future possibilities – ranging from atomic settlement to programmable money (though here too, incumbents will argue the same can be achieved using traditional infrastructure.²

“I think of instant treasury as clients having access to the right information at the right time to make the right decisions”
Christof Hofmann, Global Head of Corporate Cash Management, Deutsche Bank

Instant treasury

As instant payments look set to reach across borders, what does this mean for “instant treasury”? As Christof Hofmann, Global Head of Corporate Cash Management, Deutsche Bank told LinkedIn followers after his session, ‘Digital Payments Transformation: The Future of Competitive Advantage in Banking & Payments’, “it does not mean the same for everyone and we really have to listen to our clients”. He continued, “I think of instant treasury as clients having access to the right information at the right time to make the right decisions. This could be using instant payments, but not necessarily.”

With more of this instant information being available, the challenge for corporates is having the right tools and processes in place to make full use of it. That could mean having analytics that not only flag, for example, when a payment needs to be made, but also how it should be made (by ACH? RTS? Wire?).

Yet for this to be effective, you also need to bring in the right data in the right way – and standardisation of the application programming interfaces (APIs) – the tools used to share data between systems – remains a sore point. There is work being done to ease this challenge, however. SWIFT continues to offer support on API standardisation through its library of API standards, while corporates can also work with specialist fintech integrators, to better connect their own systems with those of different partners.

Interest continues to mount in central bank digital currency (CBDC) initiatives such as the ECB's exploration into a Digital Euro, for which advice on the potential issuance, design and implementation is expected in Q3 2023.³

Collaborative efforts are also under way in Asia-Pacific, where the Reserve Bank of Australia (RBA), the Central Bank of Malaysia, the Monetary Authority of Singapore, and the South African Reserve Bank are working on Project Dunbar – a platform for international settlements using multiple CBDCs.⁴ On 9 August 2022, the RBA announced its collaboration with the Digital Finance Cooperative Research Centre (DFCRC) on a research project to explore use cases for a central bank digital currency (CBDC) in Australia.⁵ But do central banks see CBDCs as top of the priority list?

It was Dinesh Khara, Chair of the State Bank of India who underlined the point that countries that already have modern and well-functioning payment and settlement systems would simply see digital versions of currencies all converging at the balance sheet level.

In October 2021, the Financial Stability Board set quantitative global targets for addressing the four challenges faced by cross-border payments (cost, speed, access, transparency) as a key foundational step in the G20 Roadmap.⁷ These targets were set for each of the three main segments of the market (wholesale, retail and remittances).  

Twelve months later, the roadmap has, said Dean Sposito, Head of Institutional Cash Management, Western Europe at Deutsche Bank, “been raised to the level of high politics”. In an interview with Finextra TV’s Debi Bell-Hosking, he reflected that, while good progress had been made on speed (“gpi connected the world – we proved we could do it”) and transparency (moved forward by ISO 20022), “one outstanding item harder to solve is access and financial exclusion”. This, he explained, is important for the political arena but “a bit disconnected from the banks and regulatory side”. Each bank has its risk appetite, and this makes the piece around financial inclusion more difficult.

However, the sheer delight from everyone at Sibos at all being back together again, and the intensity of the discussions, would suggest that nothing is impossible when there is collective determination.

Sibos 2022 Amsterdam took place at the RAI Convention Centre from 10 to 13 October 2022 and is available virtually to Sibos registrants on demand

Sources

¹ See ebaclearing.eu
² See ingentaconnect.com
³ See ecb.europa.eu
⁴ See bis.org
⁵ See rba.gov.au
⁶ See federalreserve.gov
⁷ See fsb.org