Sibos 2021, one of the world’s largest financial services conferences, was once again all digital this year. Held from October 11-14, it saw over 19,000 delegates gather to address the biggest emerging issues across the financial ecosystem. The theme this year was “Recharging Global Finance.”

In light of the significant changes in payments in recent years, it’s important for payment providers to keep up with the fast-changing ecosystem. Based on the discussions and the ideas presented at this year’s conference, we have summarised the top seven issues to take away from Sibos 2021.

1. The future of money is fraught with interest

Amid rising demand for a cashless society, money has become more notional than before. This idea has now spread beyond payments. By expanding their digital capabilities, payment providers (including central banks) have come up with digital exchange solutions such as cryptocurrencies, digital currencies, stablecoins, and programmable money. These solutions are expected to change the way money looks and is spent.

With central banks now coming up with their own versions of digital currencies called central bank digital currencies, it will be interesting to see the progress of this new form money being adopted in various geographies at different paces. This will also put a spotlight on the issues around digital currency, law enforcement, customer safety, investor protection, market integrity, financial inclusion, and evolving business models.

The future of money looks fascinating and sophisticated.

2. Technology takes payments to the next level

Digital adoption, accelerated by COVID, is already bringing us a new normal. To find operational efficiencies, redefine current business models, develop relevant products, support resiliency, and unlock new sources of value, financial institutions (FIs) across the world are seeking a technological edge.

Cloud was the standout technology topic of discussion at the conference. With increasing payments volumes and associated data, there is growing demand to manage payments processing efficiently. One of the emerging options is moving to modern cloud-native architecture, which is economical and flexible and helps FIs become more agile. Partnering with cloud providers and associated solutions allows payments providers to focus on delivering value to customers and shedding their non-value-adding tasks.

Artificial intelligence (AI) and machine learning (ML) were also much discussed at the conference. Coupled with data analytics, they can help curb fraud, perform intelligent operations, provide customized services and build efficient decision-making capabilities. We all should continue to harness data intelligently and have the right engineers to build operating models using raw data and creating value from it.

3. Consolidation of market infrastructure

Driven by the growing number of financial and payments schemes, along with increasing transactional volumes for real-time payments, debit systems, securities, and bill payments around the world, many jurisdictions are consolidating domestic payments infrastructure through initiatives like P27 and EPI. These will drive innovation and mergers across payments. They will also support better coordination between investments and innovation in regional schemes, increase the efficiency of decision making, and eliminate the overlapping of services.

By creating strong regional alternatives, the consolidation of systems will pave the way for a more competitive global payments landscape.

4. Cross-border payments change continues

Current inadequacies around cross-border payments include lack of transparency, high degree of uncertainty, low velocity and the inequality of participants. In a world where users expect all their payments to be fast, trackable and predictable, financial institutions need to further reduce friction in cross-border payments. B2B cross-border payments in particular need greater innovation and transparency. And although SWIFT GPI has helped more than 90% of cross-border payments to be accomplished within 24 hours, a lot more work remains to be done.

Thomas Halpin, HSBC’s Global Head of Payments Products, said at the conference that “it is estimated that roughly $2.4 billion a year is lost due to friction in the cross-payments system. However, not only do we lose the money, but it is also impacting around 5% of all underlying cross-border transactions. Hence this clearly results in loss of opportunities, increased risk, and uncertainty that is so critical for customers. So, the cost dimension is big, but the impacts are bigger.”

The migration to ISO 20022, with its richer and more structured data, should help in this regard. The new standard will enable interoperability, perform reconciliation, curb risk and support smoother, faster processing of cross-border payments. But there can still be limitations around foreign exchange and non-harmonized anti-money-laundering regulations.

Since an individual payment provider can only impact the change in cross-border payments in a limited manner, collaboration within financial services is extremely important here.

5. New forms of payments

The newest payment method discussed extensively at this year’s conference was “buy now, pay later,” which allows customers to either pay the whole amount later or pay in instalments. Klarna, Affirm and Afterpay are a few leading providers. It is a powerful tool that helps merchants and businesses get instant payment against products sold, while buyers get immediate financing with a flexible repayment window.

Another much-discussed new payments form was “request to pay.” In Europe, EBA Clearing launched its “request to pay” offering in November 2020, while in the U.K., Pay.UK launched its product in June 2020. “Request to pay” is an emerging real-time payments channel that allows any business or merchant to send an electronic request for a payment to a debtor account. It can be used for bill payments and e-commerce. It is a cost-effective and secure payment mode that provides more control and visibility for end-consumers and businesses.

Other payments modes discussed were mobile wallets, QR codes and online payments.

6. Sustainable finance

Much of Sibos this year focused on sustainable finance, as both global and regional regulators are encouraging products from banks and fintechs to address this need. At the conference, experts examined the role of the finance industry in supporting clients’ transition within a sustainable, low-carbon economy through incentives, innovation and investment opportunities.

Recently, the Hong Kong Monetary Authority committed to promoting green and sustainable finance to address climate risk. The European Central Bank also conducted an economy-wide climate stress test to assess the exposure of euro-area banks to future climate risks under various climate scenarios.

Amid international initiatives like COP26, over the next 12 months we can expect to see more banks creating innovative green solutions that both reduce their carbon footprint and help their customers live more sustainably.

7. Striking a balance between security and innovation

We expect 21st century central banks and regulators to be much faster, more transparent and resilient. We also expect to see them play greater roles in promoting competition and driving innovation. But fostering digital acceleration can also expose the industry to information security threats, cyber-attacks and financial crimes.

This is what is driving the emerging expectation that regulators will have to make trade-offs across risk appetite, operational efficiency, and innovation.

On one hand, regulators are encouraging innovations like open APIs, digital currencies and contactless payments.  On the other, they are exercising more control in areas such as customer safety and operational resilience in the cloud.  It will be fascinating to see how regulators balance these competing concerns in the future.

My overall takeaway from Sibos 2021 was that in a constantly changing and evolving world, we need to stay focused, relevant, collaborative, competitive and innovative.

Sibos 2022 will be hosted in Amsterdam. I am already looking forward to it.

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