Wednesday, June 19, 2024

EXCLUSIVE: Sibos Day 3 round up

As we entered the third day of Sibos, the agenda was filled with even more engaging discussions that provided insightful perspectives into the financial world and its evolving digitisation. Take a look at what we thought of Day 1 and Day 2 of Sibos

CBDC Through The Bankers Lens, Challenge or Opportunity – With more than half of the world’s central banks exploring the use of CBDCs, there is an evolving argument between whether CBDC models should be intermediated or not. In a poll undertaken before the talk, 66% of people saw CBDCs as an opportunity, which could be seen as shocking given that more and more Fintechs are seeking to displace banks in their offerings of credit displacement and other features.

Tom Mutton, Director of the CBDC Unit at the Bank of England, noted that it’s important to differentiate between different types of CBDCs. Whilst Retail CBDCs are new and could allow households and businesses to make basic payments via an online currency for the first time, Wholesale CBDCs have actually been in existence for a while, in the form of Central Bank Reserves. Soon Chong Lim of DBS Bank went on to discuss that the development of Wholesale CBDCs ‘could be very innovative in terms of the monetary arrangements and use of cross border trade investments’, so long as there is interoperability to avoid fragmentation, maintain efficiency and protect individuals and their data.

Florence Lubineau commented that ‘a digital euro could become a reality in the next 4 or 5 years’, It’s important for key players in international banking to ascertain how far clients see potential in CBDCs. In Europe, money creation and distribution is largely driven by commercial banks. ‘Here, they are systemic to the financial system and banks are much more regulated. What is for sure is that CBDCs will surely differ from one region to another.’

Conversational Banking – Fanny Mouron of Avaloq hosted an extremely valuable talk on ‘conversational banking’ and how servicing clients through social media messaging services can provide incredible opportunities for wealth managers.

‘The way we consume relationships has changed.’ 50 billion text messages are sent every year. 50% of customers currently interact with their bank via web and mobile applications at least once a week. Mouron noted that client expectations are accelerating towards ‘screen relationships’ where everybody wants things instantly. ‘In today’s digital era, investors face a similar issue. Investors judge investment providers not just against their financial peers, but also against players like Google, Apple and Amazon.’

Thus, conversational banking is the mix between tech and touch, enabling higher touch experiences while using social messaging channels with AI. Essentially, a client may be able to use a social messaging app to contact their relationship manager who responds on the client’s preferred channel of communication, whilst using a different environment themselves so as to protect users.

This is convenience personified for the client. The familiar environment results in improved responsiveness and a hyper-personalised service that improves their experience. Whilst this exchange may seem purely digital, it is important to go ‘digital first, but not digital only.’ By offering a hybrid model, banks will still have a personal connection with clients, therefore remaining trustful, human, and genuinely engaged in the experience too. One of the key questions always asked in service is ‘How may I help you?’ Conversational banking could really provide a better answer to that question.

Financial Inclusion In The Digitised Post-Covid World – The pandemic no doubt magnified the need for more people to have access to financial services in an online environment.

Marion King of NatWest interestingly noted that in the UK, over a third of people are not comfortable with using the internet to access or manage their money. Financial inclusion for NatWest seems to be about providing comfort, by making cash accessible to all those who need it no matter where they live. Thus, NatWest partnered with a security company to distribute over £2million of cash for those who couldn’t access it during the first wave of the pandemic.

Areas like Brazil and Africa seemed to be much more embracing of financial technologies in the post-Covid world than the UK. Gustavo Costa Tayar commented that 43% of respondents think they’ll use less cash in the coming year, showing the adoption of online banking as a trend that is coming to stay. Michelle Swanpoel analysed Africa’s increasing digitisation of finance, which was already in motion prior to the pandemic. To her, Africa’s youthful population is a key reason for their digitisation of finance. Only 3% of the population is above 65 and so Swanpoel believes that ‘the population is a lot more tech-savvy’, and therefore more aligned with financial technology.

Likhit Wagle of IBM went on to discuss how financial inclusion isn’t just about bringing new people into finance, but undoing the prejudices in the financial system that are algorithmically harming marginalised groups in society. Biases against African Americans in America were undoubtedly implemented into financial algorithmic calculations. Wagle went on then to highlight the impressive work IBM are doing to make algorithms explainable, therefore limiting prejudices that could be inherent in some financial decision making.

The Future of Money – Bradley Leimer, John Egan, Bin Ru Tan and Dr Leda Glyptis then posed some depthy questions about the future of money, often with a dystopian, fearful tone.

As digital currencies become more popular, ironically they become harder to understand. The challenge of the future is defining value in these digital currencies that desire to be decentralised and independent of governance. If that value is not consistent upon a community, several inequalities can emerge. Leimer voiced that ‘there are more negatives to people having private control of money and assets in a way that will be more derogatory to the long term health of humanity.’ He goes on; ‘everything that gets decentralised becomes centralised and regulated again.’ Egan echoes this worry.

Well developed countries have institutionalised prejudices against certain communities. In some cases, they strip these communities of the right to vote, the right to go to certain regions and induce cultural hatred. What happens when these institutions get the added capacity to control money supply to these communities? This is a great amount of power, and regulatory action needs to start happening in live time to stop such actions. Bin Ru Tan offered some more positive outlooks on the future of money, estimating that banks will embrace crypto technologies, which are a clear symbol of dissatisfaction with the current monetary system. An early example of this is how DBS, the largest bank of Singapore, opened up their own digital crypto exchange to understand how to manage this new space.

Technology is neither good, nor bad, nor neutral. It is the gift of the users to determine the ethics and principles that need to be underpinned in finance, and we are at that inflection point now.

The key takeaway of Day 3 of Sibos seemed to be this; focusing on digital inclusion will support and enable financial inclusion, however it is imperative that ethics, regulation and security act in live time and exist to the highest degree to ensure the future of money doesn’t descend into a financial, cultural, and moral dystopia.

People In This Post

  1. Corpay to Acquire Cross-Border Payments Company Read more
  2. ZA Tech Rebrands as Peak3, Raises US$35M Series A led by EQT Read more
  3. UK’s Global Fintech Community on Track for Further Integrity and Ethics Skills Boost with Innovate Finance and CISI Certificate in Ethical AI Partnership Read more
  4. What’s the Biggest Story in Fintech? | FF News at Money20/20 Europe Read more
  5. Propelling Digital Banking Innovation | Arun Thallapelly | Temenos Community Forum 2024 Read more