This year’s Sibos conference held in Amsterdam recognised the need to embrace digital transformation. Benjamin David investigates.
Sibos returned as an in-person event with a packed conference programme this year, hosting more than 250 expert speakers from across the financial ecosystem and bringing captivating debate and big-picture outlooks from some of the biggest names in finance.
The Sibos 2022 conference agenda’s theme, ‘Progressive finance for a changing world’, recognised the need to embrace digital transformation, navigate new risks and drive sustainability and ethical change. As new risks emerge, the event evaluated new opportunities existing for financial services providers, allowing them to spearhead technological innovation and drive positive global change. Central themes from the conference were digital innovation, market infrastructure interlinking and digitising trade.
During the opening plenary in Amsterdam, Queen Maxima of the Netherlands announced that “digital innovation holds tremendous promise for financial inclusion and financial health”, and the conference’s theme, namely progressive finance for a changing world, “could not be more timely”.
The Queen stated that there had been major progress in the past decade, with a quarter of the world’s adult population now having access to financial services. “Fully 76% of adults are now in some way included,” she said, “which has unlocked new opportunities for millions of people previously left behind.”
“Digital innovation holds tremendous promise for financial inclusion and financial health.”
Investments in critical digital public infrastructure – including greater connectivity and digital IDs – have “laid the foundations” for this growth, she added, detailing how the rise of digital payments had driven a massive increase in account ownership.
Almost 40% of adults in developing economies opened their first account to receive a wage or a government payment, she said. In addition, millions of small merchants are now paid and make payments using their phones. “This has enabled financial service providers, especially new fintech players, to innovate in the design and delivery of new products and services.”
The audience was asked how people can better manage their day-to-day finances, get access to credit, plan and meet future goals and – “during multiple crises” – build resilience and insure themselves against shocks. “To do so makes good business sense,” stressed Queen Maxima, since financially healthy customers are “better” customers, and those who provide these services can differentiate themselves from other providers.
“But for the moment, that is not what is happening,” she added, explaining that only 55% of adults in developing economies can access emergency money within 30 days. Additionally, she referenced a survey finding that almost half of respondents, including those from OECD countries, agreed with the statement: “I have no money left at the end of the month.”
“Interlinking market infrastructures means a much wider reach and a better payment experience across borders.”
“In some places, we have seen both an increase in access to finance – and simultaneously a decrease in financial health. So, let us identify the best solutions to these challenges and bring them to scale,” the Queen said.
What can be done? Given these challenges, Queen Maxima suggested that one way to tackle the decline in financial health is to encourage private-private partnerships that provide services across entire value chains.
“Collaboration across industry and government is also key to creating inclusive digital public infrastructure that enables services beyond finance – such as health and education. These are the building blocks of sustainable development.”
The topic of interlinking market infrastructures also played a central focus at the conference. “Interlinking market infrastructures means a much wider reach and a better payment experience across borders,” said moderator Saloni Shukla during the Swift-focused ‘Connecting the dots: Market infrastructure interlinking’ session.
“Market infrastructures have a key role in enabling instant and frictionless end-to-end payments between bank accounts in their own communities. But what do you get when you interlink them?” asked Shukla.
Advertised as an explanation of Swift’s vision to interoperate market infrastructures, “combining the global presence of SWIFT with their domestic reach”, the panel discussion featured Erwin Kulk of EBA Group, Soon Chong Lim from DBS Bank, Swift’s Carlo Palmers and BNY Mellon’s Carl Slabicki.
Slabicki pointed out that cross-border interlinking amounts to a “fundamental reset” and would see a “large” area of improvement in the coming years, providing 24/7 instant payments across the globe.
Palmers stressed that Swift is a critical pillar in achieving cross-border payments “in a frictionless” way. “Interlinking is a big one,” he added, “and Swift’s network reach and infrastructure can be heavily reused and leveraged.”
“The trade ecosystem is vast, the challenges are plentiful and inefficiencies can have far-reaching consequences.”
Slabicki called the number of challenges a “complex mess”, adding that consumers “must” be able to pay globally. Likewise, DBS Bank’s Lim mentioned that it’s important to “split” low-value cross-border payments from high-value cross-border payments.
Palmers also noted that to make payments “frictionless”, data transferred at the source must be accurate.
According to Slabicki, Swift has an important role to play here in establishing standards to help bring “everyone together” to pre-validate accounts, beneficiaries and fraud scoring across the globe.
Lim also saw pre-validation as a “top thing”. He said: “Conditional settlement means joining pre-trade parts. Swift isn’t the only solution, though. Pre-transaction is important and post-transaction handling crucial.”
EBA Group’s Kulk said that retail and high-value payments required separating. “Interconnecting retail payments are not always Swift-connected. What’s important when looking at Swift components is that all the banks are connected,” he added.
The fraud problem
The numerous frauds impacting the trade ecosystem were another central focus of Sibos, and of the session ‘Digitising trade: the time is now to collaborate’. This was moderated by Gonzalo Perez Verdicchio, product manager chapter lead, Swift.
“The trade ecosystem is vast, the challenges are plentiful and inefficiencies can have far-reaching consequences,” read the session’s synopsis. The pandemic, moreover, “unearthed numerous frauds that rocked the trade ecosystem, prompting banks and regulators alike to react”.
Ben Arber, managing director of trade finance fintech MonetaGo, stated that fraud in trade and receivable finances is “endemic” and “longstanding” and referenced different types, such as basic invoice discounting fraud, receivable finance fraud and supply chain fraud.
He told the audience about fraud that targets companies using fake documents, fake invoices, altered bills of lading and duplicate financing. “There is also collateral fraud using non-existent collateral,” he said.
“There are vendor scams where companies are tricked into paying regular vendors.”
“There are vendor scams where companies are tricked into paying regular vendors,” he added, with “more sophisticated use of technology, including hacking into supplier platforms to create putatively genuine invoices.”
A data-driven standardised ecosystem approach is one potential solution, said Arber. Technology enables multiple financial institutions, for example, to share information on trade transactions and entities with a view to identifying duplicate financing. Using vast amounts of data provided by government regulators, custom agencies and the private sector to identify whether a document is genuine or fake is another “important” possibility, he said.
The amount of information from trade documents from banks, shared via a centralised registry, “means you’ve not got digital islands and individual groups of data”, Arber added. As a result, he said, you can collaborate globally to identify flows that look fraudulent between buyers and suppliers across markets.
In addition, cloud computing can “power” the ability to take vast amounts of data at a document level into cross-border type platforms. “Regulation is encouraging this type of approach,” said Arber.
The US’s Anti-Laundering Act 2020 covers the sharing of sensitive information, he added, including reports of suspicious activity between institutions and cross-border, outside of US regulations.
The legislation, he said, was driving some of the change towards a more collaborative and digital approach to “solving problems like fraud” and “broader problems from a financial crime perspective in the trade and receivables industry”.
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