digital disruption and new entrants in payments

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Digital disruption and new entrants in payments 1 2 September 2015 Dan Moran Head of Technical Sales Services, SWIFT

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Page 1: Digital disruption and new entrants in payments

Digital disruption and new

entrants in payments

1 – 2 September 2015

Dan Moran

Head of Technical Sales Services, SWIFT

Page 2: Digital disruption and new entrants in payments

2 SWIFT Latin American Regional Conference 1-2 September 2015

Page 3: Digital disruption and new entrants in payments

5 mega trends impacting correspondent banking

3

Greater compliance, transparency and liquidity requirements on banks

De-risking, rationalizing correspondent network, more controlled traffic flows

Unclear regulatory framework for non-banks but likely to increase to same level

Compliance

Regulators push to open access to payments systems and bank accounts (PSDII)

Regulators push for more (non-bank) innovation (FCA in UK)

Breaking the value chain, specialization, partnerships, APIs

Open access

Customers looking for simpler, real-time experience, domestic and international.

Also expect lower price, more transparency, full certainty

Increased willingness to shop around, use non-banks

Real-Time

Off the wire

Solution of 70’s, superior to Telex, not fit for purpose anymore for all payments

Multitude of intermediaries, results in inferior service (speed, transparency…)

New technology innovations like crypto-protocols

Trend to central clearing systems – direct to ACH

Growth Return to sustainable growth – trade flows grow faster than GDP

Revenues expected to grow at 8% per annum in next 5 years

Two speed growth, shift to East and to RMB – 64% expected growth in RDE’s

SWIFT Latin American Regional Conference 1-2 September 2015

Page 4: Digital disruption and new entrants in payments

Focus on domestic Real Time Payments

Live in 17 markets, 5 more in planning / development

4

Africa Nigeria

South Africa

Central & Latin

America Brazil Chile

Mexico Colombia

Asia Pacific India Japan

Singapore South Korea

Taiwan Australia

Hong-Kong New-Zealand

Europe Denmark Iceland Poland Sweden

Switzerland Turkey

UK Finland

SWIFT Latin American Regional Conference 1-2 September 2015

Page 5: Digital disruption and new entrants in payments

SWIFT’s Financial Crime Compliance roadmap

Key features

• Comprehensive,

growing set of

solutions

• Initial focus on

correspondent

banking

• Cohesive, mutually

re-enforcing offering

• Cloud solutions

• Strong customer take-

up

5 SWIFT Latin American Regional Conference 1-2 September 2015

Page 6: Digital disruption and new entrants in payments

The unbundling of banks Source: https://www.cbinsights.com/blog/disrupting-european-banking-fintech-

startups/?utm_content=buffer2f104&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer

6 SWIFT Latin American Regional Conference 1-2 September 2015

Page 7: Digital disruption and new entrants in payments

Correspondent banking disintermediated at origination

7

Local bank Local bank

PSP PSP

ACH ACH

GTB GTB

End customer

(retail, SME, corp)

End customer

(retail, SME, corp)

Correspondent Banking

Co

rre

sp

on

de

nt

Ba

nkin

g d

isin

term

ed

iati

on

Transfer

Agent

Transfer

Agent

*Icons are representative example

of each model SWIFT Latin American Regional Conference 1-2 September 2015

Page 8: Digital disruption and new entrants in payments

Rationalizing the hype

8

Peer to peer,

no correspondent

banking ‘side effects’:

delays, costs,

counterparty risk

Bi-lateral

agreeme

nts

Real time,

continuous

payments

Lower cost

for FI

Open source

internet protocol,

distributed ledger

End-to-

end

SLA Value

dates

Back

office

24/7

Sanction

screening

Liquidity

trapped

Reconcil

iation

Security

Confide

ntiality

Integrati

on

Governa

nce

Release

manage

ment

SWIFT has done an in-depth analysis on crypto protocols and

distributed ledger technologies, positioned for international and real-

time funds transfers. This analysis included technical aspects like

messaging, security, reliability, resilience, quality of service, ease of

implementation and also commercial, business practice, legal and

compliance considerations. This analysis is available upon request.

Cla

im

Ch

allen

ge

SWIFT Latin American Regional Conference 1-2 September 2015

Page 9: Digital disruption and new entrants in payments

Bank-grade payments system requirements

9

Addressing

real

challenges

compliant Clear ROI for

banks Scalability

SWIFT Latin American Regional Conference 1-2 September 2015

Page 10: Digital disruption and new entrants in payments

Need for a change

10

Technology Business

SWIFT Latin American Regional Conference 1-2 September 2015

Page 11: Digital disruption and new entrants in payments

• “Blockchain is a really disruptive development and banks have a lot of fear

concerning this technology because, in the pure theory of blockchain, a lot of

processes within a traditional bank would be obsolete”, Thomas F Dapp,

Research Analyst, Deutsche Bank

• “Blockchain technology will not only change the way we do payments but it

will change the whole trading and settlement topic”, Oliver Bussmann, CIO,

UBS

• “Blockchain technology continues to redefine not only how the exchange

sector operates, but the global financial economy as a whole,” Bob Greifeld,

CEO, Nasdaq

• “In time, distributed ledgers will support smart contracts – computer

protocols that verify or enforce contracts. This will lead to a wide variety of

potential uses in securities, syndicated lending, trade finance, swaps,

derivatives or wherever counterparty risk arises.” Santander Innoventures

What are the banks saying

11

Source: The Financial Services Club's Blog by Chris Skinner

SWIFT Latin American Regional Conference 1-2 September 2015

Page 12: Digital disruption and new entrants in payments

What are the banks saying….and doing

• “Blockchain is a really disruptive development and banks have a lot of

fear concerning this technology because, in the pure theory of

blockchain, a lot of processes within a traditional bank would be

obsolete”, Thomas F Dapp, Research Analyst, Deutsche Bank

• “Blockchain technology will not only change the way we do payments but

it will change the whole trading and settlement topic”, Oliver Bussmann,

CIO, UBS

• “Blockchain technology continues to redefine not only how the exchange

sector operates, but the global financial economy as a whole,” Bob

Greifeld, CEO, Nasdaq

• “In time, distributed ledgers will support smart contracts – computer

protocols that verify or enforce contracts. This will lead to a wide variety

of potential uses in securities, syndicated lending, trade finance, swaps,

derivatives or wherever counterparty risk arises.” Santander

Innoventures

SWIFT Latin American Regional Conference 1-2 September 2015 12

Page 13: Digital disruption and new entrants in payments

Call to action

13 SWIFT Latin American Regional Conference 1-2 September 2015

Page 14: Digital disruption and new entrants in payments

SWIFT Latin American Regional Conference 1-2 September 2015 14

Questions.

Page 15: Digital disruption and new entrants in payments

SWIFT Latin American Regional Conference 1-2 September 2015 15

Digi-voting

Page 16: Digital disruption and new entrants in payments

SWIFT Latin American Regional Conference 1-2 September 2015

On a scale of 1 to 5 please rate your level of

satisfaction with this session.

Lowest Highest

16

Page 17: Digital disruption and new entrants in payments

SWIFT Latin American Regional Conference 1-2 September 2015

On a scale of 1 to 5 please rate your level of

satisfaction with the session speakers.

Lowest Highest

17

Page 18: Digital disruption and new entrants in payments

SWIFT Latin American Regional Conference 1-2 September 2015 18

Agenda what’s next

• Coffee Break SWIFT Lab: 11:00 – 11:30

• Plenary: 11:30

Sponsored by:

Page 19: Digital disruption and new entrants in payments

www.swift.com

SWIFT Latin American Regional Conference 1-2 September 2015 19