FINEXTRA SIBOS REVIEW IN ASSOCIATION WITH SAP NOVEMBER 2015

FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION WITH SAP

Reflections on Sibos 2015 ........................................... 3

01 Key takeaway #1 Digital ......................................... 5 02 Key takeaway #2 Regulation ................................... 8 03 Key takeaway #3 Real-time payments ....................11 04 Key takeaway #4 Blockchain .................................14

05 Key takeaway #5 Asia ...........................................17 06 About ..................................................................20

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

03

REFLECTIONS ON SIBOS 2015

By Ross Wainwright, Global Head of Financial Services, SAP

Digitalisation was the defining theme of Sibos 2015. The banks need to formulate innovative digital transformation strategies that enable value creation, improve customer loyalty, drive increased revenues and ultimately profitability. They also need to adapt quickly in a landscape in which technology is rapidly evolving and new competitors are created every day. Digital strategies need to encompass improved customer experience, employees, suppliers, industrialised operations and of course risk and compliance. And they need to do this against a backdrop of higher spend on regulation and still-challenging economic conditions.

The banks’ relationship with fintechs was centre stage in Singapore. It is time to move on from the ‘them and us’ thinking that pits fintechs against banks and vice versa, and pursue a collaborative approach. The banks need the fintechs but the fintechs need the banks as well. Given the challenge for start-ups to work with banks – their procurement processes alone are often insurmountably long and complex for new companies to negotiate successfully – there is also a role for more established financial technology providers to bridge the ‘innovation gap’ between the banks and the start-ups.

Regulation was still firmly on the agenda in Singapore. The realities of the evolving regulatory environment inform all the strategic and tactical business and technology decision-making of banks around the world. But regulation is now ‘business as usual’, and the tighter, more costly regulatory environment adds another layer of complexity for banks as they formulate their strategic responses to the digital opportunity.

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

04

Regulation both helps and hinders banks in the digital world. It restricts what banks can do with big data for example, and increasingly the regulators are opening the floodgates for the burgeoning fintech industry to encroach further on the banks’ territory – bringing more digital payments players into the regulators’ purview, but also forcing banks to share data with these players and giving them a stronger foothold in the payments business. That said, the banks have the history and the expertise of complying with regulation so they have an inherent advantage here.

Sibos has always had a technology focus, but the level of interest this year in one technology in particular – blockchain – was remarkable. Though some banks expressed skepticism about its role given it is unproven certainly in a high volume transaction banking environment, more were of the view that something has to be done with this technology – now. Whether its strongest impact will be in the cryptocurrency area or more for the processing of complex cross-industry transactions such as trade finance deals, it is clear that its potential has to be assessed. Many banks are experimenting with blockchain and this is vital. If the banks don’t take the lead here, others will.

The good news from Sibos 2015 is that digital is at the top of the agenda. The banks are talking not about a ‘digital future’ but about a ‘digital now’ – encompassing blockchain and cryptocurrencies, collaborative business networks, real-time core banking and digitalisation of back end processes. The challenge is to keep this focus and turn the excellent discussions in Singapore into tangible actions during the months ahead.

FINEXTRA’S FIVE KEY TAKEAWAYS FROM SIBOS 2015

#1: Collaboration and a focus on the customer experience are key to banks’ success in digital

#2: Regulation remains a priority, and smart innovation support both compliance and business development

#3: Real-time payments help banks respond to digital disruption – but avoiding fragmentation and delivering customer-focused services will be vital

#4: Blockchain is a buzzword but it does have potential, and banks need to explore this in the context of their core systems renewal

#5: The shift from West to East continues, and the “digital future” of banking and payments is playing out in Asia now

For more of Finextra’s coverage of Sibos 2015 visit http://finextra.com/sibos/

01| FINEXTRA’S INSIGHTS FROM

SIBOS 2015 – IN ASSOCIATION WITH SAP

05

KEY TAKEAWAY #1: COLLABORATION AND A FOCUS ON THE CUSTOMER EXPERIENCE ARE KEY TO BANKS’ SUCCESS IN DIGITAL

Highlights:– Banks must digitalise now – and are doing so– The only option is for banks and fintechs to

collaborate– Customer experience is the critical factor– Cyber-threats make the digital challenge for

banks even greater

Standing room only in the Sibos Future of money session

That digital was a major theme at Sibos was no surprise. The degree to which the digital conversation dominated may have surprised some – given that the focus of the conference is transaction banking, while the big noise about digitalisation has until recently at least been centred on retail banking. But there was no mistaking the urgency behind the discussions, nor the size of the tasks banks face in achieving their digital goals. As Javier Santamaria of Santander and the EBA Board said, digital requires a “full redefinition from scratch of what you are going to do and how you are going to do it”.

The end-to-end nature of digital was echoed by other commentators during the event. Describing her bank’s digital transformation programme, Claire Calmejane, Director of Innovation at Lloyds Banking Group, said: “We don’t just take the digital product and the digital channel – we actually redesign the front end, the middle office and the bank end.” For Rob Hetherington, General Manager EMEA, Financial Services, SAP, digital encompasses four aspects: how banks improve their engagement with customers, how they help those

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

06

“ I think that one of the most important things… is to create an ecosystem in which everyone can access our system and propose to us apps, so that we can build a new ecosystem that involves the new start-ups and in this way be reactive, faster and also innovative.”

“ We need to redesign our offering to bring a new set of services to the customers – not as we used to in the past but as they are demanding today. We need to bring banks back to that first level in terms of quality of service and responding to what customers really demand”

customers interact and exchange value seamlessly, how they digitalise their processes and how they enable their employees to serve customers in a digital world.

Rhomaios Rham, Managing Director, Global Head of Product Management and Head of Digitalisation, Global Transaction Banking, Deutsche Bank, also believes that the customer is key: “The new digitalisation is really about taking the digital assets that we’ve created through the process of automation and utilising them in a way that allows us to create processes that we couldn’t have imagined in the analogue world – completely re-imagining the customer experience,” he said.

Insights into what customer focus actually means when it comes to designing digital transaction banking services came from Sean Gilchrist, Managing Director, Commercial Digital at Lloyds. “One of the rules I have is that we user test everything before we launch it. We have a panel of 50 clients from SMEs up to global corporates and financial institutions. We get them to try out the system when we are in the design phase. Based on the feedback we get we iterate the design and keep improving it. This helps to make sure that when we launch something it’s right for our customers. We run a monthly release cycle so we’re constantly taking feedback and constantly improving and iterating the designs so systems become more relevant for clients in the context they’re operating in.”

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

07

The elephant in the room – literally, in Singapore, since the Innotribe space, its hangout, traditionally on the fringes of the event, was situated right at the heart of proceedings this year – was of course the fintech community. Should the banks be competing with the start-ups who some say are inflicting ‘death by a thousand cuts’ on them, or should they be collaborating? The prevailing view was that collaboration is the only sensible way forward. As Leda Glyptis, Head of EMEA Innovation Centre, BNY Mellon, said: “These are sharing economies we are moving towards, and there is a partnership role fintechs can play, where they identify their niche – they have that single-minded determination no big corporate can ever have – they bring that freshness and focused ‘T-bar’ offering that sits very nicely on top of everything else.”

Underscoring the need for collaboration, SAP’s Hetherington also pointed out that banks have their own particular strengths in a digital environment. “I don’t think banks should fear competing with fintech players. Banks have huge assets they can leverage and be very successful in their own right. Banks are extremely good at processing vast volumes of transactions at scale in a secure way. Banks are extremely good at managing customer data in a secure way. They have trust that many technology firms and start-ups would die for.”

The importance of living up to that trust was echoed in the discussions throughout the event about the ever-growing threat of cyber attacks. One observer quipped on social media during the event that distributed ledger specialist Blythe Masters talked more about cybersecurity than she did about blockchain – which given the buzz around blockchain in Singapore was remarkable indeed – but this surely reflected the gravity of the cyber-threat which, if anything, was underplayed during the conference, though SWIFT CEO Gottfried Leibbrandt emphasised this point (see Social Scene).

SOCIAL SCENE

Banks cannot hope to own all #innovation in #payments landscape. Change in mindset needed to cooperate with new players

Not all #fintech startups will survive but it’s important to discuss their ideas and adoptibility. #Sibos

Work with partners, fintech, build the ecosystem of #innovation to drive #CustomerExperience

Future of money #sibos #innotribe: A bank can’t buy a fintech and claim it’s digital strategy without changing its culture first

Swift CEO: Cyber security a bigger challenge than fintech

DTCC’s Bodson – we worry an awful lot more about cyber threats than blockchain. #Sibos

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

08

02KEY TAKEAWAY #2: REGULATION REMAINS A PRIORITY, AND SMART INNOVATION WILL SUPPORT BOTH COMPLIANCE AND BUSINESS DEVELOPMENT

Highlights:– Regulation might not have been top of the Sibos agenda – but it hasn’t gone away– A lack of harmonisation around regulation continues to create challenges– There is a drive to ‘move beyond’ compliance– Regulation can drive innovation – and innovation can cause compliance challenges

By contrast with previous post-financial crisis Sibos events, the topic of regulation was certainly more low-key in Singapore. But, as Lisa Robins, Head of Global Transaction Banking, Asia Pacific at Deutsche Bank, said: “Don’t be deceived by the fact that regulation is not high on the agenda here, because it’s high on all our agendas. It’s foremost in everybody’s day to day lives.”

The lack of harmonization between regulations in different markets continues to create significant challenges for firms operating cross-border, as Thomas Zeeb, CEO of SIX Securities Services, pointed out. “One of the biggest challenges in regulation is frankly the volume and the fact that much of it is not harmonised either in terms of content or in terms of the timing of its implementation,” he said. “This creates a number of challenges for those of us working in cross-border environments.” He cited the recent work of ISSA in distilling the vast quantity of regulation globally into 17 principles which will help the industry come to a standard “that allows regulators to feel more comfortable with what we are doing, and all of the stakeholders in the custody chain to understand their roles and their responsibilities to each other”.

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

09

“ Regulators are still challenged with how or whether to regulate cryptocurrencies and as such there is a lack of progression. This could ultimately lead to the situation where individual states are imposing their own views. We should avoid a nationalistic approach to cryptocurrencies. We have to take into account that they are inherently global. This requires a consistent approach not on a national or a regional level but on a global level.”

Tony Freeman, Executive Director, Global Industry Relations, Omgeo, DTCC, referenced a new term he had heard applied to this challenge in Singapore – “disharmonisation”. “There is a lack of harmonisation among regulators in terms of data sandards, timings and high level agreement of the objectives of some regulations between Europe, Americas and Asia,” he said. “For organisations like ours that causes complexity and excess cost down to our customers. So I think there is an emerging consensus among service providers and utilities that we can work together to try to address this disharmonisation issue.”

If regulation has not gone away, there is a recognition that life must go on. As Benoit Dessere, Global Head of Payments and Cash Management, Societe Generale, pointed out: “In the past few years a lot of corporate treasurers’ time has been taken up with making sure their systems are compliant with all the regulation that was coming out. It doesn’t mean that regulation goes away, but what we are seeing today a bit of “back to basics” treasury work.” In practice this means a renewed focus on working capital management, resilience and security, including data protection, he said.

During the Innotribe programme there were calls for the regulators to innovate in the same way that fintechs are innovating digital banking (see Social scene below) – and certainly other observers saw opportunities to exploit new technologies both to meet compliance requirements and to leverage them for business gain. “If you think about the risk and regulatory areas, that’s where you need more granular data access than you’ve ever had before,” said Andy Hirst, Vice President – Banking Solutions, SAP. “New insights, new views of data you weren’t able to get at before. That’s where the most value can be established quickly to help protect the banks – and in effect make better use of capital.”

“ Many capital markets companies have still got challenges with the regulatory overload and the new compliance challenges in the future”

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

10

The fintech and regulation discussions overlapped often – regulation is easier for fintechs which is a disadvantage for banks, upcoming regulation (like PSD2 in Europe) will increase the regulatory burden on new entrants but it will also grant them access to banks’ data – so a double-edged sword for the banks, the banks have a history of and expertise in complying with regulation, so actually they have an advantage here.

One interesting take on the relationship between fintech and regulation came from Angus Fletcher, Head of Market Advocacy & Business Strategy, Global Transaction Bank at Deutsche Bank. “We have heard a lot at this conference around disruptive technology,” he said. From a regulatory standpoint, “we’re seeing starts of dossiers now around cyber-security, data protection and also national approaches to onshoring versus offshoring technology”, he continued. “What’s going to be vital is ensuring that technology can thrive as we go forward but at the same time making sure there are not new risks being brought to bear and there is a degree of level playing field between new players and existing players in this space.”

At last year’s Sibos the convo was all about risk & compliance; this year its all innovation & blockchain

“The dilemma we have with regulation is the lack of harmonisation.” Thomas Zeeb #Sibos #Sibos2015

“We need to sandbox regulation to innovate it from scratch!” #innotribe #Sibos @Innotribe #fintech

@Innotribe Re-inventing regulation – should regulators be taking a startup approach? #sibos #startups #fintech

“When over-complying with unclear regulations the banks simply cannot focus on customer experience, and corporates suffer” #Sibos

SOCIAL SCENE

03

“ The impact of real-time payments on bank operations and technology is substantial. It’s expensive, but it’s worth the effort”

KEY TAKEAWAY #3: REAL-TIME PAYMENTS HELP BANKS RESPOND TO DIGITAL DISRUPTION – BUT AVOIDING FRAGMENTATION AND DELIVERING CUSTOMER-FOCUSED SERVICES WILL BE VITAL

Highlights:– Real-time payments are here and there is more to come– Going beyond domestic and retail brings additional complexity that must

be addressed– Interoperability is key and ISO 20022 standards and market practice are

needed to ensure this– Banks can leverage real-time to improve customer service and improve efficiency

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

11

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

12

“ It is really key to us to make sure that the market infrastructures that support us in the different markets we cover have a cohesive approach. That covers many things – standards, schemes and rule books. What we are seeing at the moment is a lot of different initiatives, especially in Europe, happening at the same time... fragmentation is a big risk.”

In a few short years the Sibos discussion about real-time payments has gone from “what is this and what might it mean?” to “it’s here and we have to do it [are doing it] now – the question is how to do it well”. As David Kretz, Head of Global Payments, Global Transaction Services, Bank of America Merrill Lynch, pointed out, the volume of real-time payments activity alone justified its high priority in Singapore. “There are 18 real-time payment schemes up and running today and roughly the same number under consideration or in development – and some have very high rates of adoption,” he said. Indeed, so established is retail at the level of domestic real-time payments that industry commentators are already moving on to consider what’s coming down the line. Isabel Schmidt, Managing Director, Global Head of Market Management and Head of Institutional Cash Americas, Deutsche Bank, said: “Right now real-time is primarily a domestic discussion, but you hear discussions about how we are going to do this in the cross-border space. This brings new challenges, for example in the areas of AML and KYC: how do we integrate those aspects in a real-time environment? I have heard voices here this week saying the technology is there to do this – but there are always manual exceptions, so how do we handle those in a real-time environment?”

Going beyond retail into the B2B space will bring other challenges, Schmidt continued. “As we move into a B2B environment at some point volumes are going to increase dramatically and values may increase as well and that creates challenges that we have not as an industry focused on yet, including credit risk, liquidity risk and market stability as a whole. As these markets grow, do we have the right infrastructures to support this in a safe and sustainable manner? These are serious considerations that we have not really engaged in yet.”Carlo Palmers, Market Infrastructures Solution Manager, SWIFT, agreed the adoption of real-time across borders and by larger markets brings new challenges. “In larger markets it is unlikely we will see single solutions. One key requirement for any real-time retail payment system is ubiquity. If you have different solutions they will have to interoperate with each other, and that is a challenge we will have to address when moving these new systems into larger markets.”

There was consensus during Sibos that the underpinning for interoperability between real-time payment systems is ISO 20022 – and as Paula Roels, Director, Co-Head of Market Management, Institutional Cash, Deutsche Bank, pointed out: “ISO 20022 will play a major role in the space of real-time retail payments – in fact it is fair to say that it is becoming the dominant standard in that area.” But the standard alone is not enough – harmonised market practice around its usage is also required, she said. If we do not agree on an operational common standard we won’t be able to maximise the benefits of ISO 20022. This requires global dialogue – we

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

13

banks together with market infrastructures and SWIFT need to engage in closer talks to promote the alignment efforts. We have made great progress in the past few days so now we need to keep up the positive momentum.”

ISO 20022 use is indeed an essential underpinning of real-time payments, agreed Kevin Brown, Payment Industry Insights. “The challenge for Europe is how to ensure that the different countries and solutions can move ahead quickly but you still end up with the interoperability across Europe that gives the benefits of SEPA, that’s come from the SEPA SCT,” he said. “Equally Europe’s got an advantage because the banks are already on the ISO 20022 standard so a lot of the back office work they would need to do is there with SEPA already.”

Though the UK’s Faster Payments scheme – in place since 2008 – is not based on ISO 20022, a key recommendation from Teresa Connors, Head of Client Engagement, Payments, Royal Bank of Scotland, was to use ISO 20022. Other key lessons would be to undertake a “piece by piece transition – to make sure it works at scale”, she said, and to remember that the real-time payments platform “is not the end goal”. “Build a platform on which you can build not only faster payments but also other propositions – like Paym in the UK.”

There was agreement in Singapore that while there is a regulatory demand to implement real-time payments, the move is also an opportunity for the banks – both to wrest back leadership of the market from new payments entrants and to rationalise their infrastructures and reduce costs.

“The business case for real-time is around the opportunities to protect the franchise, grow the business, give customers a better proposition,” said Brown of Payment Industry Insights. “There are clearly some really interesting opportunities around how data is used, how additional value services are delivered to customers, and the innovative thinking around these solutions is going to be where the potential opportunities for revenue growth and producing good customer solutions comes in,” he continued.

“The banks are also thinking about how the introduction of real-time will work with their systems – and does it give them an opportunity to take cost out and simplify their back offices?”

SOCIAL SCENE

Payments is moving to real time, no escaping it. Banks need to be prepared for it @jpmorgan #Sibos #Oracle

Consumers want money faster: real-time payments & commerce fast becoming a reality. ANZ’s @NigelDDobson at #Sibos

#Banks engaging #fintech bring overlay services for fast #payments is a way to think about the real-time #commerce ecosystem” #Sibos

12 Australian banks have agreed to adopt #ISO20022 for real-time payments (New Payments Platform) @standardsforum #sibos

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

14

04KEY TAKEAWAY #4: BLOCKCHAIN IS A BUZZWORD BUT IT DOES HAVE POTENTIAL, AND BANKS NEED TO EXPLORE THIS IN THE CONTEXT OF THEIR CORE SYSTEMS RENEWAL

Highlights:– There is a lot of hype around the ‘b-word’ but this is one area of fintech the

banks are taking seriously– The exact applications of blockchain are still being worked out but complex

transaction flows lend themselves best– Banks are experimenting – but seriously – with distributed ledgers– Blockchain is bigger than IT, but banks must consider it within their IT

strategies for digital

“ If we were here 12 months ago, blockchain might have then been more closely coupled with Bitcoin, whereas that decoupling is now happening and they are being seen independently in their own right.”

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

15

“ There’s a lot of hype about blockchain, but there is some reality there. Only by getting your hands dirty and playing with the technology yourselves can you really get that hands on understanding of what’s going to work practically and what’s not going to work.”

Sibos has always been a technology show but the emphasis this year on one particular technology – blockchain or distributed ledger – was so strong as to surprise even its proponents. It was difficult to have a conversation in Singapore in which the ‘b-word’ wasn’t mentioned, and it was literally no surprise that a blockchain player – Hyperledger – won the Innotribe Start-Up Challenge (see picture above).

Almost as popular as talking about blockchain at Sibos was talking about how most people discussing it didn’t really understand it. Simon Taylor, VP, Blockchain R&D, Barclays, agreed “there is still a lot of confusion about what blockchain is”. “More important than understanding that is knowing how it’s going to impact your business,” he said. “How’s it going to make a difference to your customers? How’s it going to make a difference from a cost standpoint? How’s it going to make a difference from a regulatory standpoint? It can hit all those things.”

With the decoupling of blockchain from Bitcoin the evolution of the industry’s thinking about where to best apply distributed ledger is tending towards more complex, paper-based activities. “I look for where is there a lot of paper process that crosses industries,” said Taylor. “A classic example is trade finance. Not only have you got banks involved but you’ve got manufacturers, buyers, shipping companies – and the fact that it’s such a complex value chain means that you really have to have a technology that is good at crossing those value chains. Where you have those multiple industry participants, blockchain really comes into its own. We’ve relied on paper to cross those organisational boundaries historically. Blockchains may be able to do that, and in the next 12 months we are going to prove that one way or the other.”

Whatever the application of blockchain turns out to be, it is imperative banks are at the forefront of developing it, said Massimo Proverbio, senior managing director of Accenture Payment Services and the global banking lead. “Banks need to lead the digital disruption that the distributed ledger will bring particularly in areas such as cross-border payments and foreign trade, which are business segments that banks currently ‘own’,” he said.

Proverbio suggested an immediate strategy to exploit blockchain. “Right now, banks should appoint a single blockchain lead and allocate a central budget (avoiding duplicated investments and teams); develop an agile, high-level strategy; educate IT and business staff; experiment and develop new ideas (such develop proof-of-concepts as well as initial products and services using a distributed ledger and test them with customers) and above all engage with customers, fintech and regulators to get a broad stakeholder consensus view of what is desired and might work.”

Barclays is certainly following this approach, as Taylor explained. “In the Barclays Accelerator in New York we had a company called Wave. We’ve signed an agreement with that company to do an electronic bill of lading in trade finance on a blockchain which is a bit of a watershed moment – to move from experimenting with blockchain technology to actually using live customer data. It’s in a pilot, it’s very restricted and we are going to work closely with all our control and compliance teams to keep it as safe as we possibly can, but we really want to learn if the promise of this technology is actually real.”

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

16

Thomas Zeeb, CEO of SIX Securities Services, cautioned against viewing blockchain as only a technology issue. “There’s tremendous potential in blockchain but at the same time there are a lot of challenges. They go from the issue of accountability to how’s it going to be regulated. So it’s not a pure IT solution that we’re going to be looking at. We have to take the discussion up a layer and look at the business innovation that’s going on, collapsing layers between various stakeholders, reducing costs, delivering more products and better services to our clients. A lot of that tends to be forgotten in looking at IT solutions alone.”

Taking the time to do blockchain properly is certainly important, agreed Teresa Connors, Head of Client Engagement, Payments, Royal Bank of Scotland. “RBS has a number of innovation projects under way. With Blockchain in particular we are part of a consortium called R3 and the objective there is to take the time to make sure that we can make blockchain work securely and on a scaled basis. To do that you need standards, you need a common language and you need some strong robust user cases for acceptance. We are taking a very measured approach in order to get it right,” she said.

Blockchain may be more than technology, and rushing in may be a bad idea, but the phrase ‘more haste, less speed’ comes to mind here – because too much circumspection could play into the hands of those who, daunted by the size and cost of the project to effectively rip out infrastructure that works with today’s centralised processes and upgrade it to cope with distributed processing, prefer a wait and see approach that could result in missing the blockchain boat.

Distributed ledger or no distributed ledger, to operate successfully in a digital environment, the banks must undertake core systems renewal, however expensive and huge that project will be. As Falk Rieker, Global Vice President, Global IBU Head for Banking, SAP, said in Singapore: “There is a saying, never touch a running system. Banks have to overcome that fear factor and make up their minds about replacing, step by step, their existing systems.”

SOCIAL SCENE“The buzzword of Sibos is real-time”. Clearly someone didn’t get the blockchain memo #sibos

Walking around #Sibos2015 most heard of #blockchain but don’t understand what it is #fintech @Sibos @Innotribe #singapore @swiftcommunity

ECB’s Mersch: Too early to separate #blockchain fantasy from reality

@prestonbyrne says clearing is poor use case for Blockchain due to privacy concerns – process automation more likely to succeed #innotribe

“#Bitcoin and #blockchain are symptoms of CUSTOMER needs” – @Innotribe’s @petervan Banks @ #Sibos, listen up. customers matter

05KEY TAKEAWAY #5: THE SHIFT FROM WEST TO EAST CONTINUES, AND THE “DIGITAL FUTURE” OF BANKING AND PAYMENTS IS PLAYING OUT IN ASIA NOW

Highlights:– RMB internationalization, Stock Connect, ASEAN integration are all factors

driving – and features of – a robust Asian economy– Banks from outside the region need to ‘get local’ to add value and be successful– Digital innovation and disruption are already impacting in Asia and markets

elsewhere can learn lessons– Singapore’s ambition to become a ‘smart city’ is founded upon leadership in a

number of the key areas discussed during Sibos – innovation, real-time payments, adherence to global standards

“ The battleground for our industry, the battleground for our future, is being fought in this part of the world.” Piyush Gupta, Chief Executive Officer and Director of DBS Group

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

17

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

18

“ We need to have deep presence in the local markets in ASEAN, understand local regulations, build relationships with policy makers, industrial bodies... We need to bring to bear the experience we have had from other integration projects and help the ASEAN markets to ensure that we avoid some of the pitfalls we have seen in the other market integrations”

“ The Stock Connect project linking Hong Kong and Shanghai together is very demanding in terms of timing and the operational processes are very different, but we have found ways to work around it. The lessons learned by the Chinese regulators will be that people will find ways to work with them. So as the Stock Connect process is expanded out to other markets such as London, we shouldn’t expect them to change their timings and processes to accommodate.”

An Asian Sibos will always have an Asian flavour, but in Singapore there was no escaping the global impact of a number of ‘local’ issues. One was obviously the rampant upward trajectory of the RMB as an international currency – as Lisa Robins, Head of Global Transaction Banking, Asia Pacific at Deutsche Bank, said: “I think the RMB is probably one of the most challenging and exciting events that’s happened in the 21st century from a financial point of view. In the short period of time from 2008 to 2015, look at how it’s grown.”

Another is the ongoing evolution of ASEAN integration which was interesting to Sibos delegates on a number of levels – for the growth it brings to the markets involved and players working in them, for the opportunity it represents for investment and business development for institutions from other markets, and for the parallels and lessons both ways in relation to other integration initiatives such as that in the EU.

Perhaps reason why the Asian flavour of Sibos 2015 was so palpable and so relevant was that so many of the key themes of the event resonate so strongly in the region. As Piyush Gupta, Chief Executive Officer and Director of DBS Group, said in his rousing opening speech: “A lot of the technology, the disruption and the change that is upon us is more visible and is happening more imminently in Asia than anywhere else in this world.” Asia is full of ‘digital natives’ – with 50% of the world’s internet population residing in the region, and “the most profound changes that are happening anywhere in payments are happening in China”, he said, driven by Alibaba and Alipay.

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

19

There is a big opportunity right now for banks to “focus on the customer experience and leverage technology to change the nature of the transaction banking industry”, Gupta told delegates, “and the best placed people to be able to make this change are the people in this room. It’s the incumbents. Because there is still an enduring element of trust – banks are where you leave large amounts of money – that will last five, maybe 10 years.”

The way to avoid becoming ‘dumb pipes like the telcos’ is for banks to use the “network advantage, the clearing and settlement advantage and the market infrastructure advantage meaningfully”, Gupta continued, alongside leveraging their expertise in risk management – an expertise new entrants will find it takes time to build up.

In the closing plenary of Sibos, Ravi Menon, Managing Director, Monetary Authority of Singapore, also alluded to many of the key themes running through the event in his discussion of Singapore’s ambition to become a Smart Financial Centre. This vision is about “pursuing innovation and technology to increase efficiency, manage risks better, create new opportunities and improve people’s lives”, he said. Critical to this is collaboration with fintechs – including in the area of blockchain. Also crucial is the ongoing development of Singapore’s real-time payments infrastructure FAST, which is leveraging ISO 20022.

At the beginning of Sibos week, Gupta drew a parallel between the impressive development of Singapore – dubbed at its independence 50 years ago ‘a very unlikely nation’ and now the second largest asset management centre, the third FX centre, the hub of the world’s commodity trade – and the financial industry today. “Singapore reminds us of the power of the dream,” he told Sibos delegates. “It has been a tremendous demonstration of the human spirit. If all of us, if everyone in the room keeps that spirit alive, we have a great future.” This was just one of the lessons to be learned from the Asian experience as the financial industry tackles the many challenges and opportunities ahead.

SOCIAL SCENE

#DBS CEO: Analysts speak of a potential lost decade in Asia…But still I think we are on cusp of Asian century #Sibos

#SIBOS Day 4 – Growing #FinTech interest in Asia

Already considered in Asia #sibos, #blockchain can be part of the solution for faster reconciliation and #fasterpayment

#sibos ASEAN day: given the various market specificities in Asia, working with a local partner is a must.

71% voted that the RMB might rival EUR by 2025 #sibos

“... ask what we can do for Asia” as recommended by SMBC’s Shimura-san at #Sibos

Ravi @MAS_sg, Central Bank, vision of future finance: APIs for regulation, mobile and social ID #Sibos #fintech

| FINEXTRA’S INSIGHTS FROM SIBOS 2015 – IN ASSOCIATION W

ITH SAP

20

06ABOUT

Finextra This report is published by Finextra Research.

Finextra Research is the world’s leading specialist financial technology (fintech) news and information source. Finextra offers over 100,000 fintech news, features and TV content items to visitors to www.finextra.com.

Founded in 1999, Finextra Research covers all aspects of financial technology innovation and operation involving banks, institutions and vendor organisations within the wholesale and retail banking, payments and cards sectors worldwide.

Finextra’s unique global community consists of over 30,000 fintech professionals working inside banks and financial institutions, specialist fintech application and service providers, consulting organisations and mainstream technology providers. The Finextra community actively participate in posting their opinions and comments on the evolution of fintech. In addition, they contribute information and data to Finextra surveys and reports.

For more information:Visit www.finextra.com, follow @finextra, contact contact@finextra.com or call +44 (0)20 3100 3670

SAPSAP is at the center of today’s technology revolution, developing innovations to help our customers and improve the lives of people everywhere. SAP customers fight complexity, generate new opportunities for innovation and growth, and stay ahead of the competition. Commercial and retail banks achieve customer-centricity with streamlined, automated operations and a seamless, integrated system for trading, finance, risk, and compliance. Banks can restore investor trust, improve customer financial supply chains, enable growth, support digital banking services, reduce costs and complexity, and drive profitable sales and financial innovation. In addition, a full range of front to back cross asset trading solutions along with collateral management and treasury solutions to transform securities companies. SAP enables more than 282,000 customers in 190 countries to operate profitably, adapt continuously, and grow sustainably.

For more information: Visit http://go.sap.com/solution/industry/banking.html

Finextra Research Ltd 101 St Martin’s LaneLondonWC2N 4AZUnited Kingdom

Telephone+44 (0)20 3100 3670

Emailcontact@finextra.com

Webwww.finextra.com

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without prior permission in writing from the publisher.

© Finextra Research Ltd 2015