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

  • 2 SWIFT Latin American Regional Conference 1-2 September 2015

  • 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 70s, 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 RDEs

    SWIFT Latin American Regional Conference 1-2 September 2015

  • 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

    http://upload.wikimedia.org/wikipedia/commons/4/41/Flag_of_India.svghttp://upload.wikimedia.org/wikipedia/commons/b/b4/Flag_of_Turkey.svg

  • SWIFTs 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

  • 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

  • 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

  • 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

  • Bank-grade payments system requirements

    9

    Addressing

    real

    challenges

    compliant Clear ROI for

    banks Scalability

    SWIFT Latin American Regional Conference 1-2 September 2015

  • Need for a change

    10

    Technology Business

    SWIFT Latin American Regional Conference 1-2 September 2015

  • 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

  • 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

  • Call to action

    13 SWIFT Latin American Regional Conference 1-2 September 2015

  • SWIFT Latin American Regional Conference 1-2 September 2015 14

    Questions.

  • SWIFT Latin American Regional Conference 1-2 September 2015 15

    Digi-voting

  • 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

  • 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

  • SWIFT Latin American Regional Conference 1-2 September 2015 18

    Agenda whats next

    Coffee Break SWIFT Lab: 11:00 11:30

    Plenary: 11:30

    Sponsored by:

  • www.swift.com

    SWIFT Latin American Regional Conference 1-2 September 2015 19