18 October 2017
SIBOS day 2 – A discussion about the role of payment infrastructures in the era of instant
On the second day of SIBOS, equensWorldline’s CEO Michael Steinbach was present during the panel discussion. The topic of the discussion was ‘Complementary or competitive? The role of payments market infrastructure and correspondent banks in instant international payments’. This blog is a summary of the panel discussion.
The session was moderated by Lisa Lansdowne-Higgins (Vice President Business Deposits and Treasury Solutions at RBC). The panel members were Andrew Brown (Chief Risk Officer at Earthporth PLC), Michael Bellacosa (Global Head of Payments at BNY Mellon), Leila Fourie (CEO at Australian Payments Network) and Michael Steinbach (CEO at equensWorldline).
Strong focus on regulatory aspects
At the beginning of this panel discussion the panel members shared some hurdles when it comes to development of instant payment services. Brown (Earthporth) said that regulations are an important hurdle, but the culture of the environment is an even bigger hurdle. According to Steinbach (equensWorldline), regulations create barriers because legislation can differ for each country. Connecting to the local networks is an equally important barrier which needs to be overcome.
Steinbach expressed his strong belief that changes in consumer behavior, new technologies and business models and regulatory pressure will drive the change towards a standardized and commoditized global instant world.
There needs to be a driver for change
Fourie (Australian Payments Network) named three concerns when it comes to instant international payments: regulations (such as privacy), standardization, technology and security. “There are some 25 countries with instant payments, but there is no network effect between these countries. And that is wat we will need”, she said. Bellacosa (BNY Mellon) confirmed the importance of regulations during the discussion, but more importantly there needs to be a driver for change. The creation of new payment infrastructures or the modernizing of present infrastructures requires lots of investments. “There should be a value or benefit for those paying for this, if not, why change?”
It is all about scale
All panel members agreed that tremendous investments are needed to build real time end-to-end infrastructures. “It is all about scale, but not all banks have the scale to make the necessary investments, while processing of payments is becoming a commodity. This will lead to further consolidation of the payment infrastructures”, said Steinbach (equensWorldline). He expects that in time the banks will no longer make money on processing payments but more on the distinctive products and services they build for their clients.
Not everybody is Freddy
Fourie (Australian Payments Network) said that real time payments will become commoditized as well. She quoted Freddy Mercury stating that consumers have a ‘I want it all and I want it now’ mindset. “We need an underlying set of rails and value added services, such as real time fraud services. Collaborating with fintechs may help to build new overlay services on top of the new real time rails.” Brown (Earthporth) doesn’t disagree with Freddy Mercury, but that is not true for all situations or customers: in some cases it doesn’t matter if the transaction is completed in seconds or not.
Multiple solutions can co-exist
The panel then focused on the priorities for the stakeholders in the market. For Steinbach (equensWorldline) it is important that each stakeholder determines what his core business is and how they want to earn money. “That is different for each bank, because not all banks are the same.” Bellacosa (BNY Mellon) said that multiple paths exist Keeping it bank-centric, improving your services and managing your investments can be such a path and SWIFT GPI is very much in line with that. According to Brown (Earthporth) SWIFT GPI will be a solution for some of the market, but there will be other solutions for other areas. He thinks multiple solutions can co-exist for various challenges in the market with different use cases.
Relevance for the future
The panel discussion also briefly touched upon Blockchain. The audience was asked how many of them were piloting with Distributed Ledger Technology (DLT) and how many participants were already live with DLT-projects. It was clear that everybody is pioneering with it, but that there are not that many live cases yet. “It will take a long time before DLT will replace what we have today. The reality of today is still very relevant for quite some time to come”, concluded the panel members.
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