Visit Ripple at booth H19
Sibos 2015 is well underway in Singapore with over 7,000 banking industry attendees from 140 countries around the world. Here’s our recap so far.
Major themes driving the conversation:
- More than ever before, fintech is an engine for change and opportunity. The future will look different; that we know. How we get there will be defined by how banks and fintech upstarts work together today.
- We’re past the stage of skepticism and experimentation so it’s time to start asking the right questions. That often begins with focusing on a specific use case or corridor and expanding from there.
- Banks need to adopt agile methodologies to foster innovation—which, by and large, is already happening. The next step is to test new technologies and provide new products and services to customers.
- Distributed financial technology is one of the hottest topics of the conference. There’s tons of interest around the settlement use case and the speed and cost efficiencies these innovations can provide.
- For many banks, it’s still about taking the first step. A major trend recently has been the idea of the “Innovation Lab.” Leveraging those lessons into material change and products is where the rubber meets the road and remains an open question in many cases.
- Many startups at the forefront of distributed ledger technologies are still finding their sea legs. It’s not enough to “get it.” It’s about execution. Major bottlenecks include: finding talent, validating relevant use cases, testing scalability and understanding privacy.
- While fintech startups get to talk a good talk, banks are hardly irrelevant and if anything, it’s likely that these two forces will shape the future together. Banks own two key factors—customers and existing settlement infrastructure. That’s why they’ll be the ones calling the shots when it comes to integrating new technologies.
- Standards, standards, standards. The industry wants to see a common framework or standard when it comes to distributed financial technology.
We’ve included highlights from two constructive events that Ripple participated in at Sibos 2015.
The first featured a discussion by industry experts on “figuring out innovation in the evolution of global payments.” Panelists included:
- Leo Lipis, CEO for Lipis Advisors
- Casey Wilcox, Head of Financial Institutions and Business Development for Earthport
- Mary Ann Francis, Head of Global Payments Practice for Wipro
- Nilesh Dusane, Head of Global Sales and Client Relations for Ripple
Nilesh Dusane: We’ve built the enterprise capabilities banks have been asking for
Banks are dealing with evolving expectations on two fronts—from the customer and also from regulations.
Nilesh: Expectations are changing. Think about it from two different perspectives: 1. Customer expectations—global payments are no longer driven solely by high value payments. Low value payments are increasing year-over-year. As such, there’s an increasing expectation for speed. 2. Regulations are changing—consider Basel III. Going forward, we’ll need transparency, for example, around fee pre-disclosure for banks to offer to their customers.
Banks are using these pain points as opportunities—solving specific issues (like fee pre-disclosures or offer low-value payments in specific corridors) with new technologies.
This new narrative will be written by Millennials.
Casey: In the 90s, we saw millennials take root in tech startups. Where we haven’t seen the same in financial institutions. I think we’ll start to see millennials as influencers and decisions makers in these organizations.
Banks are hardly irrelevant. Instead, they’re in the driver seat.
Nilesh: Banks will still have a role to play. These emerging innovations are simply technologies. Banks, however, are really strong at risk management and standardization. So they can layer in these technologies to improve payments services.
Banks get the picture.
Nilesh: Banks are already changing the way that they operate. So many banks right now have created innovation centers. The primary objective is to experiment, to figure out the right tech for their business. Importantly, we’re now seeing some banks take it a step further, operationalizing findings from the lab into their core businesses.
In fact, the process started a while ago.
Nilesh: We’ve been engaged with financial institutions for almost two years. Over the last year, we’ve completed a number of proof of concepts, testing Ripple. We’ve learned a lot from that experience. 1. Banks have to be the endpoints of these transactions. Banks are going to be the primary interface to their customers. 2. Banks have requested the capability to exchange information (such as account numbers and other customer data) privately, not through a public ledger. To use these technologies, they need additional, enterprise capabilities, which we’ve built. Using Ripple, banks can exchange PII and payment data over https.
The second event was a breakfast hosted by CGI that included fifty or so representatives of the top global banks and central banks. Panelists included:
- Jerry Norton, Vice-President, Financial Services for CGI
- Michael O’Loughlin, Director of Consulting for CGI
- Patrick Griffin, Head of Business Development for Ripple.
Michael O’Loughlin: Ripple is ready today
A major theme was that of collaboration. On the one hand, it’s pertinent that banks investigate emerging technologies collaborating across and the offerings of fintech upstarts, either through so-called innovation labs, or existing business units and risk teams. On the other, banks need to collaborate amongst each other and with fintech companies to build the network effects distributed financial technologies have to offer.
Don’t allow fear to define an organization, either because of inherent risks or because of regulations.
Michael: It’s a challenging time for banks but it’s not a question of if but when. Blockchain technology works. Don’t sit on the fence; it’s time for collaboration.
It’s time to accept that this is real.
Jerry: Six months ago, we presented with Ripple at NACHA. Since then, Ripple has legitimized the debate. The debate has also spawned other paths beyond payments.
Don’t get distracted. Keep your eye on the prize.
Patrick: The industry’s been overexposed. The business opportunity has been lost in academic musings or a search for alternative use cases. The industry needs to focus—identify a specific business problem and focus on the ROI. We’re moving from the innovation labs to the business lines—global transaction banking, cash management and liquidity risk. There’s a push and a pull. For example, these technologies can answer regulatory pressure—such as help with the travel rule, Basel III and Dodd-Frank. It’s about simplifying settlement, which then allows you to reimagine services up the stack.
Banks need to work together.
Michael: Distributed ledgers depend on an ecosystem to be successful. The ecosystem can be just your bank. For the innovation labs, the frustration is that tech is leading the way. There are internal struggles as to who owns this but I think you need to work together.
One clear use case: cross-border payments—and it’s already happening.
Patrick: The use case I know that is viable and the one that we’re focused on is cross-border payments. There are no commercial productions in any other use case that I know of.
Emerging technologies don’t make correspondent banks irrelevant.
Patrick: These technologies lower operational costs for correspondent banks. It’s the first time they can deliver a PayPal-like experience for cross-border payments. For tier-2 banks, it’s a treasury story. Then there are the non-bank actors, which lend their balance sheets for liquidity because they have a leg up on capital structure and technology.
Finally, we’re addressing core infrastructure.
Michael: It’s the first time in years that the back-end in banking is getting the limelight. The majority of innovation has been on the retail side. Settlement risk still lies with the banks.
Moreover, addressing core infrastructure enables new degrees of cost-savings and automation.
Jerry: The attributes of these technologies are different. They provide a guarantee of delivery and a proof of guarantee. Today, we have islands of automation so there’s loads of reconciliation at the joints of these islands. This technology enables you to reconcile in a completely different way. In this light, the back office is completely different in terms of cost and function. It’s a big, brave vision, and we’re not there yet.
For banks, it’s a game changer.
Patrick: This technology allows banks to report on intraday liquidity in real-time and continuously. It allows different error handling and exceptions versus today, where it takes a day to learn of a failure.
Ripple is leading this use case today (real-time payments settlement).
Michael: We believe Ripple is the answer for the cross-border payments use case. Banks need to come together to collaborate. With others, it will take 1-2 years to realize the benefits. With Ripple, it’s ready today.