Sibos 2022: New global priorities for payments
This year’s Sibos conference flagged the need for banks and their customers to get ready for the new world of instant global payments. Westpac’s Jeff Byrne and Nish Dharmaratne explain what’s on the way.
Sibos 2022, this year’s annual gathering of finance professionals, centred on the theme, ‘Progressive finance for a changing world’
More than 8,000 people gathered in Amsterdam in October for the first in-person Sibos since COVID, to hear about the need to embrace digital transformation, navigate new risks and drive sustainability and ethical change.
Organised by the global money transfer system SWIFT (short for Society for Worldwide Interbank Financial Telecommunications), the conference had a focus on how cross-border payments are changing to make for more seamless and faster transacting.
The Metaverse and the use of artificial intelligence to ward off financial and cybercrime were among the hot topics discussed, but the boldest conference-wide themes at Sibos 2022 were: the benefits of the new ISO data standardisation globally; the latest developments interlinking cross-border and real-time payments; and, the pressing need for regulators to provide guardrails in the form of governance for the next generation of global transactions.
So, what does this mean for customers and corporate treasurers?
Benefits from richer data
SWIFT is receiving an upgrade, with the new ISO standard 20022 to be introduced from November 2022 and to be completed by 2025.
The standard will create a common language for payments worldwide, with the ultimate result that payments will carry higher quality data – and more of it
Dharmaratne says the richer data will bring several benefits for banks and their customers. They will be able to identify their customers’ payment trends and gain insights into their payments experience.
“We will be able to build insights through this data to help customers. With supplier payments, for example, we will have better visibility and very quickly be able to provide information back to the customer when the payment lands,” she says.
“Banks will have to think about how to manage this data in more useful ways for the customer. We will get it through our payment platforms, but just keeping it in the platform won’t be beneficial.”
Additional data will help banks more quickly identify whether an international transfer is to or from a party that is on a nation’s sanctioned list. Each country has its own different list of sanctioned parties. Currently identification takes time, because the data attached to payments is unstructured resulting in many false positives that can delay payment delivery
Once the information is in the new ISO standardised form, it will be easy for banks to write algorithms to conduct almost instantaneous checks, allowing money to be delivered to customers almost immediately.
“The bottom line is it'll improve straight-through processing significantly,” Dharmaratne explains.
But with the new technology and capability also comes a new imperative for banks, as the Sibos discussion highlighted.
To benefit from the change, banks need to build the right data repositories and understand what to do with that data, including upgrading downstream processes, financial crime monitoring and sanctions screening.
“Banks will not necessarily have the right data techniques or technologies, so we may need to partner with companies or fintechs to build value-added applications off the back of this data,” reports Dharmaratne.
Infrastructure for 24-hour global transactions
Many countries, in particular the larger markets such as the US and Europe, are moving towards instant seven-day 24-hour transaction processing and payment, just as Australia has with the New Payments Platform.
These systems are aiming for instant domestic transactions. Sibos 2022 highlighted the need for two sets of infrastructure in different markets to “connect” to each other, creating instant global transactions – and this recognition puts real-time treasury strongly in the frame.
Real-time payment networks across the world are maturing, and interoperability between international and domestic payments is now the focus of both banks and regulators, observes Jeff Byrne.
Currently, a bank making a payment to a recipient in another country relies on its relationship with a correspondent bank in that country, while payment speed varies according to the time zone, the quality of the infrastructure available and individual banks’ processing times.
Developments discussed at Sibos point the way to a seamless, follow-the-sun approach to transaction processing. “So, a payment made in the US to an Australian recipient, for example, could be settled immediately. That's the end game,” Byrne says.
Australia already has seven-day, 24-hour transaction processing and payments through the New Payments Platform (NPP), but it’s not yet interlinked with the rest of the world. The NPP’s roadmap to introduce cross-border transaction settlements brings this a step closer.
“We're not there yet, but markets such as the UK and India are gearing towards getting the local infrastructure ready to connect with infrastructure in other jurisdictions in the future,” notes Byrne. “This is a foundation for real-time treasury operations, and it’s central to the value proposition of Westpac’s plans and strategic investments.”
Digital currencies on the rise
Sibos participants also received updates on how various nations were progressing with central bank digital currencies (CBDCs).
The Reserve Bank of Australia is one of many central banks working on a CBDC proof-of-concept, similar to other nations, with some more advanced.
Byrne says Sibos featured many high-level conversations on CBDC, “but there weren’t any conclusions or recommendations,” he says. “Right now, it’s almost as if we have a solution looking for a problem, so I think it will be some time before CBDC, or any other crypto or blockchain exchange of value matures in the formal economy.”
The Sibos discussion, however, delivered pause for thought on Australia’s progress for Dharmaratne. If Central Banks do adopt CBDCs take off and it becomes possible for state and federal governments to settle foreign sovereign bond purchases through CBDCs, might Australia be left behind?
“We are looking at some use cases within the industry now & potentially working towards an acceptable proof-of-concept. But what I saw through Sibos sessions is that the thinking on central bank digital currencies is now much more advanced.”
Keeping up is particularly important for Australia because the Australian dollar is the fifth most traded currency in the world.
But before the global economy can start to draw on the fast and seamless transaction and settlement potential of CBDC and other digital currencies, Dharmaratne says there will need to be a robust and widely accepted governance framework to provide “guardrails” against potential related risks. A lack of tracking and traceability of digital currencies makes them susceptible to money laundering, making the security of CBDCs important for central banks everywhere.
Improving the customer experience
Ultimately, all of these changes will improve the transaction experience of the customer.
Banks will start working with customers to enrich the data they receive from them, so that customers can derive the maximum benefit from that data, Dharmaratne says.
For instance, customers could include supplier and invoice reference numbers in their payments, which would make reconciliation easier, but also allow banks to provide them with better insights about payment trends, she says. “We will be able to identify payment patterns, improve on fraud statistics and early recognition of payments that have failed in the past.
“The most important part is how customers build their own strategies, particularly their e‑commerce strategies, by understanding this instant payment landscape. Because the end-consumer will expect instant payments and receipt of goods, or instant refunds when a purchase is not going through. It will be instant in most parts of the value chain.”
Australian companies with global operations will need to invoice and collect in local currencies and then bring the cash back to Australia to be used. This will be a lot more efficient if banks are operating with a global 24x7 payments infrastructure with cross border transactions seamlessly connected.
Immediate settlement of global transactions will provide company treasurers with a lot more control and flexibility, allowing them to quickly move cash from one location to another jurisdiction.
However, Dharmaratne warns that a lot of companies aren’t ready for the change, and are still using legacy ERP systems and applications that don’t cater to the instant payment cycle.
The cost of change management for new e-commerce models is top of mind for many treasurers but, with the enhancement of web services and online transactions, companies that are investing in new ways of accepting payments will become the ultimate winners.
Collaboration across the industry between banks, technology partners and regulators
When it comes to global payments, no organisation can go it alone to solve for all customer requirements, regulatory requirements and scheme compliance. That is why collaboration is growing across the spectrum – between banks, fintechs, regulators and other governing bodies, such as the Financial Stability Board (FSB).
This collaboration aims to solve not only for current friction points in the customer experience, but also to set the standard for the future, including the adoption of new ISO messages, the interlinking of real-time payments, the entrance of alternative payments and settlements schemes, and the introduction of Digital Assets.
As payments continue to evolve, regulators will need to rapidly infuse the required governance, working together with the industry to keep pace and maintain the regulatory standards followed today.
Browse topics
Disclaimer
©2024 Westpac Banking Corporation ABN 33 007 457 141 (including where acting under any of its Westpac, St George, Bank of Melbourne or BankSA brands, collectively, “Westpac”). References to the “Westpac Group” are to Westpac and its subsidiaries and includes the directors, employees and representatives of Westpac and its subsidiaries.
Things you should know
We respect your privacy: You can view our privacy statement at Westpac.com.au. Each time someone visits our site, data is captured so that we can accurately evaluate the quality of our content and make improvements for you. We may at times use technology to capture data about you to help us to better understand you and your needs, including potentially for the purposes of assessing your individual reading habits and interests to allow us to provide suggestions regarding other reading material which may be suitable for you.
This information, unless specifically indicated otherwise, is under copyright of the Westpac Group. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied of distributed to any other party without the prior written permission of the Westpac Group.
Disclaimer
This information has been prepared by the Westpac and is intended for information purposes only. It is not intended to reflect any recommendation or financial advice and investment decisions should not be based on it. This information does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter into a legally binding contract. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This information may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure this information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of this information, or otherwise endorses it in any way. Except where contrary to law, Westpac Group intend by this notice to exclude liability for this information. This information is subject to change without notice and none of Westpac or its related entities is under any obligation to update this information or correct any inaccuracy which may become apparent at a later date. This information may contain or incorporate by reference forward-looking statements. The words “believe”, “anticipate”, “expect”, “intend”, “plan”, “predict”, “continue”, “assume”, “positioned”, “may”, “will”, “should”, “shall”, “risk” and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts. Past performance is not a reliable indicator of future performance, nor are forecasts of future performance. Whilst every effort has been taken to ensure that the assumptions on which any forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from any forecasts.
Conflicts of Interest: In the normal course of offering banking products and services to its clients, the Westpac Group may act in several capacities (including issuer, market maker, underwriter, distributor, swap counterparty and calculation agent) simultaneously with respect to a financial instrument, giving rise to potential conflicts of interest which may impact the performance of a financial instrument. The Westpac Group may at any time transact or hold a position (including hedging and trading positions) for its own account or the account of a client in any financial instrument which may impact the performance of that financial instrument.
Author(s) disclaimer and declaration: The author(s) confirms that (a) no part of his/her compensation was, is, or will be, directly or indirectly, related to any views or (if applicable) recommendations expressed in this material; (b) this material accurately reflects his/her personal views about the financial products, companies or issuers (if applicable) and is based on sources reasonably believed to be reliable and accurate; (c) to the best of the author’s knowledge, they are not in receipt of inside information and this material does not contain inside information; and (d) no other part of the Westpac Group has made any attempt to influence this material.
Further important information regarding sustainability-related content: This material may contain statements relating to environmental, social and governance (ESG) topics. These are subject to known and unknown risks, and there are significant uncertainties, limitations, risks and assumptions in the metrics, modelling, data, scenarios, reporting and analysis on which the statements rely. In particular, these areas are rapidly evolving and maturing, and there are variations in approaches and common standards and practice, as well as uncertainty around future related policy and legislation. Some material may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. There is a risk that the analysis, estimates, judgements, assumptions, views, models, scenarios or projections used may turn out to be incorrect. These risks may cause actual outcomes to differ materially from those expressed or implied. The ESG-related statements in this material do not constitute advice, nor are they guarantees or predictions of future performance, and Westpac gives no representation, warranty or assurance (including as to the quality, accuracy or completeness of the statements). You should seek your own independent advice.
Additional country disclosures:
Australia: Westpac holds an Australian Financial Services Licence (No. 233714). You can access Westpac’s Financial Services Guide here or request a copy from your Westpac point of contact. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice.
New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac (NZ division) or Westpac New Zealand Limited (company number 1763882), the New Zealand incorporated subsidiary of Westpac ("WNZL"). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product. WNZL is not an authorised deposit-taking institution for the purposes of Australian prudential standards. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac.co.nz .
Singapore: This material has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients of this material in Singapore should contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore.
U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. The services and products referenced above are not insured by the Federal Deposit Insurance Corporation (“FDIC”). Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. Transactions by U.S. customers of any securities referenced herein should be effected through WCM. All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269. Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments.
The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person of WCM or any other U.S. broker-dealer under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.
UK and EU: The London branch of Westpac is authorised in the United Kingdom by the Prudential Regulation Authority (PRA) and is subject to regulation by the Financial Conduct Authority (FCA) and limited regulation by the PRA (Financial Services Register number: 124586). The London branch of Westpac is registered at Companies House as a branch established in the United Kingdom (Branch No. BR000106). Details about the extent of the regulation of Westpac’s London branch by the PRA are available from us on request.
Westpac Europe GmbH (“WEG”) is authorised in Germany by the Federal Financial Supervision Authority (‘BaFin’) and subject to its regulation. WEG’s supervisory authorities are BaFin and the German Federal Bank (‘Deutsche Bundesbank’). WEG is registered with the commercial register (‘Handelsregister’) of the local court of Frankfurt am Main under registration number HRB 118483. In accordance with APRA’s Prudential Standard 222 ‘Association with Related Entities’, Westpac does not stand behind WEG other than as provided for in certain legal agreements (a risk transfer, sub-participation and collateral agreement) between Westpac and WEG and obligations of WEG do not represent liabilities of Westpac.
This communication is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. This communication is not being made to or distributed to, and must not be passed on to, the general public in the United Kingdom. Rather, this communication is being made only to and is directed at (a) those persons falling within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”)); (b) those persons falling within the definition of high net worth companies, unincorporated associations etc. (set out in Article 49(2)of the Order; (c) other persons to whom it may lawfully be communicated in accordance with the Order or (d) any persons to whom it may otherwise lawfully be made (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this communication or any of its contents. In the same way, the information contained in this communication is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial Conduct Authority and is not intended for “retail clients”. Westpac expressly prohibits you from passing on the information in this communication to any third party.
This communication contains general commentary, research, and market colour. The communication does not constitute investment advice. The material may contain an ‘investment recommendation’ and/or ‘information recommending or suggesting an investment’, both as defined in Regulation (EU) No 596/2014 (including as applicable in the United Kingdom) (“MAR”). In accordance with the relevant provisions of MAR, reasonable care has been taken to ensure that the material has been objectively presented and that interests or conflicts of interest of the sender concerning the financial instruments to which that information relates have been disclosed.
Investment recommendations must be read alongside the specific disclosure which accompanies them and the general disclosure which can be found here. Such disclosure fulfils certain additional information requirements of MAR and associated delegated legislation and by accepting this communication you acknowledge that you are aware of the existence of such additional disclosure and its contents.
To the extent this communication comprises an investment recommendation it is classified as non-independent research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and therefore constitutes a marketing communication. Further, this communication is not subject to any prohibition on dealing ahead of the dissemination of investment research.