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The Shape of Things to Come in the Financial Industry - Reflecting on SIBOS 2018

In Sydney, Australia, at SIBOS 2018, participants raised many questions about the increased role of technology in the financial industry. While there have been essential upgrades in technology, continued developments are promising autonomous solutions based on artificial intelligence and other new rending technologies like Blockchain and the Internet of Things.

Such future developments will likely help resolve many of the age-old challenges faced by the financial industry; especially those that address regulatory challenges which are in constant motion and are becoming more complex. Data is the basis of all future financial technologies focusing on payments, financial risk, compliance, security and customer relations management.

Traditionally conservative, the banking industry’s adoption of advanced approaches to solutions has been accelerating. Banks are now forced to rethink their traditional role and adopt future-proof technologies focused on serving a mobile client.

A plethora of technological breakthroughs realized by smaller players in the industry is making it easier for banks to acquire and adopt a more aggressive approach to transforming their operations. New technologies are helping the industry address the core issues of transparency, financial risk, compliance, and real-time connectivity.

For example, SWIFT, which organizes SIBOS, and is the dominant global force in financial messaging and cross-border payments, has been campaigning for the development and implementation of its recent gpi technology. This new Swift technology update has come as an answer to what blockchain technology also promises to deliver.

The gpi transformation is fast becoming the standard payments model for SWIFT's 11,000 member financial institutions. It gives bank and client a chance to have more control over payments processes. These upgrades deliver higher security, transparency, payment recall, transparent exchange rates and transaction tracing in real time.

Without a doubt, the global financial landscape is experiencing a transformative shift paralleling the global change to a digital economy. At the helm of this transformation is data and the technologies exploiting it.

Because data is the driver of today’s global economic wealth, the issues of data protection and privacy have become central to regulators. The EU was first to update its privacy laws, introducing the General Data Protection Regulation (GDPR) in 2016 and enforcing it in 2018. All companies dealing with EU citizens will need to hand them the full control of their data.

On another digital front, the EU has issued different directives for enhancing the competitiveness of the financial landscape on the continent. In 2015 the EU tasked the payment service industry with up-grading the scheme for pan-European SEPA instant payments.

Again in 2015, the payment services directive (PSD2) was drafted to boost competitiveness in financial markets. The directive allowed smaller FinTechs and non-financial businesses to access customer data kept away in the silos of more significant financial institutions. The directive also upgrades the safety of online payments and supports the development of innovation in online and mobile payments. Such events are seen pivotal for the development of digital businesses who want to establish payment ecosystems outside the conventional banking industry.

Sensing the constant shift in financial markets, financial institutions are also rushing to acquire new technology through acquisitions and investments in R&D. Investment in application program interfaces (APIs) is also on the rise. APIs allow banks, financial technology companies, and other tech players to link up and connect with customers more pervasively.

The rise of APIs is also supporting a confluence of synergies from new technologies, allowing machine learning, blockchain, and IoT to resolve sticky challenges in compliance, payments and security. One of the most reiterated statements at SIBOS was that financial technology innovations are fast forming and big banks better heed them or risk becoming irrelevant in the future.

On the other side of all of that sits the regulator, encouraged by experts and speakers at SIBOS to support innovation and not hinder it. With the diversity of payments and financial transaction, models came many responsibilities for regulators, from having to deal with mobile payment systems managed by non-banking entities to the vague contours of the growing crypto-currency market.

The global financial regulatory association of the Financial Action Task Force (FATF) has already started to expand its role through forums with all of the financial industry players. This will help FATF formulate new and updated compliance standards that will work with evolving technological trends.

According to bankers and experts, technology is seen as a force that will continue to disrupt the financial industry for decades to come. Different technology will merge to create super solutions that rely on the acquisition and analysis of structured and unstructured data.

Data is already being massively produced beyond the processing power of current technology, but new computing technologies, including quantum computing, are rushing to find new solutions. For bankers, the future is about finding partners with the right technology; budgeting aggressively for acquiring technological severe upgrades, or by acquiring smaller players in the industry. Surely, all options will come through significant investment in new technology that can catalyze digital transformation.

Belal Hejawi                                                                                              

Content Development  

 

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