Business Forum Frankfurt 2016 - Building for the Future
200 members of German SWIFT community gather to discuss the future of the financial industry.
A record 200 delegates from the German community gathered for the Business Forum Frankfurt and SWIFT Germany AGM 2016 on 19 April at Deutsche Bank’s Auditorium in Frankfurt. The theme for this year’s event was “Building for the Future: Disruption, Innovation and the Transformation of Banking”. Jürgen Marstatt, Head of SWIFT Germany, welcomed the participants and introduced the programme which was framed by the SWIFT 2020 strategy, and combined keynote speeches and panel discussions to address key topics such as the transformation of global transaction banking, the future of payments, standards, fintech and innovation. Christian Kothe, Head of Central & Eastern Europe, announced that Jürgen Marstatt will commence a new role at SWIFT as Head of Consulting and Training in Services & Support, starting on 1 May,. He will hand leadership of the Frankfurt office over to Michael Formann, who started the SWIFT office in Vienna in 2008 and has successfully developed the Central European SWIFT communities with his team. Christian thanked Jürgen for his achievements during his time as Head of the Frankfurt office and wished Michael the best of luck as he continues to drive SWIFT’s high ambitions in the German market.
Germany still in top ranks for global messaging traffic
In his opening speech, Stephan Müller, Chair, NMG SWIFT Germany and CIO, Commerzbank, highlighted the status, trend and vision for SWIFT in view of the global economic climate. While growth have been significantly impacted by China’s decreasing growth rate, the economic situation of the USA has started to normalize, announcing a possible end of the low interest rates period. In Europe, sustainable growth in 2016 is not expected, with Germany forecasted to achieving a growth rate of only 1.3%.
Negative interest rates are posing a major challenge to banking as many systems are unfamiliar with them, so extensive alignments and adjustments must be made. Reporting on the progress in implementing the SWIFT 2020 strategy with its focus on SWIFT’s core and new solutions, Müller said that he appreciated the efforts of the FIN renewal programme, among many other things, and recognised SWIFT’s successfully expanding compliance services portfolio which helps all financial institutions to manage a major challenge.
Müller presented figures showing Germany again ranking third world-wide by FIN traffic received and fourth by FIN traffic sent. In FileAct traffic, Germany was still by far the global leader in 2015 with more than 8,050m messages sent from a total of over 18,200m for the top 20 countries.
A financial landscape of threats and opportunities
SWIFT’s CEO, Gottfried Leibbrandt, was cordially welcomed by the audience and gave an update on the cooperative’s latest business developments, listing some impressive messaging traffic and operational performance data. The number of FIN messages grew by 8.8% last year, to more than 6.1bn, whilst both SWIFTNet availability and FIN availability remained at an impressive 99.999%.
Commenting on the current challenges and worries in the financial world, he mentioned the strong impact of “new powers” emerging in geopolitics and changing economic balances, as well as the developments in financial markets, which lead to negative interest rates and have increased pressure on institutions globally. Additionally, the banking sector is more and more exposed to competition from new FinTech and non-banking payments companies, presenting threats and opportunities alike which could change the shape of the industry considerably. SWIFT too will have to reshape, but it will stay true to its core mission of secure messaging and its stated goals in standardisation, security, resilience, reliability, and reach ̶ the latter becoming increasingly important in the digital future. Since its creation, SWIFT has always driven innovation in the financial sector and continues to develop new solutions in close consultation with its users in areas that are of the greatest benefit for the community, understanding that innovation is only successful if it addresses an existing demand. With a mention about the increasing number and sophistication of cyber-attacks, Leibbrandt assured his audience that maintaining the highest network security always has been and will always be SWIFT’S top priority.
After his speech, the SWIFT CEO honoured Thomas Egner who held the role of chairperson of the German PMWG (Payments Maintenance Working Group) for more than 10 years. As of 1 May, Thomas has left Commerzbank to become EBA Secretary General and will therefore not be able to continue to represent Germany in the PMWG. In his time as chair of the German PMWG, he made a significant contribution to various workshops of PMWG and ISO 20022 modelling & business validation groups.
SWIFT 2020 – The roles of the community and of SWIFT
An insightful discussion between Stephen Lomas, Managing Director, Head of Market Policy, Global Transaction Banking, Deutsche Bank and SWIFT Board Member, and Stephan Müller, Chair, NMG SWIFT Germany and CIO, Commerzbank and SWIFT Board Member followed, moderated by SWIFT’s CEO, Gottfried Leibbrandt. The panellists outlined the strategic priorities of SWIFT 2020, comprising the core mission of messaging including software & connectivity, and compliance as the focal point of SWIFT’s shared services for financial institutions and market infrastructures.
Lomas confirmed the significance of continuing this strategy by further strengthening the core mission and cutting prices consequently. He was supported by Müller who added that SWIFT’s core activities could only be strengthened in connection with value-added services like its compliance portfolio. Gpii was mentioned as being a sample of innovation within one of SWIFT’s core processes, while Lomas highlighted compliance as one of the most important building blocks of SWIFT’s services for the community. Another topic discussed was whether SWIFT could cover the demand for compliance services for securities firms, as some major fines have already been seen in this area. Regarding standards, the panellists said they welcome the market infrastructures initiative to support and harmonise the implementation of ISO 20022.
Global Transaction Banking – What does the future hold?
Two designated experts - Christian Westerhaus, Managing Director, Institutional Cash, Global Transaction Banking, Deutsche Bank; and Reinhard Furthmayr, Head of Product Management Cash Services, Transaction Services and Financial Institutions, Commerzbank - discussed SWIFT’s recently launched global payments innovation initiative (gpii) and how banks will respond to FinTech models that are positioned as an alternative to traditional correspondent banking.. The panellists both spoke very highly of the gpii, , developed out of SWIFT’s core to improve global correspondent banking by increasing transparency, speed and predictability of cross-border payments, making world-wide sales easier, more dependable and cost-efficient to the German industry.
Gpii will enable banks to offer corporates a strongly enhanced service with key features such as same day use of funds, predictability of fees, end-to-end tracking of transactions and transfer of rich payment information. The positive effects of implementing the initiative should be achieved in the first instance without over-complicating the service, which will only work with unitary standards. To date, 52 banks have signed up for the initiative, representing 70% of cross-border payments traffic on SWIFT. The pilot phase is scheduled for 2016, with early result expected by Sibos Geneva. The objective is to show that the financial industry can be agile and respond quickly to the challenges that it faces, all whilst exploring further long-term changes, such as the use of new technologies. A number of corprates have also stated that they will be putting pressure on their banks to join the initiative and are unlikely to be accepting “non-gpii” payments in the future.
Future of payments – The advent of real-time
After a series of speed briefings on new products & services by SWIFT specialists, which ran in parallel with the SWIFT Germany AGM, a panel of prominent SWIFT and community experts discussed the global shift towards real-time payments: Josef Gilger, Head of Competence Center Payments & SWIFT, Hypovereinsbank – Member of Unicredit Group; Dirk Schrade, Bundesbank; Thomas Egner, Director, Business Development, Commerzbank; Hans Rainer van den Berg, CEO, van den Berg AG, Chair, Working Group SEPA, Instant Payments & Crypto Currencies, Bitkom e.V. The discussion was moderated by Thomas Ramadan, Payments MIs, EMEA, SWIFT.
The panel kicked off with each panellist presenting an individual mission statement on the development of real-time payments systems in the near future. While most retail customers already perceive existing payment systems as real-time because to them the process ends at the point of sale (POS), the transaction has yet to be processed by merchants and banks. Principally, the experts are convinced that real-time payment processing is not a vision but will become reality soon in the German and European payments market as it is also in the interest of the Eurosystem. However, regulation will be needed to make the involved parties act in concert as shown by the comparatively rapid implementation and operability of SEPA. The set-up of a Europe-wide infrastructure providing a practice-oriented multichannel technology which allows interoperability for both banks and merchants will require multi-million euro investments. Bank representatives among the panellists assured that the banks are ready to invest but there are doubts whether merchants, generally looking for lowest costs will join in as providers like PayPal are already present at the POS, and others will follow.
Andrew Muir, Head of Standards Operations, SWIFT, informed the audience about SWIFT’s harmonisation initiative to bring consistency to the global implementation of ISO 20022. With 200 initiatives in 90 countries currently underway, there is a proliferation of uses of the standard and a lack of harmonisation. He encouraged participants to publish their standards information in a consistent format on MyStandards and share information on ISO 20022 messages, versions and market practice used with other market infrastructures. Moreover, he announced a new Change Request (CR) Forum to be implemented by SWIFT on the back of MyStandards later this year, enabling the Country Groups to engage in MT CR reviews. In the context of Standards Release (SR) 2016, he commented on technical changes in different payments, securities, and commodities messages and presented the timeline for SR 2017. Muir closed his presentation with an overview on standards initiatives for 2016, including in the areas of regulation, blockchain, real-time payments and GPII.
The final session of the day focused on one of the most talked about topics in the financial world of today. Hubertus Väth, Managing Director, Frankfurt Main Finance, the marketing association of the financial centre of Frankfurt, surprised listeners by asserting that the Rhein-Main-Neckar region surrounding Frankfurt is the second-largest FinTech hub in Germany, providing a strong base to become a leading European FinTech hub. Germany ranks 5th among the top 8 global regions as a follower with high future potential, while its FinTech investments are growing disproportional compared to global investments. On a European level, Germany is catching up with the UK in terms of absolute FinTech investment but will have to further develop its investor landscape to provide more growth capital.
Prof. Dr. Andreas Hackethal, Professor for Personal Finance, University of Frankfurt, demonstrated how FinTech changes the financial industry by using the examples of Roboadvice and RegTech. He analysed behavioural patterns of private investors to find out that an individual advisor’s strategy dominates the decision of a retail investor despite his personal risk profile, while Roboadvice support “matches people with portfolios” more precisely by building on behavioural economics. RegTech helps to close the gap between regulatory requirements and industry capabilities by offering services in the areas of regulation, compliance and risk. Established service providers have already started to invest into scalable solutions to banks and FinTechs have identified this as a hot growth topic.
Thomas Elm, Head of Derivatives Market Models, Deutsche Börse, defined some interesting trends in the emerging FinTech environment. Innovation moves towards partnerships where startup speed and creativity meet corporate scale and capability to establish successful business. The majority of startups focus on B2C as there are “more accessible problems” to solve. B2C companies are better known to the general population, and founders can get started straight after university, but the B2B sector is becoming increasingly attractive. According to him, a good example of B2B innovation can be seen in Distributed Ledger Systems providing a shared database for services with a built-in business logic to ensure synchronisation and prevent abuse.
Christian Kothe, Head of Central and Eastern Europe, SWIFT, reviewed the highlights of the forum, stating that it had demonstrated that the industry is well aware of threats and opportunities that it faces. He assured the audience that SWIFT will work jointly with the community over the next 12-15 months to minimise cyber threats and take advantage of the opportunities of FinTech.
Regarding the much-discussed Instant Payments theme he stated that the train is leaving the station, so the question should be whether investments to move forward are already provided. After closing the session, networking drinks were kindly offered by SWIFT’s host Deutsche Bank who made participants feel very welcome and whose support was highly appreciated.