Building the future of Australia, Today
The Australian community gathers to discuss innovation
In Australia and globally, financial institutions are transforming technology and business models in order to remain relevant and competitive. At the same time, resilience and risk management are top of mind for senior executives, especially in the light of rapidly evolving cyber threats impacting the industry.
In an increasingly ‘instant’ world - where cyber-criminals are more sophisticated than ever, and new entrants are seeking to gain market share from established institutions - how do financial institutions stay resilient and secure, while continuing to innovate and navigate change? Against a backdrop of uncertainty, how can we build the future of Australia’s tomorrow, today?
With all the discussion surrounding distributed ledger technology (DLT), business leaders now confront a seemingly impossible and contradictory situation. They are dealing with a technology that has been simultaneously overhyped and underestimated. Whilst DLT is maturing as a technology, the pathway to implementation across broad and diverse ﬁnancial markets is less clear. Getting ready for DLT requires substantial investment at a time when many ﬁrms are facing ﬁnancial constraints, and it can involve working through complex and expensive issues with legacy IT systems and processes. “The reason why we don’t see blockchain impacting our daily lives quite yet is because most of the proofs of concept that are out there in different stages of development are either still in the experimentation stage or in the very early stages of expansion, and so whilst a lot of activity is happening behind the scenes on experimentation with blockchain, it’s not quite ready for primetime, and that’s because many of those experiments have headwinds in making them the mass appeal solution that we hope they ultimately will become”, Jonathan Perkinson, Partner, Deloitte observed at the SWIFT Australia Business Forum. “If the technology is already in place, going live with a production grade system requires for the said system to be fully predictable and bug free.”
Members of the financial industry are not sitting on their hands. They are investigating how disruptive technologies can support their businesses and are working together in unprecedented ways to improve customer experience and efficiencies. As an example, in the correspondent banking space, the global payments innovation (gpi) initiative will deliver secure, faster, traceable & transparent cross-border payments for corporate and retail customers. The initiative group is also exploring how technologies such as DLT can improve the end of day Nostro reconciliation process. By removing friction and cost from the cross-border payments process, the banking industry will remain the provider of choice for international payments. SWIFT gpi is a collaborative innovation where the financial industry and FinTechs work hand in hand. Eddie Haddad explained: “We are bringing the Innotribe Challenge to Asia later on this year. We’re specifically going out to banks around the word to see if they want to be involved in this industry challenge with FinTechs, developing solutions directly on the gpi network. We will build a sandbox in Singapore to do that, to allow banks and FinTechs to experiment on top of it.”
We are bringing the Innotribe Challenge to Asia later on this year. We’re specifically going out to banks around the word to see if they want to be involved in this industry challenge with FinTechs, developing solutions directly on the gpi network. We will build a sandbox in Singapore to do that, to allow banks and FinTechs to experiment on top of it.
Eddie Haddad, Managing Director, Asia Pacific, SWIFT
Beyond cybersecurity and new technologies, a topic of widespread interest is the development of Australia’s innovation agenda. The New Payments Platform (NPP) is a major industry initiative to develop a new infrastructure to support real-time payments. At the Australia Business Forum, panelists discussed how Australian consumers, businesses and government will benefit from a fast, versatile, data-rich payments system for making their everyday payments. Set to go live later this year, the NPP will be the most recent real-time market infrastructure to see the day of light, with a range of capabilities that makes it built for the future. If speed is the most visible element of a real-time payment platform, the NPP distinguishes itself by the richness of its data. Adrian Lovney, CEO, NPPA explained: “From my perspective, for corporates, for businesses and for the industry, the real defining characteristic of the NPP is the data capability. The choice of the ISO 20022 standard, which is an open, XML, data format used by financial intermediaries around the world, the information that can be contained in that, and the extent to which this data can be used by back offices opens lots of opportunities for innovation, but also for automation, cost reduction and customer service”.
We also heard how FinTech and other industries are viewing the NPP and the opportunities it will create. If the easiest way to benefit from the NPP’s capabilities and benefit from its reach and scale will be to simply plug into it, value will also come from overlay services. Opportunities exist to leverage the basic infrastructure of the platform and it is expected that these services will unfold over time. What they will be remains a question for the market but a number of use cases that encompass peer-to-peer applications, government to individual, business-to-business payments, or industry verticals overlays can already be imagined.
On the securities side, the ASX provided an update on their plans to replace the CHESS system with a new state-of-the-art infrastructure that will underpin the securities industry in Australia for years to come. ASX understood the need for standardisation early and chose to adopt ISO 20022 as its new message set for that very reason, and chose to collaborate with Digital Asset Holdings, a member of Hyperledger that too understands the need for standardization and interoperability. Such a shift of technology is not likely to happen overnight however, with participants disconnecting from the CHESS platform on a Friday night and re-connecting to the new DLT platform on the Monday morning. But it is also unlikely that all participants will be ready at the same time. Regarding this matter, Cliff Richards, Executive General Manager, Equity Post Trade Services at ASX said: “it’s quite accurate to say there’s a network effect required and you need to go to a tipping point before getting the full benefits of any ecosystem. We’ve kept that in mind and we will make sure if we progress down the DLT path that anyone connected to CHESS today and connecting to its replacement has a choice of taking a node, or just interacting with the centralised infrastructure through ISO 200222 messaging. So we know we need the two models to co-exist”.
Our panel of experts also shared their thoughts on the future of the securities services landscape, with the particular context of the NPP as innovations might meet at some point in the future. Real-time and richer data capabilities are expected to benefit the securities industry, but additional value might come for the use of overlay services that would allow for more effective funding.
We were delighted to see the Australian community coming together at the SWIFT Business Forum in Sydney. With close to 400 delegates, the forum proved to be an event of major importance for the community. Much is happening in Australia these days in terms of innovation and the world is watching us as we roll out the NPP later this year and ASX is assessing the use of DLT for its new post-trade platform. SWIFT will continue working very closely with the industry to support these innovations and we are looking forward to Sydney being at the heart of the global financial industry as we will be hosting Sibos in 2018.
Bill Doran, Head of Oceania, SWIFT