The SWIFT Benelux Forum 2018 took place at SWIFT’s headquarters in La Hulpe on 8 & 9 May.
View the photos here.
Under the theme “Navigating the new normal,” the event brought together more than 110 financial services professionals from across Benelux to discuss topics that are top of mind across our industry – the evolution of the European payments landscape, instant payments, new business models and products that are emerging as a result of PSD2 and instant payments, the future of cross-border payments, financial crime compliance and cyber-security.
After opening remarks by Olivier Lens, Head of Benelux, SWIFT, an update on the SWIFT 2020 strategy was given by Luc Meurant, Chief Marketing Officer. Half way through the five-year period covered by the strategy, the execution of the initiatives set out in the strategy is going very well. Furthermore, new initiatives such as SWIFT gpi and the Customer Security Programme (CSP) have been started and are making great progress. “All of this is good, but we cannot be complacent,” said Meurant.
The payments market is growing rapidly and is expected to continue to grow at an average of 6% per year until 2025. We have seen a rise in cashless payments in countries with rapid growth and technology adoption (e.g. China, India) and, driven by changes in the retail payments space, clients are expecting faster and cheaper payments across the board. At the same time, the financial industry still faces the challenges posed by increasing cyber risks and new cyber regulation, ever increasing compliance costs and the growing on-shoring of customer data in response to data privacy requirements and geopolitics.
The financial industry is facing intense competition, with multiple competitors emerging mostly in the retail space but with an eye on the business space. Among these are fintechs, Money Transfer Operators, card companies, and digital giants such as Alipay, Google, Amazon and Facebook. All of this is fuelled by new technology (e.g. APIs, DLT and artificial intelligence) and regulations such as PSD2. The result is that there is a battle for customer access and data at a time when we are also seeing major changes in the market infrastructure landscape, including instant payment systems, the adoption of ISO20022 and the renewal/replacement of the RTGS market.
Given all of these changes, SWIFT’s Board and executives have agreed to make a number of ambitious changes to further accelerate and expand the SWIFT2020 strategy. The plan is to really step up the game in cross-border payments, and realise the vision for gpi to become the platform of the future for international payments. Other areas that will also be accelerated are APIs, ISO 20022 and data analytics, with the purpose of using data analytics more extensively to develop SWIFT’s services and make them even better for the community. For CSP, the focus will be on moving beyond attestation to consumption, and developing additional tools.
In the securities area, where business is growing steadily at a rate of 10% per year and where the execution of the strategy is going well, the plan is to stay the course. The same goes for real-time payments, with the Australian New Payments Platform (NPP) and the initiatives already underway in the EU. Any further developments beyond that will be taken on based on the extent to which work already been done can be reused extensively.
Lastly, the ambitious roadmap for Financial Crime Compliance Services is well underway and the vision remains to have a series of compliance utilities that are available to all SWIFT users, that are comprehensive in their offering and that talk to each other.
The feeling of SWIFT’s board and management is that we have challenges and interesting times ahead, but we really feel that SWIFT 2020 accelerated should be a recipe for success.
SWIFT 2020 accelerated – a platform view
The next presentation was delivered by Stephen Gilderdale, Chief Platform Officer, SWIFT, who gave a business model and technology view of the plans laid out by Meurant. “When we talk about platform, it’s not just technology, but business models, and what we provide to allow you to do business with your customers,” he stated.
Looking at the main technology trends, Gilderdale cited artificial intelligence, digitisation and mesh (distributed or peer-to-peer systems, such as blockchain). “We are doing everything we can to provide a digital version of the services that we offer, making the most of cloud and APIs,” he said.
In the area of Financial Crime Compliance, the idea is to make the products talk to each other and use the data in one product as oil in the engine that opens it up to other systems. For instant payments the ramp-up of volumes in Australia’s NPP has far exceeded expectations and the infrastructure that will be used for TIPS and RT1 in Europe has already been deployed. The intention is now to start building on this for deployment across all of SWIFT’s user base.
This cloud infrastructure will over time become what is used by all of our customers. New technical products will all be cloud ready and instant payments ready. This is especially important for T2 and T2S participants as it can be used as the basis for ESMIG access.
In standards, the ambition with the ISO 20022 migration consultation is to move the global community to ISO 20022 for cross-border payments in three phases, starting with a closed user group, through co-existence and then full migration, using the full benefits of ISO 20022 rather than like-for-like with FIN.
APIs is an area in which SWIFT has not done a lot to date, but that is set to change. A multi-stage approach has already been set out to get there and there is high demand for the use of APIs in the financial industry to be standardised. “We think we can help standardise and keep things compliant with ISO 20022.” reported Gilderdale, “Stage two is to enable more of our services to be consumable via APIs – such as KYC and SWIFTRef. Stage three takes things further and is about the move away from messaging, bridging the two in the first instance, then, with stage four, we plan to expose APIs to trigger business transactions, leading to a paradigm shift. It is also a paradigm shift that we are looking at with gpi, where we are doing many things at once. For now we are using the existing world and supercharging it. But it can be done with ISO 20022 and with APIs, to move from a messaging business to transaction management.”
Lastly, Gilderdale spoke about the Agile programme at SWIFT. Agile is a journey that the whole organisation is embarking on, that will enable closer, faster innovation and delivery.
The pace of change is faster than ever before. We want to be closer to customers, iterate faster and adapt as we go, as dynamically as needed. We must be nimble and resilient at the same time. So we are starting with our Financial Crime Compliance business as a lighthouse project for agile and then rolling out across SWIFT.
Customer Security Programme: what’s next?
Leo Punt, Head of EMEA Services & Support and Deputy Chief Executive EMEA, SWIFT spoke to the audience about the Customer Security Programme, covering the evolving threat landscape, the timeline of deliverables for 2018 and the actions that are required by the SWIFT community to keep our industry safe and resilient.
By the end of 2017, 89% of all SWIFT users had self-attested their status on the CSP controls, a result that Punt said was something to be proud of and that confirms the community’s commitment to the programme. 2017 also saw the launch of the SWIFT ISAC, the hardening of interfaces with the 7.2 release and the launch of Daily Validation reports. 2018 will see updates to the ISAC to facilitate integration with customer systems and the launch of the Payments Control Service, which will offer in-flight detection of anomalies in behaviour, and for which a pilot with 17 banks is already underway. There will also be a new version of the KYC SA tool, the publication of a v2 of the security controls (that will come into effect in 2019) and at the end of the year, the deadline for full compliance with the v1 controls.
The ultimate success of the programme is for data to be consumed and used in counterparty risk assessments.
SWIFT gpi – the future of correspondent banking
To set the scene for a panel discussion on SWIFT gpi, Charifa El Otmani, Head of gpi EMEA, SWIFT, delivered a presentation on the trends that are shaping the new payments landscape and the multitude of changes that are underway in this space. Everything that is happening in the retail world is heavily impacting the demands that corporates put on their banks and the expectation is that payments are easy, safe, frictionless and seamless, with trust as a major factor in the choice of provider. The banking industry is organising itself in order to address the challenges, with market infrastructures embarking on major projects, such as the Eurosytems’s TIPS and EBA Clearing’s RT1 for instant payments. In the cross-border payments space, the banks are doing everything possible to make the future a reality with SWIFTgpi.
To discuss their reasons for signing up for SWIFTgpi and their experiences with the service so far, El Otmani was joined by panellists Susan Hall, Principal Product Manager ING, Mark Ortlep, Product Manager GPI, Rabobank and Laurent Steyt, Group Process Manager, KBC.
The first question to be addressed was on the main drivers for each institution to join SWIFT gpi. Hall reported that “the benefit of gpi is that we take away uncertainty. Clients want certainty and transparency and that’s what gpi gives them.” Ortlep highlighted the value of gpi when things go wrong, saying that being able to see where the payment is in the chain and what the problem is, is of great value. “We want gpi to become the new normal,” he stated.
Steyt was of the view that gpi brings many benefits, not only to his bank’s customers but also to the back office, where gpi makes it possible to give quicker and more complete answers to queries and improves claims handling. “In addition to transparency and speed, we now also see new services coming for cover payments that will help us improve risk management too,” he added, before explaining that KBC is offering two types of customer visibility: one where corporates get tracker info in their customer portal via a GUI and another for financial institution customers with the added feature of a Vostro account.
Speaking about the incentives to join gpi for banks that have not yet signed up for the service, Hall said that even if a bank doesn’t have the investment budget required to integrate gpi tracker information into their client portals, gpi still gives value to clients by delivering faster payments and better query handling.
It’s a win-win solution. You can reduce your costs internally and you can provide new services to your customers to make them happy. What is there not to like?
For Ortlep, the implementation of gpi at Rabobank coincides with the replacement of the bank’s legacy system, so full integration will only come once that project is completed, but in the meanwhile, a temporary solution has been found that still delivers good value to customers.
Another topic discussed by the panel was that of reach. Hall pointed out that it’s important that all intermediary banks are on gpi, and not just the large Global Transaction Banks. “So when we talk about reach,” she stated, “we need to influence each other to get gpi implemented across the board. If we as an industry are not gpi, we create a problem for ourselves. Our customers don’t understand why we can give them full visibility on some payments and not on others.”
El Otmani touched on the subject of the 2018 standards release (SR 2018) that makes it mandatory for all SWIFT users to pass on the Unique End Transaction Reference (UETR) for all category 1 and 2 messages. “This has a major impact. Because you are opening your systems to make these changes, we strongly recommend that you go the extra mile and implement gpi at the same time. Talk to your account manager and gpi expert to learn more about how you can implement SR2018 and gpi in a smart way,” she urged the audience.
Looking into the future, an audience poll predicted that 80% of MT103s will be gpi by Q4 2019. In response to this, Steyt stated that he “would be more than happy if all 11000 BICs on SWIFT were on gpi. That would be the best day of the year, but realistically what matters is that all intermediary banks are on it.”
Hall explained that there are various different approaches to integrating the tracker data in customer portals. “Things will evolve over time, and as the customer experience develops, so will their requirements and our offering. We, as a banking community, break our heads over value dates and time stamps, but for the corporate, what matters is when the goods will be released,” she concluded.
Instant Payments – the new normal
Carlo Palmers, Head of Payments Market Infrastructures, SWIFT, opened the instant payments session with a presentation on the instant payments landscape in Europe and the initiatives currently underway for instant payments between countries in the Eurozone, including TIPS, which is part of the Eurosystem’s vision 2020 and will go live in November 2018.
In the panel discussion that followed Palmers’ presentation, Saskia Devolder, Head of Western and Central Europe, SWIFT, Angeli Kokkes, Project leader Business/Market Infrastructures, ABN Amro and Petra Plompen, Senior Manager, EBA Clearing, debated the challenges and opportunities offered by instant payments and looked at how these fit in with other developments in the payments landscape.
“We are being challenged by a number of developments and instant is only one of those developments,” said Kokkes. “There are many challenges and changes. As consumers, we are all asking for faster and better services from our service providers.” Plompen, from EBA Clearing, spoke about EBA’s RT1 instant payments offering, which is already live and is fully compliant with the scheme for European instant payments set out by the European Payments Council (EPC).
We are pan European by design and by desire. That’s how and why we developed RT1.
Devolder told the audience that SWIFT plans to support European banking community and market infrastructures on their instant payments journey by providing the connectivity to instant payments platforms. Having gained a lot of experience in the field through the Australia New Payments Platform (NPP) project, SWIFT has developed gateways that can be reused in the European context, making sure that banks can connect from one single gateway to any instant payments provider that they choose to do business with. “In the end we serve you so that you can serve your customers. We wanted to limit the amount of infrastructure that each bank has to use. So we have developed a single gateway to talk to the outside world and connect to any market infrastructure that provides an instant payments service,” said Devolder. She went on to explain that the gateway that SWIFT will be using for TIPS and RT1 connectivity is also the gateway that will be used to connect to the Eurosystem’s ESMIG, making it future-proof and further reducing the levels of investment required by the banks.
Looking at the links between national and European instant payments initiatives, Kokkes told the audience that the Dutch community will go live on instant payments in 2019, a development that the market is very excited about. At the same time, the ECB is selling the “magic of vision 2020,” and while preventing fragmentation in Europe is a key consideration, it is a fact that there will still be different solutions for different markets, based on what customers expect and what they are used to. “We have to include everything in our roadmap – both local and European - and link all developments to one another. TIPS is on our roadmap but we need to look more at what the demand is and how it fits into the picture,” she explained.
The next topic up for discussion was the link between cross-border payments and national/European instant payments. The panel agreed that it would make sense to make a link between SWIFT gpi cross-border payments and instant payments. One of the steps towards this is likely to be the development of an even more ambitious SLA for gpi payments that would make them even faster and bring the two payment types closer together. “The community is more bullish on this in Asia Pacific, whereas in Europe, I think we first need to feel what instant payments are like to have a vision to link things up in the future,” said Palmers.
Plompen touched on the limitations of the current SEPA Credit Transfer instant scheme. When it comes to speed, RT1 is already capable of doing better than SCT Inst requires, and most transactions are completed in just a few seconds. Another important matter is that of the maximum amount of money to be transferred. “We would also be able to support banks that want to remove the level set by the scheme,” announced Plompen.
If we want to go to a new normal with instant payments, it needs to serve the corporates, and EUR 15,000 isn’t going to work there, so changes will be needed.
Making the most of national member groups
To mark the occasion of having three new NMG chairpersons at the Benelux Forum this year, Lens spoke to the three of them - Saar Carre, Chairperson NMG Belgium, Serge Munten, Chairperson NMG Luxembourg (ALMUS) and Bart van de Sande, Chairperson NMG Netherlands – about how they see their role and what their ambitions are for their NMGs going forward.
After a brief introduction by each, Munten reported that at the same time as taking on his new chairperson duties, he is discovering SWIFT as an organisation. “It is very impressive to see that around the table of ten to fifteen people, you have so much experience in so many businesses, and so many views. Everyone is very committed to providing insights and to SWIFT as a company. Many questions are asked on the facts and figures, on what is being done and how. The levels of commitment are very high which is impressive,” he stated.
Carre said that it has been very interesting to observe the interaction between SWIFT and the members, and that based on her early impressions, she is of the view that the Belgian community could possibly be more active and dynamic in its interactions with SWIFT and make it more of a two-way conversation. “There is a very efficient and well organised information process on SWIFT’s side, but we need to be organised in how we distribute that information, collect information, and feed it back to SWIFT. We need to define how we want to contribute to things such as the ISO 20022 consultation. As Febelfin we know our members, we have a platform and really have an opportunity to increase interaction between SWIFT and the Belgian community,” she said.
Van den Sande concurred with the statements made by Munten on the passion for SWIFT.
You have one mind, one purpose around the table, rather than competitors. The work is collaborative and very special.
"We have quite strong bank representatives around the table and my ambition is to go even further in the collaboration on the things where we can be stronger as a group. I really think there are new ways of collaborating to take things even further.”
One challenge raised by Munten is that NMG meetings can run the risk of becoming a one or two man show, and that it is necessary to try to engage not only the people around the table, but also of all the people in working groups and beyond. “Collaboration can also still be further improved between banks in Luxembourg beyond the NMG. We have working groups at ABBL, the banking association that are working on very similar topics and there are definitely touchpoints,” he added. .
In a final message to SWIFT, Carre said: “Nothing is more permanent than change. Keep consulting, keep communicating and keep up the good work and we will see how we can improve our interaction with you.”
Navigating in times of change
Day two of the event kicked off with a keynote address by Febelfin CEO, Karel van Eetvelt. In his speech, van Eetvelt gave his views on how the world is changing, how it will affect entrepreneurs, individuals, the financial sector and corporates. Using anecdotes from other industries including the taxi industry and telecommunications, he gave examples of how the world is changing and how people have a tendency to adopt change in their personal lives because it feels like progress, while often resisting it in their professional lives because it can feel scary and daunting.
Companies and entrepreneurs are affected by changes that come about in society and technology has become a daily fact of life for all of us. This has changed the way that people shop, bank, listen to music, watch TV series and movies, and many other things. Personalisation is also a big trend.
The winners of today listen carefully to the needs of their clients.
And ethical questions are also being asked and are always on the increase – sustainability, authenticity, fairness, openness. Companies can only lobby with success when they have the right answers to the needs of society.”
On the question of whether our industry is prepared for disruption, van Eetvelt had a very simple answer: “Adapt or die.” He went on to say that he sees change as an opportunity to satisfy customer needs. “I think we are trying to do that in the financial sector. We are innovating a lot, banks have got good at helping startups, collaboration is there, and it’s needed to speed things up. Sometimes we also invest in fintechs. I don’t think taking over and integrating vertically is a good answer because you kill the agility of a small player like that,” he added.
Whilst it is a fact that people still want human contact, and technology is not the solution to everything, it is important to note that there is a difference between human and physical contact, and the former is possible without the latter.
One problem that our industry does face, when striving to innovate, is that our risk appetite is very low, primarily due to the myriad of regulation that the financial industry has been subjected to in recent years. This was seen as a necessary response to the financial crisis, but does have the effect of making the industry very conservative and adverse to doing anything that is not in strict compliance with the many laws and controls that are in place.
“But you don’t change behaviour by making laws and creating control administrations,” continued van Eetvelt. “To make progress, you need to take risks, and at the moment the risk appetite is too low because across the board, the laws are not adapted to reality. Laws and rules need to be more flexible, agile, trusting, and we need to bear in mind that the spirit of the law is more important than letter of the law. What we need is inspirational leadership. If you don’t have that, it’s not going to work. Perspective is also important. You can ask people to adapt, but you need to give them perspective.”
Compliance – from a silo approach to utilities
Next on the agenda was Financial Crime Compliance, with a presentation on SWIFT’s role in this sector by Charlotte Pardou, Sales expert Compliance Solutions, Western Europe, SWIFT. The financial industry is under considerable pressure to implement effective systems, processes and policies across all compliance areas. Transparency requirements are always on the increase and the levels of complexity are growing, as are the expectations of regulator and customers alike. All of this leads to levels of cost pressure that for some institutions can be barely sustainable. Banks are also faced with major challenges when it comes to balancing risk and efficiency, and with the introduction of personal accountability, the stakes today are higher than ever for executives.
Financial Crime Compliance (FCC) is a strategic area for SWIFT and a key pillar of the SWIFT2020 strategy. With around 200 SWIFT employees dedicated to FCC, it represents an area of significant long-term investment. Addressing a clear community need, FCC is relevant to all SWIFT users in all geographies and since it involves very high costs and is not a competitive area, it clearly benefits everyone to adopt a community approach and community solutions to address the challenge.
With 9 services focused on Sanctions, KYC/AML and fraud detection now live, and more than 4000 institutions using them, SWIFT’s focus is now on having three interconnected utilities offering a comprehensive range of services for Sanctions, KYC & Analytics. Over time, they will address the needs of ALL SWIFT users (larger and smaller) and, by being connected, they will leverage commonalities and data between the products & services to deliver the best possible user experience. Furthermore, all of these services will be delivered via the SWIFT secure cloud to minimise costs for customers and provide more options for transparency.
In the last part of her presentation, Pardou looked at some examples of use cases for the future interconnected utilities, highlighting the benefits of the model for customers. She concluded with the timeline for 2018, which will include improvements and updates to the KYC Registry, Name Screening, Sanctions Screening and Compliance Analytics, and the launch of the Payment Controls service in November. Payment Controls provides a secure, real-time, in-network means to monitor and identify uncharacteristic sent payment patterns. It is designed for seamless integration with existing business, compliance and operational processes.
ISO20022 migration – challenges and opportunities
The last subject on the agenda for day two was the migration of cross-border payments to the ISO 20022 standard, a subject on which SWIFT is currently conducting a community consultation. Stephen Lindsay, Head of Standards, SWIFT, set out the rationale for proposing a migration, explaining TARGET2 will be migrating to ISO 20022 in 2021 and a number of other market infrastructures, including the Fed and TCH in the US and the Bank of England have also announced their plans. Instant payments projects around the world are also using ISO 20022. In all cases, the plan is to go for a full strength implementation rather than like-for-like. Should cross-border not also migrate to ISO 20022, we would be faced with the problem of having to take rich information coming from those market infrastructures and put it into a correspondent banking payment.
“The consultation sets out our vision for migration and seeks feedback from the community. Our starting assumptions include not going for a like to like migration and adopting a phased approach rather than a big bang implementation,” said Lindsay. “We need to conduct the migration in such a way that we don’t lose anybody on the journey. This is why we are proposing a co-existence strategy with migration per business line, a three-phased approach starting with a Closed User Group (CUG), then coexistence with a translation service that allows 20022 users and MT users to interoperate.
The end game is to get to a state of full migration where everyone is using 20022. We foresee that that will take about 4 years. That is what seems reasonable but we invite you to all comment on that and give us your views.
To give a community view on the topic, Lindsay was joined on stage by Ton Versteeg, Senior Product Manager, Rabobank and Patrick Heyvaert, Payments & Securities Advisor, NBB. Heyvaert is a member of a number of Eurosystem working groups, as well as a member of the Belgian SWIFT National Member Group, while Versteeg who is the SWIFT User Group Chairperson for the Netherlands, has been very involved in ISO 20022 and has been a member of the Payments Market Practice Group for Benelux for three years.
An audience poll showed that 54% of attendees could be ready in 2 years for ISO 20022 cross-border, while 27% would need 5 years, 16% had no plans or didn’t know what their bank’s plans are, and 3% are already fully ready.
Reacting to these findings, Versteeg said that there has been a clear change in bank readiness because SEPA payments already use ISO 20022 and there is now a lot of ISO 20022 knowledge in the banks. The real drivers for ISO 20022 are the market infrastructures, and all new initiatives in Europe are adopting ISO 20022 because it is more structured, it allows for much more efficient screening and offers much richer data possibilities. “If you have to move between the two standards it makes life much more difficult. It would require major maintenance on FIN to facilitate this and would probably cost as much as migrating. So why not just migrate?” he asked.
Heyvaert spoke about the actions that the Eurosystem is taking to mitigate the risks of the big bang migration to fully fledged ISO 20022 in November 2021. “If you change to something new, there is always a risk that something will go wrong, but we already have experience with T2S and we are looking at what the risks are and how we can mitigate them. One of these challenges is that banks are not ready and hence not able to connect. We are making a list of all risks and ask all the banks to come to us and tell us what the risks are for you, so that we can set up an action plan. But we cannot remove them all. Risk is also mitigated by an extensive testing period as all banks will need to test and certify that they are able to send and receive 20022 messages,” he stated.
Looking at possible obstacles to a successful migration of cross-border payments, Versteeg was of the view that the biggest challenge lies with the smaller players, who have too much on their plate and for whom the phased approach is a necessity. “Training and general awareness are also important,” he added, “so information sessions, workshops and training sessions are all crucial. As is making sure that the vendors are ready.”
The last question to the audience asked whether maintaining different versions of the same messages for different MIs poses a problem. 68% of the audience replied that maintaining several version of the same message is a big problem, confirming that there is a strong push for MIs and SWIFT to harmonise and agree on a common version and release policy. The other 32% of the audience responded that while they can manage different versions, this variation comes with additional cost and risk.
Lastly, Lindsay made a call to action for all banks to participate in the consultation and send their feedback on the proposed migration approach and timeline.
Lens closed the day by thanking all participants for their attendance, engagement, feedback, collaboration and collecting topic proposals for next year’s event.