Financial institutions and industry bodies alike will have to adapt to the new payments landscape, according to a panel at the Swift Business Forum in London.
Andrew Hausner, executive director for banking, payments and financial resilience at the Bank of England, said that central banks have to pursue their market stability mandate without jeopardising innovation in payments. A tall order, and one that will force them to adapt to ensure they do it properly.
“Change is going to happen, whether we like it or not,” he said.
Hausner went on to say, however, that innovation doesn’t necessarily always undermine stability. Too little competition can mean the market gets too concentrated, while innovation when, “properly channelled”, can actually improve stability. He said: “If there is one thing a central bank has to do, it’s keep a grip on stability.”
Blythe Masters, CEO of Digital Asset, said she was representing the “part of the industry that’s allegedly here [at the SWIFT Business Forum] to eat everyone’s lunch”. While conceding that some may view her as “the disruptor in the room”, she said: “That’s really not the way I see it.”
Disruptive technologies like blockchain, in which Digital Asset is a major player, having bagged mandates in the US for repo and Australia for equities, represent both risk and opportunity.
Risks exist because the focus on return on equity has materialised at a time when rates, spreads and liquidity are all low.
At the same time, Masters said, costs have been rising consistently, driven by new regulatory compliance requirements.
But not embracing innovation could put firms at risk of being left behind competitors that are unburdened by legacy infrastructure and regulation.
She went on to emphasise that blockchain technology is all about the ability to share and mutualise common infrastructure, and the possibility to eliminate significant post-trade cost. Often, she said, the alternative would be to exit certain spaces altogether.
