Sibos participants on the current state of industry collaboration, where it could go next and how their companies are engaging in group initiatives
The theme of 2023’s Sibos conference, held in Toronto, was ‘collaborative finance in a fragmented world’.
Over the week, panels discussed issues including international cooperation, how to deal with geopolitical and global sustainability rises and other industry-wide issues that impact financial services in all its iterations.
Speaking to Asset Servicing Times, experts from across the industry share their thoughts.
Industry attitudes
“Collaboration can be challenging sometimes, because banks and customers don’t necessarily always understand how it works,” Duco’s James Maxfield explains.
Calling for industry collaboration may seem simple “but the reality is, collaboration requires a lot of internal work,” he says. “People need to be open to others’ ideas, agendas and ways of doing things” — easier said than done.
Nevertheless, once a relationship is established between companies, collaboration can be extremely valuable; “particularly for smaller vendors, who may not have a lot of opportunity to spend, or get into some of the bigger organisations.”
“Being able to offer best-of-breed solutions is really important to us at Duco,” Maxfield shares, advocating for a “Lego brick” approach where clients get the best of a variety of vendors’ services. With this strategy, the final product “becomes a lot more impactful than the individual value that each vendor can bring”, he says.
“One company can never have everything. We make a lot of investment in data automation. Other vendors don’t, but they will invest in other parts of their platform.”
Benefits
Deepak Gupta, executive vice president for product, engineering and services at Volante Technologies, affirms that the company “has always advocated for a partnership ecosystem model. We specialise in certain things, and work collaboratively with similar technologies and partners.”
This approach is becoming an industry-wide trend, not limited to technology providers. “Fintechs are collaborating with banks; networks like MasterCard and Visa are collaborating with technology vendors and banks,” Gupta continues. “There’s an increasing drive towards leveraging each other’s strong points to make up a proposition.”
Beyond collaborations taking place in small pockets of financial services, creating best-of-breed products and interoperable solutions, a collaborative approach can go a long way in determining new regulation and industry practices. Michele Hillery, general manager of NSCC’s equity clearing and DTC’s settlement service at DTCC, draws attention to the industry collaboration that was required to bring North America’s T+1 project to life.
“DTCC, SIFMA and ICI led this initiative, fostering industry-wide collaboration,” she says. Incorporating viewpoints from both the buy- and sell-sides on this issue “enriched the conversation and provided a much broader perspective. This approach meant that we could work through many of the solutions to the problems that were identified up front, as opposed to uncovering issues at a later stage.”
Barriers
Collaborative finance is broadly acknowledged to be something the industry should be, and is, aiming to achieve. However, knowing that something needs to be done isn’t the same as doing it, and conference participants warned that barriers remain when it comes to these goals.
Andy Schmidt, vice president and global industry lead for banking at CGI, highlights data governance as “one of the main impediments” to large-scale collaborative projects like blockchain adoption. He goes on to add that “connectivity and standards are another issue.” Although a seamless payment may seem simple in theory, “getting there can be a challenge.” Companies need to be “speaking the same language, or at least close enough.”
Although the industry is getting closer to this communication goal, “being able to map that out and solve it is a sticking point.” Schmidt accepts that “it’s never going to be perfect — but it can be better. We need to work with what we’ve got.”
Another barrier that could get in the way of successful financial cooperation is, inevitably, budgets. Choosing a partner to work with will always require a huge amount of research and consideration, but Kanika Hope, chief strategy officer at Temenos Multifonds, warns that keeping costs down shouldn’t be firms’ only priority. “You need to have non-financial criteria as well,” she says. “It’s not enough to find the cheapest supplier going.”
Geopolitics
Each year, market participants travel from every corner of the map to attend Sibos. As such a global event, geopolitical issues tend to be high on the agenda; and this year was no different. The conference’s overview drew attention to the current “time of economic and geopolitical uncertainty”, considering risk management and the role of collaborative finance in this area.
Volante’s Nadish Lad, global head of product, makes comparisons to the financial crises seen 15 years ago, commenting that “there are always ups and downs”; something that the market must learn to accept. “The key is to take away the learnings,” he says, so that risk can be minimised in the future.
“In this industry maintaining a tight, risk-free regulatory approach is very important. It is crucial and critical to have the right systems, so that when a country or currency is at risk, you know what actions you need to take.”
Taking knowledge from current global issues and using it to improve product offerings and services not only helps clients, he adds, but can assist in the development of best practices and principles for the industry as a whole. Companies can “work together to manage the risks,” allowing them to see through difficult times and emerge more resilient.
Geopolitical events drive the industry’s focus, determining where budgets are allocated and what areas require the most urgent attention. Cybersecurity is one such area that has grown in importance over recent years, even more so after Russia’s 2022 invasion of Ukraine.
Addressing financial cybercrime is a little like fighting a hydra; as soon as one threat is eliminated, two more take its place. With ever-evolving and increasingly complex attacks, it’s essentially impossible to stop. Total financial crime and cyberattack prevention is both “too hard and too expensive” CGI’s Schmidt says, instead framing the fight as a “race for containment” that requires regular network and application tests and a focus on maintaining trust in the enterprise.
Embracing cloud technology is a key way that firms can bolster their resiliency, Schmidt explains, noting that several firms are using ‘dual cloud deployment’. With this model, a secondary cloud provider is established as a backup, ready and waiting in case the primary provider has an outage. With the use of a dual-cloud system, one CGI client “was able to transition and be fully up and running, complete with data synchronisation, with their secondary provider in 12 minutes,” Schmidt shares; “and most of that time was spent on the phone with the regulator to walk them through the process.” In a world where predictability seems almost perpetually out of reach, having a plan in place for unexpected events and outages is key.
ESG
Disruptions to supply chains have been apparent across all industries over recent years, and financial services are no exception.
“This is where corporate and transaction banks have great advice and experience to leverage,” Schmidt advises. “Working with corporate customers to figure out ways to reroute supply or find new suppliers is a role that many of the corporate transaction banks have been playing during the current geopolitical cycle,” he says, adding that “this also positions them to be able to drive a similar type of activity in terms of sustainability and ESG.”
ESG and sustainable finance have become increasingly politicised issues, particularly over recent months. In the US, certain states are placing outwrite bans on engagement with ESG initiatives, and influential individual actors have been keen to share their opinions on the inutility of climate concerns.
When other areas of the world are putting ESG high up on their agendas, firms operating across multiple jurisdictions may face challenges when it comes to maintaining a consistent sustainability approach. One such company is Torstone Technology, with Sam Farrell, North America head, noting the difficulty of “focusing on whatever geography you’re operating in, while also maintaining the culture that your firm has.” This balancing act is “a tough area to navigate, and it won’t get easier.”
Whatever a company’s internal alignment with ESG may be, regulations in different jurisdictions dictate just how much they are able to make their ethoses a reality. “The EU and the UK are leading in terms of ESG regulation,” says Kanika Hope, chief strategy officer at Temenos, “but there are still countries that don’t have as much sustainability maturity.” She recalls one client whose attempts to engage more with ESG were quashed by their country’s regulation, exemplifying the complexities of working across borders.
Just like in other areas of the industry, collaboration is key when it comes to making real change in the ESG space. “Collectively, we can move the needle and promote sustainable growth,” Hope says. “We cannot do it alone.” Whether the political climate will be able to agree on an approach, however, remains to be seen.
Working together across jurisdictions is essential, enabling consistent approaches to issues that impact all areas of the industry and, in many cases, the wider world. Collaboration paves the way for real, meaningful change, and will only become more essential as time goes on, existing pressures intensify and new challenges emerge.
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