Takeaways from Sibos 2023: collaboration comes to the fore

As the global banking and payments community descended on Toronto for the 2023 edition of Sibos, many conversations centred around collaborative finance in a fragmented world in the sessions and the exhibition.

The importance of partnerships and collaboration was apparent in the various panels discussing the state of cross-border payments today and interoperability between the old and the new. Regarding the future, representatives from banks, central banks, network providers and regulators examined the development of digital assets, central bank digital currencies (CBDCs) and how and where they will be integrated into the payments mix.

The first payments discussion of the event began with the biggest question of all: what’s next for low-value cross-border payments?

In recognition of the increase in cross-border transactions, the panel sought to discuss how correspondent banking has evolved to facilitate this growth and uncover the evolution of emerging alternative payment models.

Speaking on the shifts in this area, Jean-François Mazure, Head of Cash Clearing Services at Société Générale, assigned his bank’s success to operational efficiency.

“We all see the pressure around prices. And if we want to meet our end users’ expectations, it is very true that we will have to offer them better prices to be achieved through the decrease of our internal costs,” he explained.

To meet end users’ expectations, particularly those of SMEs, banks are increasingly focusing on ways of facilitating cross-border payments for the masses. The panel explained that lower barriers to entry for low-cost cross-border payments have opened the door for both non-bank participants and alternative payment models.

Reflecting on EBA Clearings’ immediate cross-border payments (IXB) pilot that connects users in the United States and Europe and the challenges presented using alternative payment models, Petra Plompen, Senior Manager at EBA Clearing told the panel that “technology is not the challenge”.

“What we learned is that you really need to do this together with the banks that are using this, to show that you can meet their requirements and our user requirements,” she added.

The changing market was clearly evident in arguably the biggest announcement of the week: a partnership between Swift and Wise. Financial institutions will now be able to direct Swift payment messages to the Wise platform via the network’s correspondent services solution without the need to implement further changes to their own systems.

Wise CEO Kristo Käärmann said the deal could make his own firm’s platform redundant and he was entirely comfortable with that.

During the sessions focused on digital currencies, panellists discussed the various types of digital currencies being used today, where we are in their evolution, and how market participants see them being used in the future.

Ryan Rugg, Global Head of Digital Assets, Treasury and Trade Solutions at Citi, discussed the creation of Citi Token Services for cash management and trade finance that will see the bank integrate tokenised deposits and smart contracts into Citi’s global network.

By tokenising deposits, Rugg explained it “adds a 24/7/365 always on infrastructure. We’re currently live between the US and Singapore and where it gets really interesting is that we’re working with a federally regulated local network to make it not just a Citi token. We believe in multi-bank, multi-border.

“Also, with that, programmability enhances this and adds benefits to the bifurcated market. When I was at R3, we had started on public chains, we went to a private version of Ethereum. Right now, it looks like it going to be fungible in the future. It’s even compatible if regulation changes with stablecoins, or crypto and banks getting permission. We’ll have a platform built out for our clients.”

In the same session, Scott Hendry, Senior Director at the Bank of Canada, provided the central bank’s view on developments in digital assets through the lens of CBDCs.

“We exist now with multiple types of money and the future is going to be the same way. The technology underlying it is, for me, largely irrelevant. We must make sure that we can trust the money that we use, no matter where it comes from,” he explained. “We need central bank money, and we need private money, so whether it stablecoins or commercial bank deposits – tokenised or not – or even various forms of cryptocurrency, I think there’s a role for the multiplayer.”

From there, the discussion moved to the design and implementation of CBDCs. Then, immediately the conversation turned to whether people wanted to use them.

Matthias Schmudde, Head of Payments division, Deutsche Bundesbank, explored this sentiment, commenting: “The main aim is to make cash fit for the digital age, and retail CBDC is something that will do this job. We’re central banks, we’re not fintech with a trial-and-error approach. It will take some time to get the buy-in, and we think it’s important to explain, important to exchange arguments to come to a solution that is beneficial for everyone in the ecosystem.”

Bank of Canada’s Hendry agreed, adding, “Whatever is built, whether it’s from the private sector or central bank, it needs to be used by the public, it needs to be adopted to a certain extent, to achieve critical mass to form the network that is necessary to support the system, justify the investment and be useful to the people.”

Finally, interoperability was at the centre of the CBDC discussion, with a panel investigating how these incoming digital currencies will work at the cross-border level. Swift itself is working with central banks and financial institutions on beta tests of an experimental method for interlinking CBDCs with existing fiat infrastructures.

Nick Kerigan, Managing Director, Head of Innovation at Swift, argued that interoperability should be front of mind now while the industry is early in the development of CBDCs to avoid some of the issues that have been seen with existing national payment systems. This was echoed by David Ballaschk, Senior Payment Expert from the Deutsche Bundesbank, who noted it was unlikely there would be a single standardised approach to CBDCs, so interoperability is the best that can be hoped for.

Hari Janakiraman, Head of Industry and Innovation, Transaction Banking at ANZ added that interoperability was vital to ensuring the sector doesn’t have to worry about how they connect to different blockchains and tokens, enabling firms to focus on building meaningful use cases. That’s where initiatives such as Swift’s sandbox plays a role by providing a global platform for collaboration.

It’s also critical, noted Adeline Bachellerie, Head of Digital Currency and Innovation at Banque de France, that the central banks work with all ecosystem players, from Swift to fintech firms and other payment providers, to guard against any unintentional fragmentation during the design and implementation of any CBDCs.

Sibos offered a timely reminder of how financial services are changing. The sessions, and major announcements during the week, showed the pace of change and the power of meaningful partnerships. Rewind a few years, and the Swift and Wise announcement would be almost unthinkable. In 2023, it’s entirely logical.

The event challenged participants to consider how the industry can collectively make payments faster, cheaper, more frictionless, more transparent and the significant implications of this evolution to their businesses and that of their clients.

It was a welcome opportunity to reconnect with clients, partners and the broader community to unpack these topics and deliberate the potential solutions to the fundamental questions posed.

Alexandra Rivas is ClearBank’s International Payments Product Lead based in London, where she is responsible for leading our international expansion plans and product deliveries across payments. Alex was previously a Vice President in Wholesale Payments at JP Morgan, where she managed real-time payments notably SEPA Instant in the EMEA region.