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APIs, Immediate Payments and Distributed Ledgers - Hot Topics for SIbos

Sibos 2015 is almost here, and Singapore beckons.

Key themes I expect to dominate Sibos are real-time, or immediate payments, PSD2 for the European banks and distributed consensus ledgers, particularly for cross-border payments solutions.

Immediate payments are a big theme in Europe and the USA, with Australia in the middle of a programme, run by SWIFT to introduce them in 2017 and Singapore now live with the FAST system for 18 months. It is becoming clear that immediate payments will become pervasive and will dominate mass retail and corporate payments everywhere; the race is on for banks to transform their IT and operations to enable immediate payments and to develop new payments and payment account propositions for their customers.

PSD2 is European regulation, with immediate implications for European banks, but its effect is likely to be felt globally. Not just because regulators around the world tend to feed off each other with new regulations, but also because it will catalyse the development of a new payments ecosystem for the digital economy. In particular, it will enable new types of payment providers, allowing third parties access to account information and the right to initiate payments, requiring banks to expose their payment systems through APIs. This has major security and liability implications that banks need to address, compounded by other PSD2 requirements to enhance the security of online payments. The PSD2 has additional requirements to improve the original PSD, as well as the interchange caps for cards transactions. With the PSD2, European banks face both a compliance challenge and an opportunity to reinvent themselves for the digital economy that will dominate their payment plans and investments for the next three years at least.

Sibos 2014 in Boston was the point when the banking community started to accept that there is more to distributed consensus ledgers than Bitcoin, and that the technology has the potential to dramatically improve the efficiency of financial markets, taking out layers of intermediaries and gatekeepers. Since then, there has been considerable investment in the technology, by both banks and VCs.  The technology remains immature, and the industry is still in a discovery phase, but expect in Singapore to hear a lot more on how it is being developed for industrial use in capital markets and in payments. I expect that much of the interest will be on the capital markets side, focusing on smart contracts and distributed exchange of assets, but these are exceptionally complicated uses for distributed ledgers and a very complex domain - I am not sure much clarity will emerge in these areas for some time.

However, distributed ledgers are not about transforming technology, but about transforming the way value can be transferred,  ubiquitously, trustless, in real-time, at low cost – payments are the purest form of value transfer, and for me payments are the most exciting use of distributed ledgers. It is here the technology is maturing, and in particular cross-border, international payments distributed ledger solutions are likely to be get a lot of focus at Sibos.

Sibos next week should be fascinating.

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