Welcome to Finextra's live coverage of the Swift Business Forum in Stockholm. This event will explore how banks can think in new and innovative ways as different business models impact the majority of existing banking revenues.
17.07: That is it for our live coverage of SWIFT's Business Forum Europe. Thank you very much for following proceedings here on Finextra, we will see you next time!
17.05: Final poll time! Will the Nordic financial services industry survive or thrive in the next decade? 61% say survive, outnumbering the positive thrive responses. Perhaps there has been an outbreak of realism? It is now time for the drinks reception, so it would be interesting to take this poll in an hour's time to see if it changed at all.
17.02: How will Brexit affect the Nordics? Javeus says that Brexit will probably mostly affect the UK, to a cheerful audience reaction. The negative effects for Sweden will be felt on the political side where the two countries are well aligned. With the UK leaving the EU, Sweden may not find it is able to make its voice heard in Europe.
16.59: Would the rise of protectionism in the US affect the Nordics? In Sweden, very much so, almost half of everything made in Sweden is exported. Free trade is a boon to the Swedish economy.
Looking on the positive side, Javeus says there are a lot of investments to be made, in the US and around the world, that got put on hold due to the global financial crisis. This should help promote growth.
16.57: With an amusing piece of smallprint to explain that forecasting the future is difficult, we move into a Q&A. If Trump's promises don't come to fruition, what effect will that have on the US economy? If nothing happens, this will have a big impact. Javeus notes that the US is always the first in and first out of a recession.
16.50: Are you a model? The probability of your profession being automated in 20 years time is a staggering 98%, according to Javeus. For cashiers this figure is 95%, and for truck drivers this is 80%. The knock on effect of this is that wage increases will be low or non-existant, with employees having to take this in order to retain their job. This has a knock on effect to inflation - without wages rising, there is no impetus for inflation to rise.
16.47: Interest rates will remain in a very low or even negative for a long time to come, says Javeus. Also, bond yields have been falling for a long period. The big question is what will happen to inflation, as that is key to interest rates, which themselves are key to real estate and stock market prices. Globalisation is gearing up - it is switching from product-based to services. There is also increasing price transparency - this creates pressure on companies not to increase prices. Technological disruption is cutting out the middle man - such as Uber and Airbnb, for example. Finally, automation is going to have an effect on society on so many levels - in 20 years, half of all jobs today could be taken over by automation.
16.38: Trump's cabinet has tremendous personal wealth. Javeus asks if they would really pursue any policies that would be bad for the stock market? If even for the issue of self-preservation, this seems highly unlikely. Economic policy uncertainty in the US is relatively low, but this is not the case in Europe. Brexit plays a part in this, but also the rise of populism combined with a large number of national elections. But as it turns out so far, 2017 has not played out as bad as was feared in some quarters. Javeus says that a win for Theresa May could actually lessen the chance of a 'hard Brexit' because she will have more leeway. At the same time, it looks like the German election later in the year will be between two very pro-European candidates.
16.32: Both small businesses and households in the US have very optimistic expectations of the future following Trump's move to the White House. But whenever expectations move far ahead of reality, you set yourself up for disappointment. There is still no word on the plan for tax cuts in the US, for example. Equity markets in the US and Europe are doing well and are on the up, although the US is tapering off slightly.
16.29: Purchasing managers indices provide a great indicator of which economies are set to thrive or not in the medium term, according to Javeus. He says that the global economic improval seems to be running quite well in sync. In addition to this, Trump is starting his presidency with quite a strong tailwind of economic indicators.
16.24: The topic for today's closing keynote is 'The decade of uncertainty - surviving or thriving?' Johan Javeus, chief strategist and head of Research and Strategy at SEB. His initial slide features a big picture of a happy Donald Trump, with a smaller image of an exasperated Angela Merkel.
16.20: Technology has been a key theme throughout all of the sessions today. The hype around blockchain is cooling a little, and the real practical applications of DLT can be really considered now. Also, the rise of robotics provide another new technology with great potential.
16.15: Cyber is a board level issue, but is it being understood at the board level? The need to demysify the threats that face us is one of the key findings of the day. Another is the move from ego to eco, and Gilderdale notes that banks can really benefit from choosing the right partners in the financial services landscape.
16.10: Slightly later than advertised, closing remarks come from Stephen Gilderdale, head of UK, Ireland and Nordics at SWIFT. We started the day talking about building the future, which involves innovation but also keeping our feet on the ground during this through due dilligence risk management and attention to cyber threats. Gilderdale underlines that this has been the best attended Business Forum Nordics ever, and remarks about the high hit rate that a certain live blog has seen today. Very kind, thank you Stephen!
15.59: Time to run to the plenary room for closing remarks and a keynote presentation.
15.55: What is the future for traditional trade finance instruments? Trust again is critical - there will still be a role for banks and traditional documents, says Cronsell. At the start of the century, export credit agencies were asking the question as to how long their type of organisations would exist, according to Karlsson. Then came the financial crisis and they were critical again. He believes they will be around for a long time to come.
15.51: Fintechs will make their own developments, compete against each other and find solutions. Niemelä loves this from a banking perspective, as it allows them to watch this evolution and have the successful solutions added to their existing their offerings. Ecosystems should be inclusive, a comment that gets nods from everyone on the panel.
15.49: Everything happens in the commercial contract. This is where a lot of work can either be made or simplified. Referring back to the opening keynote, Cronsell says that it all comes down to trust. How do you digitise trust?
15.43: CSR is a big issue in the trade world. Karlsson says his organisation spends a lot of time on this in all transactions, even the smallest ones. It is also a big issue for corporates, with Cronsell recalling the amount of contracts they have to go through to ensure that everything is correct here, and that is even before they have to go through these contracts with their banking counterparties.
In order to digitalise trade, you have to have simple instruments. If your process is complex, you are unable to digitalise it, says Niemelä. A topic for corporates, banks and SWIFT is how to keep things as simple as possible. When you add in lots of layers, you cannot digitalise it. Cronsell agrees, and says that corporates also need to take responsibility for this.
Standards involving all the stakeholders is key to success here, notes Ljungblom.
15.36: How is derisking - the closure of certain bank relationships in certain markets - affecting trade? Angola is a big oil exporter, although USD payments have been cut off by many banks, so it is an issue. Even though euro payments remain. In general, the panel agree that derisking is affecting their business, both on the bank and the corporate side.
15.33: At the end of the process there is a payment. An audience question asks how real-time payments may impact on trade. Money has to be transferred and the company has to be sure they will get the money and the financing is there - these elements will remain, but the process around it may change, says Niemelä. From the corporate perspective, Cronsell says that transparency is the most important factor - but having the flexibility to use the real-time payments piece if you need to track a payment is important. She notes that this should also be cost effective as well.
15.26: All the stakeholders need to be brought in to the standardisation piece. It is evolution, not revolution, for Ljungblom. What do we want to accomplish? Where are the pain points? Understanding this is critical before you try to digitise a process. Development needs to be done with customers and stakeholders in partnership.
A theme that has run through a number of the sessions today has been not to chase technology for technology's sake, but rather what creates the business case to use new technologies.
15.21: Standardisation is very important, but is it as good as it could be right now? By bringing a multi-banking solution online with the MT798, Cronsell can see that she has saved her company money by centralising, but the framework is still quite wide. There is still scope for further standardisation.
15.18: How soon will technological developments in the supply chain affect business? 59% say 3-5 years, while only 21% go for 1-2 years.
We shouldn't get bogged down in the trade finance area of trade, according to Niemelä. There is a lot more open account business flavoured with insurance products, for example. The MT798 is being expanded to areas such as recievables financing. His answer to the poll would have been that it is happening already.
15.12: The first interactive poll question is put to the audience - how will technology change the collaboration between corporate and financial services providers? Just over half say Significantly (54%), while 33% opt for Moderate. Little and Not at all both poll 8%.
Cronsell says that if more corporates were in the audience, the top result would have triumphed by even more. Technology is crucial for corporates as their main focus has to be on their end user customer, it can make life a lot easier by removing manual processes.
Standardisation is the most critical thing for Ljungblom. Banks in the Nordics are quite good at agreeing, but incorporating banks from around the world, and other financial services providers such as insurers will take longer.
15.08: Trade growth and economic growth have been growing at a fairly similar pace since the financial crisis, notes Karlsson. The huge trade growth figures we saw in the 1990s will probably not return though. From a Swedish perspective, exporters are very focussed on the developed world - 80% of exports go there. Karlsson would like to see more growth for Swedish exports to the emerging market.
15.03: Haugaard starts by looking at front page of the FT to highlight the variety of political issues that banks are managing today, from the results of the French election, through Brexit, all the way to Bill Clinton collaborating to help write a 'White House thriller'. There is a lot going on, he notes.
14.59: Our final breakout session of the day is titled ‘Trade in 2020 - challenges and opportunities in trade finance’. The moderator is Søren Haugaard, global head of Trade and Supply Chain Finance at Danske Bank. Joining Haugaard are a panel made up of Stefan Karlsson, head analyst of The Swedish Export Credit Agency; Sofia Cronsell, Payment Advisory Officer at Sandvik Credit; Urban Ljungblom, Trade and WCM Sales Development and Digitalisation at Nordea; and Antti Niemelä, head of Transaction Banking Sales with OP Financial Group.
14.30: That is a wrap for this CSD panel. Join us again in 30 minutes, when our focus switches to challenges and opportunities in trade finance.
14.29: There are so manay initiatives today in the market. A lot of energy has been expended in working on harmonisation and standardisation, and De Pauw warns that we should not now create lots of slightly different DLT communities.
Will there be significant change in the CSD infrastructure in five years time? Limbourg says that the same names will be present, but what they are doing will change. It will be an incremental change rather than a big bang. Cameron and De Pauw both agree that this is more likely in the bond market.
14.25: A final polling question asks in which timframe the audience expects to execute some of their business/operations using DLT. Within 3 to 5 years wins the day, with 54%, followed by after 5 years (36%). Cameron notes that this is a very realistic view. Where it becomes painful is when you try to introduce it wholesale into the CSD world - there are smaller bits and pieces that could be picked up by this more simply, such as corporate actions.
How do we want to redesign the financial industry? De Pauw says we should answer this question and design the process first, and then see if DLT provides the answer or not. For example, he deosn't think DLT will come in to replace ISO 20022, that is not the answer.
Limbourg wants to know how things will work in 5 years time. Moving to ISO 20022 has not been a smooth process, there are other market challenges. It will take a lot of intelligence to link the pieces together.
14.19: You would not go directly to save money, it doesn't work like that, notes Cameron. Limbourg says there are a lot more mechanics to put in place, the plumbing. This is not a neutral space.
14.13: Norway and Sweden do not have any desire to join T2S, according to Fors. On the flip side, Finland and Denmark are moving towards entry - Denmark would be the first non-euro currency to join. A poll asks the audience if they would like to connect to Europe's CSDs. 53% want to connect direct, whereas connecting through an investor CSD or through an agent bank both only poll 13%. Cameron says that direct connection is probably not as easy as the audience think. A number of banks have worked on this with BNP Paribas, and only one of those clients has now connected directly. This particular project has taken three years to see through, and there were some surprises along the way.
14.09: Are there too many market participants? Cameron notes there are not as many banks in this space as there used to be, financial pressures causing some to move out of the market. His view is that the market did want to see a consolidation of infrastructures, but has now largely given up hope of this ever happening. On CCP side, De Pauw hopes to see more interoperability in the European markets.
14.05: In response to an audience question, Cameron says he wants CSDs to become better and cheaper than ever, rather than pursuing new business opportunities. De Pauw sees opportunitites in the collateral management space for CSDs, in collaboration with the banks. By moving it into a single pool, collateral could move faster and 24 hours a day.
Limbourg looks to countries such as Singapore and Korea for a fresh perspective on where CSDs could grow.
14.02: Limbourg notes that the Nordics tend to be ahead of the curve on asking questions about the market, and putting markets together in harmony. On the other side, she is very curious that now the base regulatory work is done in the Nordics, when will it be concluded? Despite not being in the eurozone, the impact of T2S is still felt.
14.00: Asset segregation needs to be looked at from an investor perspective. This is probably best done in the bank or CSD of their home market, suggests De Pauw. Segregation is there already. You don't want to replicate this in every market that an investor is investing in to.
13.57: There is a choice in Europe to go to an issuer CSD or investor CSD, notes Cameron. The cross-border volumes in T2S is 0.3%, so there is no real momentum in moving to the investor CSD. People are voting with their feet to go directly to the issuer CSD, where there is one less intermediary than going to investor CSDs. What is happening in the Nordic market is not what is happening in the central European market.
13.52: Today, the Nordic CSDs operate as investor CSDs. The next polling question asks if the audience expect this to change. Yes, it would be an excellent move, according to 38%. The desire for change causes surprise in the panel, that the end investor model should change. Would a move to the much more intermediated central European model be worthwhile? De Pauw thinks not, but perhaps a change in business model that integrates distributed leger technology in the medium to long-term may be what people are responding to.
13.42: When you talk to CSDs in southern Europe and even outside Europe, the time it takes to comply with CSDR is significant, notes Limbourg. How do you comply with this regulation, maintain the day to day running of the CSD and still innovate if you are a CSD of 30 people? That is a challenge.
With CSDR and T2S, De Pauw hopes that CSDs will move beyond simply doing what is needed to comply.
13.39: It is important for CSDs to understand how they can evolve, what they can do now and what they can do next, according to Limbourg. De Paux follows up by saying that the deadline on CSD regulation is coming up shortly, so in a year's time he thinks the focus would shift in a repeat of this poll.
13.36: The session opens with a polling question, asking what the major drivers for changes in your bank/CSD business in the next three years? Complying with regulation comes out on top with 61% Improving products and services (18%) and moving to new technology (18%) tie, while resilience and addressing cyber threat issues only polls 4%. This low result causes some concern on the panel, with De Pauw commenting that this must be addressed. Moving to new technology is mostly in the R&D phase at the moment.
There are more important things than regulation that should be driving your business, says Cameron. You have to do this, but other areas should be greater drivers for change.
13.30: The post-lunch session we are covering is entitled 'The future of CSDs'. Moderator for this panel discussion is Göran Fors, deputy head of Investor Services at SEB. Fors is joined by: Alan Cameron, global solutions sponsor, Clearing and Custody Services at BNP Paribas; Nadine Limbourg, senior manager, Market Infrastructures for SWIFT; and Edwin De Pauw, managing director and head of Project Management Europe at Euroclear.
13.20: Lunch was a typically healthy and tasty Swedish affair, featuring salmon, pickled cabbage and cous cous.
12.02: Final poll for the audience - will banks still dominate the cross-border space in five/ten years' time? Some 67% audience say yes, but Raymaekers notes that 33% saying no is possibly the more interesting answer. But we are out of time to discuss what that means, so the audience is encouraged to discuss it over lunch. We will be back in an hour and a half for a session focussed on securities.
11.58: Are fintechs competition for banks or do they provide a chance for collaboration? Integration is important, says Fjereide. Sundberg agrees - OpusCapita positions itself is a fintech and partnership with banks is important. He also brings up the role of in-house banking, and perhaps if a company can fund its subsidiary in India instantly through an in-house bank, why would they use an external bank?
11.51: An audience poll finds that the lack of a clear business case (33%) is the main obstacle standing in the way of blockchain-based cross-border payments. Application of technology was the second most popular answer (28%), followed by Regulation (18%), Standards (11%) and Interoperability (10%).
11.47: Turning to technology, blockchain is mentioned. It has potential, but you have to drill down to a specific use case, says Moberg. It is so technical, you have to look at what the pain points are for cross-border payments and then see if the technological solution is viable.
Doing payments in the treasury department, you don't care about the technology behind it, you just want it to work, adds Sundberg.
11.43: Time for an audience poll, asking what the most important feature is on cross-border payments for banks and their clients. Certainty is the most popular answer, on 29%, this pipping Predictabililty (26%). Timing finishes at the bottom of the pile with 11%, echoing a similar poll from the recent Business Forum London.
11.39: Treasurers and banks won't be looking at the tracker for every single transaction, but it comes into its own if there is a problem with the payment. The concept is the important thing, says Fjereide, particularly the transparency and the service level agreements.
11.35: In corporate treasury, M&A can be very nerve wracking on the corporate side. The tracker from SWIFT gpi will show exactly where the payment is, which should take some internal pressure off the treasurer. Moberg says that corporates are a priority, banks need to ask them how they want to receive the information that they need. He sees this as a competitive space for banks.
11.29: Sundberg says that predicting payment flows is key. He would not mind if payments were being received at D+1 or D+2, but the certainty that the payment will arrive on the specified date is powerful. This is very helpful for cash flow forecasting for corporates.
11.25: Having previously worked in the cash management back office for a global treasury based in Sweden, Sundberg highlights how slow and non-transparent cross-border payments can be really frustrating. Depending on a few key people at your bank to call for information about funds in progress is not efficient. As such, he is very excited about the possibilities of SWIFT gpi.
11.21: Fjereide notes that a lot of customers use US dollars as the currency of choice of international payments. This is not a problem in Europe, but further afield there is a need for more speed and transparency. He notes that SEPA helps banks and corporates in Europe. SWIFT gpi tracker enables greater transparency, banks cannot sit on a payment for a couple of extra days without it being known.
11.17: The panelists are now invited on stage. Joining Raymaekers are Atle Fjereide, SVP at DNB; Tomas Moberg, senior manager, SWIFT Relations and Payments Infrastructure at Nordea; and Karl-Henrik Sundberg, solution consultant at OpusCapita.
11.15: So what next? Phase 2 of SWIFT's gpi promises richer remittance data, invoices and compliance data, for example. It will also look at how to instantly stop unsolicited payments. New experiences can be built on top of this infrastructure - Raymaekers encourages the bankers in the room to build with their imagination using the API.
11.11: SWIFT gpi is live, with payments going through it today. There are a number of core transaction banks that have signed up for this. It is accessible by any bank and can still reach non-initiative banks. The objective of SWIFT gpi is to deliver a better cross-border payment experience. Raymaekers says it is almost like a DHL for international payments, you can track the journey of the money between the buyer and seller, available in real-time through an API.
11.05: The title for the banking and payments stream that we are following next is 'Cross-border payments - faster, transparent and more secure transactions'. The moderator for this session is Wim Raymaekers, global head of Banking Markets at SWIFT. He notes that it has started snowing outside, so everyone should be inside participating in the workshops!
Raymaekers opens by showing how banks are 'under attack' from a variety of disruptors: telcos; startups; and e-commerce companies among others. The question posed is how banks can open up their online presence while still surviving the attack from these new players.
10.34: That concludes the opening plenary. We will be back after the networking break with coverage from a stream focussing on cross-border payments.
10.31: Final poll of this session. The question asks about the most disruptive factor the financial services industry faces today, is it innovation or cyber? 55% plump for innovation. Ellis says these two come as a package, and the use of people, process and technology again are crucial. Start with the people. Berzins says you must look at the customer, they can be the most disruptive element to your business.
10.26: How can banks work best with fintechs? A poll of the audience finds collaboration to be the way forward, with 87% of the vote. Acquisition comes in second with 9%.
10.25: Aytap says that, in Sweden, security is not a competitive space and banks collaborate closely, perhaps ahead of the European curve. A cautionary note from Ellis is that cyber criminals don't necessarily respect national borders.
10.21: Partnership between banks and fintechs is the only way for European banks to be competitive in 5-10 years, suggests Berzins.
10.18: Conversation turns to collaboration. While historically banks have been quite closed entities, digital disruption is changing this, says Berzins. It is ecosystems that are winning today. In five years, banks will differentiate on the relationship side, those who have many technology partners and those that don't.
10.10: Time for another poll. Are financial services firms adequately addressing cybercrime risk? Very split results, 54% saying yes, 46% for no. Ellis says we woefully underestimate the risks in the world we live in.
10.07: Aytap says SEB worked on a study this winter on the type of next generation cyber security they would have. It boiled down to two aspects, identity driven cultural change, and performance driven. Ellis suggests that ownership is also important, to foster this culture of ownership among the business. Aytap agrees, pointing out that the demystifying of cyber security is vital if everyone will get on board with the program and take ownership.
10.01: Innovation touches on every area of the business, but so to does the cyber threat. Aytap says that cyber threats need to be demystified within the business. It is a risk management issue, and it is important that the rest of the business understands the threat. Ellis says we should start from the perspective that you are already compromised - working from this mindset allows you to look at how you segment processes. It is about people, processes and technology.
9.57: There is a cyber attack article in the press every day, it is an increasing reality for us all, says Ellis. We need to look at our organisations and question if they are fit for the future. Some institutions are like an armadillo - hard on the outside but soft on the inside. Once you have cracked the shell, it is relatively easy to suck up the data you want.
9.55: TIme for the first audience poll of the day: what is your organisation's commitment to embracing new technologies and innovations? 59% say they have a high commitment, 35% medium, and just 6% low. Ellis says that he may have expected High to score even more than it did.
9.52: There are 3 reason why you should do a product yourself, according to Berzins: 1) the product or service you have developed is unique; 2) you are doing it with a good economy of scale, 3) the services are core to your business so you would want full control over it - such as Apple with the calling app on iPhone, for example.
9.46: Asking customers what they need doesn't work, as we ourselves don't know, suggests Stenström. We need a societal view of things. She says that a lot of time innovation goes too fast, and that some more considered critical thinking is required.We need products that solve real needs.
9.43: Berzins says that banks need to tackle the issues that are real, and solve them for real, in order to innovate. Some innovations may look promising, but if they do not solve a real need then they can easily stall. He points to distributed leger technology as possibly falling into this category.
9.37: Now it is time for the opening plenary panel discussion of the day, looking at digital transformation. Stenström is staying on stage as a panelist, while Javier Perez-Tasso, chief executive, Americas and UK region at SWIFT is the moderator. The other panelists are Kevin Aytap, SWIFT CISO at SEB; Girts Berzins, head of strategy Digital Banking for Swedbank; and Josh Ellis, head of Crisis Management at BAE Systems.
9.35: Stenström concludes the story about her student, saying that Macron's victory in the French presidential election gave them the inspiration to take the internship. By thinking of innovation as something cultural, it gives it meaning.
9.29: Referring to the same survey, Stenström says that 60% of millenials want their bank to be a partner or a friend. The audience are invited to discuss what this actually means in a business setting, which gets a lot of interaction going in the room. She calls this the human side of innovation. Cultural innovation in financial services is the backbone of society.
9.24: Emma Stenström, associate professor, PhD, from the Stockholm School of Economics is welcomed to the stage for the opening keynote address. The theme for her presentation is 'The Key to Innovation'. Stenström begins by recalling a student of hers who received the offer of an internship at a bank, but confided in her that they were worried what it would look like on their CV if they took it. Just 8% of millennials trust banks, Stenström notes. The key to innovation is how banks develop trust.
9.15: Taking inspiration from an American professor who is reinventing the battery, Åhman says that in innovation, it is key to ask the right question, while the team that you surround yourself with is just as important.
9.11: Åhman reports that SWIFT traffic in the Nordic region is growing nicely - intra-Nordics trade and payments grew 7.5% in the first quarter of the year. Looking specifically at trade finance, banks and corporates seem to love the cover message MT 798 - use of which has now surpassed Asia-Pacific.
9.06: Following an introductory video setting up our themes for the day - how banks can successfully manage regulatory and cyber challenges to build for the future, delegates are welcomed to the event by Erica Åhman, Head of Nordics at SWIFT.
8.38: Welcome to sunny Stockholm for Finextra's live coverage from SWIFT's Business Forum Nordics. Things will be kicking off in around 20 minutes, with the day ahead promising insights into digital transformation, banking and payments, cyber, securities, and more.