Swift Operations Forum Europe 2018, Amsterdam - Day 1 report

Swift Operations Forum Europe 2018, Amsterdam - Day 1 report

Innovation in financial services and the application of new technologies dominated conversation on day 1 of the Swift Operations Forum Europe (SOFE) 2018.

The day began with Leo Punt, head of EMEA Services and Support at Swift taking to the stage to welcome the 360 delegates from 40 countries that have travelled to Amsterdam in the Netherlands for the event. SOFE 2018 has a theme for each day. Future days will explore security, and the shape of the future for banking, but day 1 was all about innovation.

Keeping up with exponential change

The opening plenary session kicked off with a presentation from Stephen Gilderdale, Swift's chief platform officer. He began by recalling the quote "change will never happen this slow again" and noted that this is a particularly relevant thought when applied to the financial services industry. Technology is the catalyst for this, and as it becomes possible to do and automate things that were not possible before, technology continues to evolve, business transformation is evolving too.

The increasing rate of change is exponential, Gilderdale said. In the payments business, this facilitates new market entrants. These are digital natives with no legacy infrastructure to hold them back, who are catalysing the adoption of new technologies and changing the marketplace.

Artificial intelligence (AI) is one of the buzzwords of 2018, and Gilderdale noted that we are still in the early days of seeing the benefits that this technology can offer. The potential it has is undoubtably exciting. The way that banking has been digitised in the past 10 years is incredible, and the way that this has happened enables a better customer experience.

Gilderdale also drew attention to the new business models that are emerging, pointing to PSD2 and Open Banking as allowing third parties to build on top of or complement existing offerings in the market, ushering in a new era of competition and collaboration.

Cyber crime is also forcing change on the industry. It is changing ways that banks manage their businesses, while also making the community as a whole think about how the entire ecosystem is managed. Gilderdale said that the 'protecting my own four walls' way of thinking is no longer sufficient, and that community collaboration is critical to tackle the cyber threat.

Swift is also evolving. Legacy can also be an asset, and Gilderdale made the point that one key asset for Swift is the ecosystem that is already there and accessible through one single window. He highlighted that even on FIN, messages are delivered within seconds and cost low level eurocents, while at the same time retaining security and resilience.

In terms of Swift's innovation focus, Gilderdale explained that a growth and acceleration plan agreed earlier in the year included a commitment to greatly accelerate work on the SWIFT global payments innovation (gpi) and APIs, as well as to step up innovation on ISO 20022, data analytics, and the Customer Security Programme (CSP).

On gpi, Gilderdale said that over 300 banks are now committed to implement it, representing some 80% of Swift's cross-border payments. Today, gpi tracks all payments. In 2019, the tracker will be made available to all users, while by 2020 it will be mandated that all payments must have a confirmation. Gilderdale said that the development of gpi is to ensure that the whole community benefits from its capabilities.

During the opening plenary, we also heard from Craig Young, chief information officer at Swift, who also outlined some of the steps the organisation is taking both now and in the pipeline in order to derive benefits from new technologies. Looking at Swift's API strategy, he noted that an open dialogue with the developer community is essential. Young highlighted that Swift had launched a developer portal at Sibos, saying that it was important to spend time to get this right, and that feedback from developers is important.

Young also shared Swift's technology roadmap for 2020-2022, looking at the aspirations for the future state. The featured six key pillars, where the organisation aims to:

  • Extend customer reach, by simplifying the footprint and converge offerings. This will use the cloud and API enabled access.
  • Enhance product offerings. Included here are transactional and information services, as well as secure and flexible multi-channel access.
  • Refactor and refresh the application stack, through microservices and API-based apps.
  • Automate infrastructure. This includes template-based provisioning and industry standard tooling.
  • Modernise compute platform, through commodity servers and virtualisation. These will be containerised and cloud ready.
  • Secure by extending endpoint protection. This will involve advanced tokens and applet removal.

A panel discussion that followed the initial presentations began with a poll of the delegates, asking them what they considered to be the most disruptive trend or technology to their business. Instant payments emerged as the top disruptive consideration, with four in every 10 delegates opting for this (40%). Honourable mentions go to APIs/Open Banking (30%) and AI (22%). Commenting on the results, Young made the point that there is a clear link between the top two results - instant payments and APIs - which form a key part of the new offerings that both banks are expecting from Swift and customers are expecting from their financial institutions.

Gilderdale commented that instant payments do present some complicated issues to overcome, but that the option to send an instant payment is expected today. He also noted that, from a business perspective, APIs will cause a big disruption, as they are breaking open business models.

Conversation turned to the cloud, with Young saying that cloud is a major area of focus for innovation in the industry. The cloud represents an opportunity to rebuild products and services in a way fit for the future, and he commented that Swift applications could move to the cloud as they continue to be developed and deployed.

Swift users are also already using public cloud software to connect and run services, Gilderdale said. In the long-term, most users are moving to cloud connections. He noted that Swift has a new cloud platform in the pipeline, but that at the same time some customers will still want to use their own infrastructure. Being able to demonstrate the security and confidentiality of data is critical.

Bringing AI into financial services

In a breakout session, Benjamin Badot, R&D manager at Swift talked about how AI can be used to get structure from your unstructured data. He began by noting that people generally don't like the term 'legacy' as it can be associated with obsolete and infuriatingly complex systems. However, he made the point that legacy actually characterises your company, it is literally everything that you have collected.

If you want good AIs, you need data. Badot noted that even Google has said in the past that they don't have a better algorithm than everyone else, they just have far more data to work with.

Citing the somewhat fashionable phrase 'data is the new oil', Badot says that he agrees with this but, as he changed the image on the projector to a poor pelican coated in oil from a sea spillage, it is clear he is bringing a different interpretation to it - just like oil, data can be dirty and overwhelming.

The goal for AI is to bring transparency to previously messy and unorganised data, Badot says. The idea is to pass garbage data through an AI programme and create structured data from this. The key to the success of AI in the world of banking is the use of ISO 20022, he says. This standard allows all institutions to communicate with the same language. Essentially, ISO 20022 is the common semantic data and process model that AI needs to understand finance.

Swift's take on AI is being delivered through an API, Badot says. This is because they don't want to replace one footprint and legacy with another. The API is fast as it is a mathematical model. Additionally, it learns as it goes, improving the precision of the algorithm that is already at a conversion rate of 95%.

Badot closed by outlining the three-step programme that Swift is currently engaged with on the AI model:

  1. Improve Swift data and products.
  2. Train the model on special characters - such as with Chinese and Russian characters, for example.
  3. Make a trial with initial customers.

Innovation case study

The day 1 afternoon plenary session at SOFE was all about innovation and included a case study highlighting the type of work that takes place at SWIFTLab. Claire Josserand, SWIFTLab & innovation manager, gave delegates a look at an example of a solution that is being developed right now but has not yet gone to market.

Everyone is familiar with Swift gpi, which is designed to bring payments traceability and trackability to banks, but what about the end customers of these banks? Josserand described plans for a gpi portlet, a way to integrate gpi into a bank's web portal in a way that brings information directly to their end customer. All of the information provided is seen directly through the bank screen once the customer has logged into their online banking, and the view of the tracker is customisable for every institution.

Josserand made the point that this opens up questions for banks with regards to what kind of information and how much of the process they want to expose to their end customers. She closed by saying that this is an example of a solution that could be deployed tomorrow, but that they are waiting for feedback from the community on the proposals before moving to the next stage.

The innovation plenary finished with a video message for SOFE from Swift's CEO, Gottfried Leibbrandt. He underlined that innovation is vital to the organisation as it is a technology company, and that he wants to support the company's customers. There is a big focus on innovation into systems, and Leibbrandt was keen to stress that Swift's existing footprint and systems allow for a quick ramp up of new solutions, such as gpi, which he noted as an example of innovation at the core of the banking system.

Leibbrandt closed by saying that the big challenge with innovation in financial services is to ensure that it is relatable to what banks actually have and what they are doing today, rather than simply innovating for innovation's sake.

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