Payments professionals from across Europe are gathering in Stockholm this week for EBAday 2019, hosted by the Euro Banking Association and Finextra. We're liveblogging events here.
15.45 As the moderators gather to reflect on the last two days, we say goodbye to a hugely successful EBAday 2019. We’ll be back again next year, in the Hague, for EBAday2020.
15.30 Oakes says banks tend to focus on the infrastructure and then assume the job is done, "and then the fintechs come in and do all the cool stuff". Banks need to think beyond the end-goal of just building the new rail, and instead take a longer-term view of how best to drive a return from the investment, Olofsson agrees that building new services on top of scale infrastructure is a huge challenge for banks who are driven to return substantial profit margins. This reuluctance to take a hit on the balance sheet is what leaves the way open for smaller, more nimble players to get a foot in the door and reap the benefits from the initial huge outlay on the infrastructure rebuild
15.20 Nordea's Kam says banking rails will inevitably become interoperable across regions, but the real challenge is not to focus on the payment, but on the peripheral service layers around it, by for example using a common BankID across countries at both the the personal and corporate level. Sjrogen chips in, saying that P27 doesn't want to be just a new rail-line operating alongside the old one. It wants to be a completely singular platform, from which new services can be more easily delivered. "It's the foundation for innovation," he says.
15.10 Liz Oakes from Mastercard cuts to the quick pointing out some of the regulatory and legal differences between different jurisdictions. Usually the blocks are put in place by local incumbents wanting to protect their domestic market. "We wouldn’t construct a global banking infrastructure like it is now if we were starting from scratch," she says, adding that "if the banking rails are too complex and expensive, users and competitors are going to find another way." Finastra's Olofsson believes that its up to the regulators to drive unification and harmonisation between regions, and for the banks to climb enthusiastically onboard. In the Nordics, P27 is a bank-backed initiative to drive harmonisation through a bank-backed cross-border payments system. Sjrogen says the timing is right as a) customers demand easy, streamlined payments in a global world, and b) local infrastructures across the Nordics are in desperate need of an upgrade.
15.00 Barclay opens with an entertaining analogy between banks and fintechs, comparing the latter to elderly parents taking their time to go through airport checks, while their kids rush ahead but have to wait for the banks to catch up to let them through. This goes on at some length as Barclay lets his imagination run riot, pulling in fairground rides and the Hogwarts Express along the way and painting relevant analogies to resilience and security in payments processing.
14.55 Mild panic on stage as Gareth Lodge appears to be missing in action. Our visibly flustered moderator strides in five minutes behind schedule, having apparently forgotten his assingment.
14.45 Rounding off two days of intense and often illuminating debate with a poke into regional payment areas within the pan-European context. Panelists include James Barclay of JPMorgan, Tino Kam, head of transaction banking at Nordea, Mastercard EVP Liz Oakes, Anders Olofsson, Finastra’s head of payments, and Lars Sjogren, CEO of the pan-Nordic P27 initiative. Your moderator is Celent’s Gareth Lodge.
14.35 Champagne corks popping at Bleckwen
14.30 Breaking news from the Fintech Zone
14.30 A final audience poll finds that fully 70% of the audience say they intend to re-engineer their systems to use ISO20022.
14.25 Moving onto the operational challenges facing banks in re-training staff to use the new standard. Simson says EBA Clearing is especially focused on making sure that banks are keeping up the momentum by providing an open channel of communication. Kirby says banks should not just think about the software translation or legacy silos, but concentrate as well on making sure that users understand the richer layer of information that will come with ISO 20022. There's a richness to the data that can be used to provide value added services in the future, he contends, and it's important that bank staff are made aware of the potential benefits.
14.20 Kirby reflects on the US scene, where TCH and Fedwire will move to ISO20022 over a phased three year timeline. Both the Fed and TCH intend to offer their own translation tools to banks during this period, which may convince some to delay their own deployment.
14.15 Banks have multiple migrations to manage. Beginning with Swift timeline: Initial roll out in 2021, with a four-year co-existence period. Niederlander believes banks may pursue a gradual approach to implementation rather than a hard big bang, particularly as many correspondents may not be ready to go live from day one. An audience poll suggests that as many as 36% plan to go big bang, while 20% intend to use translation services for both inbound and outbound message transmission.
14.00 Should banks be adapting their legacy systems or adopting an entirely new approach? Erste Bank's Niederlander says the new format can be the backbone for digitisation in both the retail and corporate space. "We're not here just to take the mapping across the formats," she says. Different use cases will dictate the approach taken, from rip and replace to legacy overlay. "But at the end of the day we need to ask ourselves whether our legacy systems are the optimal place for implementing ISO20022." EBA Clearing''s Simson brings the market infrastructure perspective. Education is a big aspect of the job, informing the community of details and likely impact. EBA Clearing is also working with other players on moves to standardise the tools and formatting to ensure a harmonious industry-wide approach. Intercope's Kirby says the switch over offers challenges and opportunities for banks. His message is that banks should take a strategic view and look at the value-add services that can run from a re-engineering of back end plumbing.
13.50 Coyne pulls up a slide detailing seven major infrastructures preparing to introduce ISO20022. Different approaches on display, from big bang with Euro1 and Target2 to phased co-existence with Swift and gradual roll out in the US.
13.45 Into the final stretch with an expert panel debating how to migrate market infrastructures to ISO20022 without disruption to operational performance. Moderated by Barclays’ head of payments Nicola Coyne, the panel comprises Intercope’s Daragh Kirby, Petia Niederlander, head of group retail and corporations, Erste Bank, and EBA Clearing head of Euro1/Step1, Jette Simson.
12.40 With the cream of Europe's payments industry in attendance, EBAday offers a great chance to catch up with old friends
12.30 Fintech LaunchPad pitches drawing plenty of attention
12.15 A question for the panel. Will we have phsycial plastic cards in 2025?. Three no's and one yes from the podium.Virtual cards on mobile phone and account-to-account payments will supersede the card networks believes Kam. Loven suggests that the brands on the cards will ensure their longevity. Account-to-account payments are coming up on the rails, she agrees, but still have a way to go before replicating the solid, well understood infrastructure behind the card schemes.
12.05 Loven talks up the bank's collaboration with Minna Technologies on recurring subscription payments as an expample of using transactional data from payments to build out new services in partnership with fintechs. Banks must be collaborative and open up with APIs if they wish to retain their relationships with customers, because if they don't, somebody else will.
11.55 Eacott says NatWest is keeping a very close eye on blockchain. "It won't be ubiquitous come 2025, but will have a part to play." Loven points out that no-one has yet to find a "fantastic" use case for blockchain in payments. "We are not investing right now, but we are keeping a close watch." Nordea's Kam points to the bank's involvement in We.Trade for trade finance, as an area where blockchain could play a fundamental role.
11.45 Moving on to corporate payments and ISO20022. Kaier says clients want banks to partner with fintechs to offer innovative services with the backing of an institution they trust. Nordea's Kam says ISO20022 will help to reduce complexity for corporates but will not completely eliminate it,Hharmonisation across the industry will be key. Eacott says ISO20022 will be "way more far-reaching than many of us realise". It touches all channels and interactions, he says, and clients will definitely have to be a part of this. Swedbank's Loven expects to see a growing number of business models based on instant payments and APIs: "We're only in the starting position." Eacott says banks have to embrace new business models. "The pie is getting bigger and as an institutions we have to decide in which parts we want to play."
11.40 Eacott brings up the issue of financial inclusion, pointing to the UK push for retaining access to cash as the number of fee-free ATMs and bank branches decline, creating 'cashless deserts'. A move to a Swish-type system in the UK would be a long play that would need to be carefully managed.
11.30 Onto Sweden's P2P successful P2P payments app Swish, which was brought in as a bank-backed programme as cash use declined across the country. Says Loven: "Almost all Swede's use Swish, which has made it difficult for others coming into the market and helped banks retain their role."
11.25 Helaba's Philipp Kaier says the border between payments and purchasing is disappearing. Nordea's Kam notes that payments have moved from a backwater to a a very 'sexy' proposition. Simon Eacott agrees that payments is no longer the domain of the back office. "Just walks around the hall today and you'll see the banks, fintechs and Big Techs, all investing heavily in the future of payments." Sedbank's Loven says the payment of her dreams will be one which you do not notice, aka invisible payments.
11.15 Back to the plenary room for today’s strategic roundtable debate on ‘Payments 2025 – from vision to action’. Gazing into the crystal ball are moderator Karin Sancho of EY joined by Simon Eacott, head of payments innovation and business development, NatWest, Helaba MD Philipp Kaier, Tino Kam, head of transaction banking at Nordea, and Swedbank’s head of digital banking Lotta Loven.
10,40 An interesting final question from the chair on under-hyped versus over-hyped technologies. For the banks on the panel, NatWest's Connors believes that the pure potential of APIs and AI are both underestimated and under-valued, while blockchain is a "longer play". Franzen agrees but also gives a shout out to the often overlooked field of quantum technologies.
10.35 Connors says NatWest is effectively rewiring the lighting in the house while the electricity is still on. The bank has a whole transformation and innovation programme that leans heavily on APIs. Franzen equally is inspired by the potential of APIs to run legacy architecture as the bank moves to a more agile environment.
10.30 SEB's Franzen says the most successful AI deployments at the bank have combined domain expertise from the business side with the programming team - who are typically plucked from data science disciplines such as astrophysics. This helps when it comes to understannding the decisions made by the AI as it is implemented in the field. Peilican's Desai says that if an AI doesn't have explainability or auditability then a bank simply can't put it into production.
10.15 Moving on to AI, Smuha says it's about automating the right processes at the right time at the right level. The human touch will still be required in certain situations to oversee, and approve decisions parsed by an algorithm. The ethical implications are also important. There is a misconception that technology is neutral," she says. "But, it's not. Human biases get programmed into the AI." For this reason the European Commission has recently published ethical guidelines to help coders asa they build their machines. Smuha also m calls on the audience to test up-and-coming policy recommendations from the Commission on the use of AI in different sectors across Europe. "As policy-makers, we're aware that we don't have all the answers," she says.
10.10 NatWest's Connors says a lot has changed already with regard to speed, transparency, tech and customer expectations. Data security and privacy concerns create tensions and require trade-offs with customer expectations for instant gratification. This can introduce friction into the payment processing relationship, but much depends on the individual client.
10.05 "Banks are not just thinking about how technology is changing the landscape today but also for the future," says moderator Adams, ticking all the usual bingo buzzwords - AI, DLT, IoT etc
10.00 Sessions coming thick and fast this morning. Next up a panel on technologies shaping the future payments landscape, featuring Teresa Connors, head of market management, payments, NatWest, Path Desai, founder and CEO of Pelican, Salla Franzen, group chief data scientist, SEB, and Nathalie Smuha, co-ordinator of the independent high-level expert group on AI at the European Commission. In the chair is Colin Adams of Lipis Advisors.
09.50 Exhibition floor still pulling the crowds.
09.40 UniCredit's Derras says successful solutions will be those that make customers lives more easy. "We have in the banks to be a bit more courageous to evolve our legacy systems," he says. "Internally we have to figure out how we can bring end-to-end digitisation into our own processes."
09.35 On the topic of future opportunities, ACI's Dean Wallace points out that all previous attempts to break up the Visa/Mastercard duopoly have so far run aground, but the introduction of Request to Pay and the advent of bank collaboration with Big Tech companies may yet herald the disintermediation of card payments, as has happened in Asian markets with the likes of WeChat Pay and Alipay.
09.25 Audience question on the main changes for corporates combined with open banking. Hager sees the positives in instant reporting, instant payments to customers, but it would require the full infrastructure in place to take advantage of it. "Instant payments will be just one piece of the puzzle." Much of the early innovation comes from the consumer space, before moving into the corporate world, so it's natural that their are fewer fintechs in the corporate space.
09.20 Another live poll: 'What is the biggest challenge facing market players in optimising OB and IP?' The 40% majority plump for the shifting focus from compliance to building customer propositions.
09.10 Brennan says the building blocks for payments and open banking are falling into place. "There are undoubted advantages to combining instant payments, open banking and fintech innovation." A snap poll on the biggest cause for optimisim in the current environment finds that fintech/PSP co-operation is most favoured. SIA's Joliveau agrees with this position. Nordea's Hager sees the collaboration not only in partnerships with fintechs but also at the high-end platform level, moving away from buyer/seller relationships. Derras worries that APIs in PSD2 are not yet standardised. Only when they are harmonised will opportunites from open banking and instant payments emerge.
09.00 Your dedicated correspondent is sitting in on a Stream One opener debating open banking in an instant world, moderated by Bank of Ireland’s Vincent Brennan. Sitting on the panel are Cedric Derras, global head of cash management at UniCredit, Sarah Hager, head of open banking community, Nordea, SIA’s Jean-Philippe Joliveau, and Dean Wallace from ACI Worldwide
08.30 Welcome back to day two of EBAday.