Baringa at Sibos 2023: insights from Toronto

Baringa were thrilled to attend Sibos this year. The four days of content covered everything from geo-political and financial headwinds, global payments modernisation, T+1 settlement and tokenisation, through to the challenges of converting sustainability discussions into action. Sibos had it all.

There were some notable omissions compared to previous instalments of Sibos including the hype around Web 3, limited mention of the metaverse and an ongoing struggle for articulation of real business growth focussed use cases for ISO20022.

We’ve summarised our perspectives on the most important takeaways from Sibos 2023.

Hyper-awareness of market conditions leading to increased pragmatism on investment decisions

Attendees were acutely aware of the current global economic challenges, which led to a much more pragmatic and cautious approach when looking forward.

In previous years, there has been an element of razmataz in promoting the hottest innovations in the payments market. This year, the conversations centred around where genuine value can be found, bringing a commercial reality to each conversation about innovation.

Consequently, conversations were more specific regarding practical use cases and real-world challenges. The scheduled sessions were refreshingly back to basics, covering the items that can genuinely help shift the dial for the market globally. For example, there was greater discussion of cloud technology and APIs as opposed to Web 3 or the metaverse. Generative AI (GenAI) and Central Bank Digital Currencies (CBDC) featured heavily but portrayed in a balanced way and not as a silver bullet to answer all problems. Improvements to FX, settlement and management of liquidity and the implementation of ISO20022 standards were all high on the agenda. Likewise, the conversations around sustainability, happening in parallel to UN climate week, focused on the specific solutions and were realistic to the differing pace of change across the globe.

Baringa’s view:

2024 is going to be challenging for the payments market. Given the economic conditions, the market will be cautious and investment in innovation will be tentative and focused on specifics use cases. This will be especially true for areas where standards or regulatory guidance are still being developed, for example CBDCs. 

Payments modernisation is front and centre

Across the board, every global bank we met was on a journey to modernise their payments infrastructure. This was for multiple reasons – client acquisition, infrastructure agility, operational and technology cost savings, resilience or regulatory and compliance drivers. We especially noted a hypersensitivity around fraud and financial crime.

The approaches were varied across acquisition of new technologies, self-build (but notably very few!), partnering with specialist and traditional providers or through payments as a service (PaaS). Whilst there was a vast array of integration approaches being adopted, there was one common thread: it has to be quick and flexible!

Baringa’s view:

The time to innovate your legacy payment stack is now but be clear on your strategy to execute modernisation as you will be up against a lot of competing demand for a limited skillset which will ultimately drive-up cost. Engage with players across the ecosystem to deliver the best technology and end to end client journey otherwise, you’re likely to waste a lot of effort with underwhelming outcomes. We have found that every institution has different considerations, constraints and motivations which influence their approach to payments modernisation so being clear on strategy and how you're going to deliver this change culturally is key. 

AI took centre stage in all its guises

AI was the talk of Sibos with predictive, generative and more traditional AI being part of nearly every panel discussion and technology stand. This echoes the pace of adoption seen across the financial services industry; however, the use cases remain relatively basic and the language around AI continues to be in its infancy.

There are use cases beyond what was covered in the sessions but a few choice ones were:

1. Generative AI to help sales teams in creating deal responses and relationship manager scripts at pace.
2. Predictive AI to solve for fraud and financial crime through understanding sentiment and providing “next best action” as part of customer calls.
3. Accelerating the client due diligence process through reviewing and summarising key documentation for onboarding or annual reviews. 

Baringa’s view:

Whilst GenAI has extensive possibilities and use cases, our advice to financial institutions is to be open but deploy responsibly. You need to be aware of the potential unintended consequences and risks involved especially in these early days. Creating private sandbox environments to experiment safely and creating the right framework and guardrails to ensure production instances are deployed responsibly is key.

The terms of continued collaboration need to be examined

By the very nature of Sibos, collaboration was unsurprisingly a key thread throughout the week; however, the conversation could feel a little limiting. 

For true collaboration, it is important to look outside of the immediate correspondent banking network and examples of this truly being enacted were few and far between. Even in what appears to be exciting partnerships, such as SWIFT and Wise, there is a need to disrupt the modus operandi to ensure the big players are not left behind.

Baringa’s view:  

We observed an openness to collaboration; however, some reluctance from financial institutions to truly share their thinking or differentiating client interaction points with other parties. This restricts dialogue and means collaboration on new proof of concepts (POCs) can focus on limited local scope. This results in missed opportunity and will stall progress for the market as a whole.

Baringa took to the stage

Baringa enjoyed taking a leading role in moderating three panels on key topics which we will be issuing specific blogs for in the coming weeks:

• Big issue debate: Are financial services ready to leap into the new era of sustainable business practices?
• FX in focus: Risk, efficiency and liquidity
• Tokenisation: Mind the gap between digital assets and existing payments rails 

If you’d like more information on the above sessions or our views on Sibos 2023 and the market more broadly, please contact us.