Sibos: the peak of Blockchain hype?

Sibos: the peak of Blockchain hype?

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Singapore is an apt location for Sibos 2015. The city’s ultra-modern high-rise skyline is at odds with its colonial heritage. A small number of quaint historic buildings dotted around the bay have managed to avoid being razed to the ground by a wrecking ball, but these are overshadowed – literally and metaphorically – by tower blocks which reach ever-higher into the hazy sky. A place where old and new worlds collide one might say.

A similar collision is currently taking place inside the walls of the Sands Expo and Convention Centre, where long-established structures – processes, business models and technologies – which underpin the global banking industry are being openly confronted by alternatives which challenge conventional thinking and, if harnessed correctly, have the power to transform the landscape beyond recognition.

Sibos 2015

Of course, not every Sibos session is dedicated to, or capable of, causing disruption. The discussion on innovation in the evolution of global payments promised much but delivered little. The panel’s comments, while eminently sensible and eloquently delivered, felt just a bit too safe and predictable. The audience listened politely, but it is unlikely that anybody walked out of the room with the thought of “Eureka!” at the forefront of their mind. With 75% of global IT spend allocated to keeping platforms updated (e.g. with SWIFT, Clearing and Settlement Mechanisms and compliance requirements), banks need a substantially lower cost base for these activities. It is perfectly possible to have one system to rule them all, to drive straight through processing, reduce the cost of errors and make transformational cost savings in order free-up budget for innovation and the provision of new value-added services. An opportunity to discuss this, and other key aspects around how banks can insulate themselves from payments risk while developing the agility to adapt to rapidly changing market needs, was missed. This was a pity.

However, if anybody wants inspiration and a technicolour look at the possible future composition of the financial services industry, then the Innotribe venue is the place to be. A perfect example was the lively debate on the blockchain, which featured protagonists from niche entrants (Chain, Digital Asset Holdings, Stellar, and Smart Contract) doing friendly battle – on the surface at least – with relevant representatives from the likes of UBS, Barclays, and DBS. In a clear sign of just how much interest existed among Sibos delegates in the potentially disruptive effect of the blockchain, it was standing-room only in both the dedicated Innotribe rotunda and the overspill area which streamed the discussion live.

There were some valuable soundbites from both the new entrants and incumbents alike:

  • We’re at the peak of the [blockchain] hype cycle” (Incumbent);
  • This is the Voice over IP moment for financial services” (New entrant);
  • The question is not why blockchain, but how” (Incumbent);
  • The biggest impact [of blockchain] won’t be on payments. Business process automation will have the biggest impact from the use of blockchain, reducing cost and risk” (New entrant);
  • We are in the experimentation phase, focusing on 3 or 4 use cases. The next phase is teaming up with other organisations, including the regulator to get agreement on an open standard” (Incumbent);
  • Your job isn’t changing tomorrow [if you’re a traditional banker/bank technologist], but you can’t afford to take your eye off the ball” (Incumbent);
  • Regulators should be involved, as blockchain-related developments should not be done in secret [from supervisory bodies]” (Incumbent).

Another interesting element came from a polling question which was asked twice, once at the beginning and again at the end, to an audience of which nearly half were bankers from traditional institutions. The moderator enquired as to how seriously an organisation should be looking at blockchain technology. At the outset, 20.5% of Innotribe respondents said they were intending to make serious investment in it. After 60 minutes of candid debate, this figure had increased to 34.3%. The arguments in favour of the blockchain were indeed persuasive.

Once Sibos is over, it remains to be seen if institutions are going to put their money where their mouth is, but ignoring distributed ledger technology or dismissing it as faddist would be a massive mistake. As per usual with new technological advances, a lot of work remains to be done to make them operationally ready and financially beneficial, but Singapore wasn’t built in a day. Instead, it evolved over time, but was boosted by relatively rapid development in the past two decades in response to new demands and enabled by technology innovation. Sibos couldn’t have a more apposite setting. If only something could be done about the smog.

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