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Club @ Sibos SWIFT INTERVIEW All change in the payments landscape The transformation of the payments landscape, initially driven in Europe by PSD2 and open banking, is spreading across the globe. Saskia Devolder, managing director and head of Western and Central Europe at SWIFT, talks to Club@Sibos about the implications for banks, market infrastructures and SWIFT itself. Club@Sibos: We are in the midst of significant transformation of the payments landscape globally. What are the main drivers of this? Saskia Devolder: The drivers of this transfor- mation depend very much on which part of the world you are looking at. In Europe, the access to accounts and open banking element of the reviewed Payment Services Directive [PSD2] has caused banks to think about how they give access to customer account infor- mation to other banks and payment services providers [PSPs]. Inevitably, this becomes a discussion about technology because it in- volves issues such as protection of customer data when it is exchanged between banks and PSPs. The use of APIs [application program- ming interfaces] has become the standard technology to enable access to accounts and open banking. The success of open banking in the UK and in Europe has led to it being picked up else- where in the world. Singapore, for example, is moving towards open banking, but the driver is not regulation. Here, they are adopting open banking because the technology allows it and consumers are requesting it. Customer requirements and competition are also converging to change the value proposition in payments. On the one hand, you have new competitors in the payments space, including fintechs that want to take a little piece of the payments business and offer very focused services. Banks, of course, are focused on a much broader picture and looking at how they can offer custom- ers a better service. Additionally, the large platform players such as Google, Alipay and Amazon look at payments as part of the overall customer experience; they want that experience to be seamless, fast and simple. If banks want to be a part of this, they must look at changing some of the payments processes they have been operating for the past century. Technology comes into play as a way they can achieve this. There are challenges in this transformation, particularly cybersecurity. Everyone – banks, PSPs, market infrastructures and the platform players must ensure they protect customer data. Any breach would have a huge impact on an organisation’s image. When a payments organisation chooses a new technology to deploy, it must take cybersecurity into con- sideration. APIs have a relatively proven track record when it comes to cybersecurity, but it’s early days for distributed ledger technology. fully exploited. Data analytics will enable infrastructures to deliver much more tailored reports to participants about their transaction settlement performance. This will be partic- ularly important as the market moves to real time and instant payments. Another important area for market infra- structures is collateral management. The optimisation of collateral has been a key focus since the financial crisis. Market infrastruc- tures are essential for collateral management, but it is difficult for institutions to place “With new technologies and new entrants into the payments market, banks will be continually challenged.” SASKIA DEVOLDER, MANAGING DIRECTOR AND HEAD OF WESTERN AND CENTRAL EUROPE, SWIFT CS: How are market infrastructures responding to this changing payments environment? SD: The communication between a bank and a payments market infrastructure determines the type of services a bank can offer its clients and customers. Like cybersecurity, the mar- ket infrastructure is out of the scope of a bank customer’s experience, but it determines the quality of services a bank can offer. How fast a bank can execute a payment depends on the services the market infrastructure can offer. Many of the market infrastructures are renewing both their services and their in- frastructure and this is an area that is really coming to life. This has given infrastructures the opportunity to think about how they can reduce their operating costs, become more efficient and optimise systems. They are do- ing this while considering the needs of their participants, who in turn are responding to the needs of their customers. One area the market infrastructures are looking at closely is data analytics; they have a lot of data, which until now they have not 10 | CLUB@SIBOS | Bringing the world to Sibos and Sibos to the world collateral in all infrastructures and applica- tions. Market infrastructures are looking to harmonise their operations to enable banks to reuse their collateral. This is something that the Eurosystem is looking at with its Vision 2020. CS: Let’s talk in more detail about Vision 2020 – it envisages the migration of payments platforms to the ISO 20022 standard. What are the benefits of such a move? SD: The Eurosystem is doing this because on the one hand, it is looking to reduce costs and improve efficiency and on the other, it wants to offer new services, such as the TARGET Instant Payments Settlement (TIPS) service, which will be live in November 2018. Vision 2020 also involves the technical consoli- dation of the TARGET2 RTGS and TAR- GET2-Securities – the consolidated system will be launched in November 2021. Follow- ing that, the Eurosystem Collateral Manage- ment System [ECMS], which will provide a harmonised platform for collateral operations