Club @ Sibos
T
his year’s Sibos theme – enabling the
digital economy – couldn’t be more
apt. Across industries – including
financial services – digitalisation has been a
catalyst for often dramatic change. Govern-
ments across the world are recognising the
need to keep up and are announcing digital
economy strategies. The changes under way
in how banks interact with each other, with
their clients (both retail and wholesale) and
with regulators will be far-reaching.
Alan Marquad, chief strategy and devel-
opment officer at CLS, believes the digital
economy is already here. “As the pace of
innovation in the private sector contin-
ues at unprecedented rates, it’s critical for
governments and regulatory bodies to keep
pace with this change,” he says. “Emerging
technologies not only accelerate the speed of
front- and back-office applications and lower
costs; they have the potential to facilitate
new business solutions that create value by
releasing cost, capital, and liquidity tied up in
current processes and architecture.”
When the phrase ‘digital economy’ was first
coined, most people were thinking in terms
of the information technology sector and the
actual technologies that were being devel-
oped, says Mark Evans, managing director,
transaction banking at ANZ. “Now we’re
seeing a convergence of the digital and the
non-digital economies. It’s similar to the evo-
lution that first happened with the introduc-
tion of the computer, or the internet; at first
the discussions and impact were limited to
the tech sectors, but eventually they became
mainstream to the point where now no one
can imagine going about their business with-
out a computer or the internet.”
The benefits of a digital economy, such as
connectivity, speed, convenience, are numer-
ous and the potential of digital technologies,
and the implications for the economy, have
not been fully realised yet, he adds.
In September 2017, the Australian Govern-
ment announced its intention to develop a
national digital economy strategy. It issued
a consultation paper and plans to launch
the strategy some time in 2018. It will set
out how the Government, private sector
and community organisations can improve
productivity within existing industries,
leverage changes in the economy caused by
digitalisation, open new sources of growth,
develop digital business capabilities, and
ensure digital skills can support the digital
economy.
Says Evans: “If you take typical Australian
sectors like agribusiness or resources and
energy, they are physical and tangible indus-
tries, but they are also undergoing a digital
transformation. They have had to adapt and
predict how digital technologies will shape
the economy of the future. We are already
seeing how our customers in these sectors
DIGITAL ECONOMIES
are using the internet of things, smart data,
distributed ledger technology, artificial intel-
ligence and more to improve efficiencies in
their supply chain, improve safety, and make
smarter decisions about their business.”
Some of ANZ’s customers in Australia and
New Zealand and across its international
footprint are doing business in remote areas.
Digital technologies are enabling financial in-
clusion, by transforming how people connect
and do business, and connecting new groups
of people into the economy. For example, says
Evans, it’s now easier to set up an ecommerce
venture, to connect to payment systems, and
to access finance.
In Europe and the Middle East, some
governments are facilitating digitalisation
by trying to move payments transactions out
of the cash domain, says Ge Drossaert, chief
commercial officer at Fidor Bank. “The Polish
Government supported digital billing, which
“Rather than viewing everything as an individual product on
which a profit can be made, banks should make use of the data
they hold on their customers to understand what stage of their life
cycle they are at and ensure they enable the customer to progress”
GE DROSSAERT, CHIEF COMMERCIAL OFFICER, FIDOR BANK
is a concept that the governments in other
countries in the Middle East region have also
adopted. The belief is that the more digital a
transaction is, the more transparency there
is in the financial system. This in turn leads
to more transparency in financial institu-
tions. Digital currencies bring traceability
to transactions, create more trust in the
financial system – which leads to greater
investment – and improve financial inclusion
for individuals.”
Another way governments are stimulat-
ing the development of a digital economy is
through enabling smaller, digital-only banks
to enter the market, he adds. These banks are
driving down costs and making it cheaper
for individuals to become participants in the
financial system. For example, such individu-
als don’t need a full banking account but can
operate an electronic wallet-based payment
account from a mobile phone. This is where
many of the opportunities in a digital econo-
my lie, says Drossaert.
“Another advantage of a digital economy
is that identity becomes more secure – a
digital ID is not as easy to steal as any other
type of ID. In turn, this means KYC process-
es become easier, particularly in countries
where people don’t have street addresses, but
do have mobile phone numbers, for example.
Combining a digital ID – with the behavioural
analysis and supported by biometrics made
4 | CLUB@SIBOS | Bringing the world to Sibos and Sibos to the world
possible by big data – will enable more finan-
cial services to be sold to more people more
cost effectively. A digital economy will be
very positive across many fronts.”
Jörg Hessenmüller, head of group digital
transformation at Commerzbank, says for
companies, digital business models and digi-
tal processes provide high efficiency, however
this is only one aspect. A key outcome of
digital economies lies in the benefits for
customers. “As experts for trade and finance
transactions, banks should take a key role in
the development of digital economies.” Trade
finance, a traditionally paper-driven business
with many manual steps and stages will
benefit significantly from digitalisation. “In
the growing digital economy, processes are
digitalised and we explore processing these
transactions using blockchain. Customers
profit from increased transaction speed, high
security levels and complete transparency.”
Drossaert believes banks must transform
into “enablers” in the digital economy, giving
people access to opportunities. “This could
be in the form of loans to people who want
to start up small businesses, or to others who
wish to pay for their education. Rather than
viewing everything as an individual product
on which a profit can be made, banks should
make use of the data they hold on their cus-
tomers to understand what stage of their life
cycle they are at and ensure they enable the