Ahead of Sibos 2016 in Geneva, GTR talks to Marc Delbaere, the newly-appointed head of corporates and trade finance at Swift, about his vision and plans for the future.
GTR: What will be the main challenges facing the trade finance and payments industry in the year ahead?
Delbaere: When I talk to people in the industry, the same issues always present themselves. Today, cybersecurity is a key theme that we all recognise has to be addressed as an industry-wide issue, and we at Swift are working on this to see how we can help.
Another important consideration is efficiency and risk management in general. The question that many financial institutions now face relates to how they can drive down costs and improve efficiency in areas such as customer onboarding, while also improving their own risk management strategies.
Regulation and compliance also continue to represent a burden to the industry as a whole, and we are also set to face further new regulations such as the Payments Services Directive (PSD) 2. We are working with players in the industry to see if we can help streamline and resolve any issues emanating as a result of greater regulation on a global basis.
We have seen a number of recent disruptive events which will impact trade and trade finance, and on top of this, the current low interest rate environment continues to present problems. However, demand for trade finance looks set to continue.
GTR: What are your own main objectives in your new role at Swift?
Delbaere: I have talked to numerous people in the industry about how Swift can play a more relevant role by introducing greater simplification and standardisation so as to help increase efficiency in trade finance and cash management, while also improving risk management. We need to continue working on global standards and providing solutions that address problems on an industry-wide basis. This means that at Swift we have to maintain a high level of openness in our own network.
When it comes to issues like global client onboarding, this has to work for every bank in every single market. At the moment, there are different flavours of our standards in different markets, and corporates need to take that into account to work globally. We need global solutions in areas such as documentation for all types of companies so that we reach the wider order and improve corporate-to-bank messaging and communications.
GTR: How many corporate members has Swift attracted over the last year, and how do you hope to expand membership globally to mid-caps and SMEs?
Delbaere: At present, we have 1,600 corporate groups using Swift and are experiencing a growth rate of about 200 to 250 corporates a year. We are hoping to double this growth rate over the next few years, as the greater the scale we achieve, the better position we will be in to introduce the harmonisation that is needed to improve efficiency and drive down costs.
Mid-caps and SMEs already represent a large proportion of Swift’s overall commercial market, but we are always looking to attract more small companies.
One of the questions that always arise is whether the company concerned is interested in a secure multi-bank channel solution. This is the case with large corporates, but it also applies to those small companies that have an international footprint and deal with multiple banks – and they can only stand to benefit from joining Swift. For small companies, working locally, this is always going to be less the case.
GTR: How crucial is the ongoing movement towards global standards for trade finance in messaging and communication?
Delbaere: The whole issue of standards is crucial to addressing problems globally. An efficient player in this industry has to go through a period of standardisation. There is an ongoing movement towards the use of Swift’s 20022 as a messaging and communications standard. For example, clearing houses are now adopting 20022. At the same time, we have a new generation of standards that are gaining wider acceptance – and this is evidenced in the Single Euro Payments Area (SEPA) programme.
Trade finance still represents an area that would benefit from greater standardisation as there are still variations in the practices of different banks.
GTR: What role will digitisation and instruments such as the bank payment obligation (BPO) and e-bill of lading, as well as blockchain, play in the future?
Delbaere: We are going through a period of massive transformation, which is being driven by digital technologies. There is a real hope that digitisation will have a major impact on trade finance, but this will take time. A lot of ancestral practices still prevail in trade finance and may continue to do so, but the real winners in this industry will be those players that take full advantage of opportunities for transformation and change by adopting digital technologies.
The BPO as a trade finance and risk mitigation instrument can offer numerous benefits to players in the trade finance arena. However, it is only one of a number of trade finance instruments available. Which instrument is used will depend on what the players involved are looking to accomplish.
The e-bill of lading represents another digital solution that makes perfect sense. It is now really starting to take off, and looks set to play a leading role in the transformation of trade finance. Some companies are already investing significantly in this technology and others will follow.
Blockchain, meanwhile, despite still being in its infancy, is also gaining more attention. I believe that this is a technology that has even more potential in trade finance than it does in cash management.
Certainly, in trade finance, it stands to deliver many of the efficiencies currently needed as well as an improved means of helping banks comply with growing regulations in areas such as know your customer (KYC) and anti-money laundering (AML).
In many respects, what we are seeing take place in trade finance in terms of digitisation now is what has already happened in others parts of the financial services industry.
GTR: Has take-up of the BPO been much slower than initially expected and what can be done to resolve this?
Delbaere: I believe that the BPO is under-represented in terms of its usage, and has not become as prevalent as it should be. However, there is a lot of growth potential.
The problem is that new instruments always take time to establish, but then again we are already seeing a whole series of different players, among banks and corporates, using it.
At Swift, we are trying to take a lead on promoting awareness of, and providing education on, the BPO and its benefits, but we also recognise that we cannot do all the heavy lifting by ourselves. Banks and corporates themselves also have a big role to play, and companies already using the BPO need to impress its usage on other companies.
As more corporates see the advantages of the BPO, and ask their banks for BPO capabilities, we will start to see real take-up.
For many banks, it makes sense to offer BPO capabilities as this means that they can offer a broader solutions set to their trade finance corporate customers. Successful banks in this area will include the BPO in their offerings.
GTR: How big a role can fintechs play as providers of disruptive technologies in the years ahead?
Delbaere: The banking world represents the establishment. Banks have a number of key strengths, including their large customer bases and the security they offer as a result of compliance with specific regulatory requirements.
On the other hand, fintechs do not have the problem of legacy systems. They also tend to be very adventurous and are always brimming with new ideas.
This is an industry that will be made of a series of companies that offer a solution – or part of a solution – that throws a new light on an existing industry problems in areas such as the mitigation and management of risk.
For these reasons, putting banks and fintechs together represents a very healthy mix. In order to innovate more, and satisfy changing customer needs, banks need to look at what is happening within the fintech industry, and consider partnerships. Most banks do still have a lot going on internally when it comes to developing new technologies, but they can continue to do this and build on their capabilities by partnering with the right fintechs.
Fintechs, meanwhile, can benefit from the strong market position of banks, and their huge customer bases, as well as increased investment.
However, I would not rule out other types of future scenarios, and ultimately some competition between banks and fintechs.
GTR: What is the Swift cross-border payments innovation initiative and how is your pilot here progressing?
Delbaere: Banks involved in this project are looking to improve the speed, transparency and end-to-end tracking of cross-border payments. The plan is to enable all banks to enhance their approach to cross-border payments by following a set of strict business rules designed by participating banks, working in conjunction with Swift. The ultimate goal is to offer corporate clients an improved payments experience, which includes the same-day use of funds, transparency of fees, end-to-end tracking and the transfer of rich payment information.
At the moment, this programme is going very well, and take-up is above expectations. So far 80 banks have signed up for the project and about 21 of them are already engaged in a technical pilot to take it forward. We plan to announce some of the results of our pilot at Sibos this year.