I recently attended the SWIFT Operations Forum Americas in New York. While there, I had the pleasure of hearing some very influential people from the financial services industry speak. Foremost among the FS heavy-hitters (to me, anyway) were the executives who spoke during the second keynote address. It wasn't a keynote in the traditional sense, but more like a panel. Attendees were invited to hear what Bank of America SVP Len Heckwolf, Thomas Halpin, SVP at HSBC, RBS's CIO Edward Glassman and Roy DeCicco, SVP, JPMorgan Chase, had to say about how the payments and treasury management space is changing.They spoke of numerous issues: the inefficiency of the payments systems, m-banking for commercial clients, risk management and commoditization. But I think the underlying theme was collaboration, or a lack thereof.
DeCicco, for example, said the one thing that disturbed him most was the growing fragmentation in the payments business. He said amidst all the talk of a global payments infrastructure and payments environment, there are some troubling signs of fragmentation. The industry is moving in the direction of payments harmonization, he asserted, however, there are still indications of isolationism as well. He used the EU as an example. "The EU did a fantastic job with SEPA," DeCicco explained. "They concentrated on Europe, which is fine. But I think a lot of what they did could have global implications. The EC's e-invoicing working group is developing standards to create more efficiencies in that space for Europe. I wish this would be done for all global markets." He believes the EU should approach this on a two-track level where the initiative was developed for the European market but also addressed from a more global standpoint.
Related to this is the global regulatory climate. DeCicco said that too many conflicts arise when such regionalism comes into play. "We, as an industry, need to do a better job in looking at all this globally," he said.
Even in risk management, there is growing sentiment around collaboration. "The key is to leverage the experiences of other financial institutions [in risk management]-to share," he said. "When something goes wrong for one financial institution, it can affect everyone. Sharing information and efficiencies will help us take a positive jump up the risk ladder."
However, even though banks say they'd like to do this, they just can't take that first step. BofA's Heckwolf agrees this kind of industrywide teamwork would be great, but doesn't see it happening any time soon. "I'm skeptical things will ever get to that point," he commented.
What this collaboration comes down to is banks' being able to determine what is a competitive advantage and what isn't, said HSBC's Halpin. There is also a certain fear of liability in some instances, said DeCicco. He said there has been talk in some circles around creating a watch list of troublesome organizations and customers who were terminated by a bank for cause, such as fraudulent business practices. "Right now a [terminated client] just goes to another bank that doesn't know how bad that customer was. If the second bank had that information available, they may not do business with them." However, banks might be afraid of such an initiative because posting such negative information might come back to bite them down the road.
These are all pressing issues and the collaboration idea is certainly well worth consideration. There are some shared, global initiatives in the industry. The Financial Services Technology Consortium's project on operational risk resiliency benchmarking comes to mind. A number of banks and vendors are working together there to share best practices around their degree of preparedness in the event of a disaster. However, more could certainly be done.
What do you think it will take for the industry to start collaborating on the important issues of creating a global payments infrastructure, standards and risk management? Will it ever happen? Chime in by leaving a comment or drop me an email.