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The Payments Landscape of the Future
20 Plays4 years ago
Francois Ionesco, Managing Director, Continental Europe Head of Financial Institutions Sales at HSBC speaks to TMI's Editor, Eleanor Hill, about the first ever virtual Sibos, how the payments landscape is shifting and how client priorities have been influenced by the pandemic.
For more information about anything you heard in this podcast or to learn about HSBC’s global services and offerings, please visit http://grp.hsbc/gvbmep2
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Transcript
Introduction to HSBC Global Viewpoint
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This is HSBC Global Viewpoint, your window into the thinking, trends and issues shaping global banking and markets.
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Join us as we hear from industry leaders and HSBC experts on the latest insights and opportunities for your business.
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A heads up to our listeners that this episode has been recorded remotely, therefore the sound quality may vary.
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Thank you for listening.
Meet Francois Iannosco, Managing Director at HSBC
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Today, I'm delighted to be joined by Francois Iannosco, Managing Director, Continental Europe Head of Financial Institution Sales at HSBC.
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Francois, welcome.
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How are you?
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And how have you found CYBOS 2020, which was obviously virtual for the first time?
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Thank you, Eleonore.
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Thank you for having me.
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CYBOS 2020, yes, we are virtual for the first time.
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Interesting setup.
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I'm working on the CYBOS delegation team working at HSBC, and it was quite interesting to
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I just adapt, but I think that Cybos and Swift have done a cracking job for this situation.
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Absolutely.
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Some great sessions and good to see Diane raise.
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Yeah, yeah.
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Super feedback from the clients.
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It was great.
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Good stuff.
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So speaking about your clients, what would you say are their sort of top priorities at
Pandemic's Influence on Digital and Agile Banking
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the moment?
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And to what extent have these been influenced by the pandemic?
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It's a good question because our client priorities have changed, right, considering the last few months.
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But still on the top of the range, our FI client's top priorities are ISO, understand the impact of ISO 20 or 22.
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Yeah, yeah.
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To be able to access Target 2 and EBA and also CHAPS in the UK.
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Also...
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They are extremely interested in accessing faster payment scheme to reach beneficiaries on a 24-7 basis.
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Improving the reach of beneficiaries globally through more focused set of correspondent banks they can rely on.
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Also understanding whether they should invest or not in digital technologies such as API.
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And from a pandemic perspective, clearly we saw a shift and our clients are looking from
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their correspondent bank to be much more agile, much more digitally and electronically friendly.
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We saw that from signing contracts, receiving media files, receiving operational updates digitally rather than from the post.
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Of course.
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For them to be able to live their life and share information with their stakeholders internally.
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That's a top priority for our clients.
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Excellent.
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So a lot of good things to aim for, but like you say, a lot of tough decisions as well.
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You mentioned the payments landscape there and real-time payments.
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How do you see that element sort of developing over the next few
Modern API and Cloud Solutions in Banking
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years?
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And is there maybe one payments innovation that interests or even perhaps concerns you?
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Payments are one of the most common interactions that banks have with their clients.
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So it's critical for our clients and also it's critical for their overall business success.
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So as correspondent banks, we need to deliver 360 degree payment experiences, which are fast, simple, connected and transparent while providing value over simply processing a payment and the executions.
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So modern API technology will help banks us deliver these services in ways which are easy for our clients to discover and also easier for them to consume.
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HSBC, if I use our own example, we are redesigning our payment system
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The bank is investing a lot in cloud-based solutions and creating microservices packages.
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This infrastructure will enable the bank to innovate more swiftly and provide corporates with more holistic HSBC experience.
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When a cloud, for example, will purchase a service, the idea is that the customer experience is scalable.
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across multiple markets.
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And these microservices can be applied to mobile, either to mobile payments, collection or account receivables.
Blockchain's Role in Government Loan Distribution
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What we saw recently and because of COVID is how government managed the distribution of loans.
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Both corporates receiving aid and government distributing loans felt that the process was
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slow and not as efficient as required.
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And also open to fraud.
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Of course.
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So this has meant governments are focusing on the ability to use blockchain technology, DLT, in the future to meet this challenge and also protect.
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Ah, okay.
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So the application of the central bank digital currencies for both
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Call sale and retail are clearly in the air.
Real-Time Payments: Demand and Technological Advances
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Yeah, that's a very interesting error indeed.
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And I know lots of people watching that closely.
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Just, François, on the real-time payments piece, where do you see that heading next?
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And what do you think actually needs to happen to further adoption?
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Because we're certainly not there yet.
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No, no.
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Clearly, investment is key.
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But the rise of redial payment schemes, RTP, is in response to technology advances, client demand and progressive regulatory policies to remove inefficiencies, increase payment velocity and encourage competition.
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The digital economy and rise of mobile banking has provided strong use case for RTP that are transforming payment and collection as the world moves towards faster, simpler, secure, and more information-rich payment.
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The professional life is now expected, our clients are expected, to echo their consumer life, their private life, experience.
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And the exponential growth of mobile has further nurtured these expectations.
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So to set the stage for greater innovation in RTP, it needs to be part of a multiple product proposition to create a superior value to the client because speed isn't the only factor.
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It needs to be real time, 24 seven, simplicity of application, like using email, national ID, QR code or APIs, applications.
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And also data reach, use of the ISO 20 or 22 message format, because this will contain more information and be more secured.
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So if we combine all these features
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It is possible to develop new services for banks, for correspondent banks, it's possible to develop new services, a new proposition to support our clients evolving business model, fueling greater growth and so adoption.
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So how do you think that corporate treasury functions, so who are our readership at TMI and our listeners, how do you think that corporate treasury functions might actually benefit from all of this investment that you're talking
Corporate Treasury and Real-Time Payment Investments
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about?
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We saw clearly that the pandemic has increased the need for companies, for corporate treasury, to understand their cash flow and reduce their costs.
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It makes API and the automated real-time reporting they facilitate whereby companies can better access their banking information services more important than ever.
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So that's why FI, Co-Explosion Bank, are investing in RTP to meet their client demand.
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So they are building better access to real-time systems such as Faster Payment in the UK over SWIFT.
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also improving access to SEPA INST over API, building overlay services for clients such as request to pay over SEPA INST or faster payment.
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HSBC is focusing on commercializing services such as a product called beneficiary self-management where corporate clients don't have bank details of beneficiaries and so
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being able to reduce the use of paper product and send payments over ACH or instant payment schemes.
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We saw as well that corporates are looking to reduce the number of banks they deal with through a program of no straw rationalization driven to reduce costs and also reduce concern of counterparty risk in more exotic currencies.
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In Asia Pacific, for instance, we have seen most demand to reduce nostrils and also request to access the low-value ACH as means of making cross-border payments.
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Additionally, COVID has accelerated the trend of digitization of offering and processes and driving a material reduction in willingness to accept manual processes.
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Yeah, yeah.
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And lastly, most European banks, as mentioned, so I mentioned ISO 20022, we are investing a lot.
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This is not directly linked to real-time payment.
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However, this will significantly improve the interoperability between the high value and the real-time schemes that are already using XML.
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An awful lot going on there, Francois, which is great.
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And I'm glad you mentioned request to pay because that's something I'm trying to get some of our readers and listeners a little bit more interested in.
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And I would definitely recommend listeners have a look at that beneficiary self-management tool.
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We've got an interesting case study on the TMI website with TFL and HSBC.
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which may be of interest for some further reading.
CBDC Developments in China and Global Impact
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But Francois, we've touched on an awful lot that's going on, but what do you think might be other trends or innovations that will be watchwords for 2021 and why?
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I would say CBDC, which is the Central Bank Digital Currencies.
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Clearly, I mean, just today, if you look at the progress made by the People Bank of China and their use of the digital yuan,
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This shows how advanced CBDCs are getting within their economy.
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This program is the largest trial of retail CBDC to date and has both PBOC, so People Banker of China, Alibaba, WeChat, and other corporates involved to test how individuals react to the concept.
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Given the digital literacy of China and
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If this trial goes well, you can expect to see this expanded quickly across all China and Asia.
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It is also a model that other regulators and central banks are looking closely at the overall operating model being used.
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And we know that the ECB and the Fed are also actively looking at application of CBDC to help post-COVID.
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As we mentioned, they felt that the overall process of distributing loans,
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receiving aid from end-to-end users was felt slow and inappropriate.
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So that's the importance of blockchain and DLT.
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Absolutely.
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So the ECB, for example, are looking into retail CBDC and the overall role of the central bank into the CBDC.
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The question is, what will be the role of commercial banks like us in the world of retail CBDCs?
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It will be also interesting to watch how Bank of England responds now that the UK will no longer be part of Europe from January 2021 and what will be the plan for sterling CBDC.
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And given the importance of the dollar globally, the Fed is clearly looking to ensure that any adopting of CBDC incorporates the dollar and ensure that it continues
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to be able to play a role as
The Dollar, Commercial Banks, and Global CBDCs
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the role it does today.
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Of course, of course.
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The question for global CBDCs is what role a dollar could or would play and the impact on central banks, commercial banks like us and corporates who operate in multi-currencies.
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Given HSBC footprint, this is clearly something that we are extremely interested in, especially to understand the overall impact on the banking operating model, including risk, cost,
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benefits and policy issues.
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Yeah, I'm fascinated to see what happens in that space.
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I know, I'm sure you've got... Something to watch.
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Yeah, absolutely.
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Something to watch clearly.
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Yeah, we'll have to catch up in another year and see how things have moved on.
Closing Remarks and Further Resources
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Well, Francois, thank you so much for joining us today.
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Really appreciate it, giving us some great insights.
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So thank you.
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Thank you, Eleanor, for having me.
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Thank you for listening today.
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This has been HSBC Global Viewpoint Banking and Markets.
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For more information about anything you heard in this podcast or to learn about HSBC's global services and offerings, please visit gbm.hsbc.com.