INSIGHTS FROM THE CITI 2024 DIGITAL MONEY SYMPOSIUM
The Citi 11th annual digital money symposium was held in central London recently with the headline ‘where the future of finance begins’.
It was a pleasure to meet many old friends and new connections who were exploring the big trends in banking and how finance will look in the future.
After the welcome, the CEO of Citi UK, Tiina Lee took part in a fireside chat with Ronit Ghose, Global Head, Future of Finance at Citi.
Tiina eloquently explained how AI was helping the 40,000 Citi developers to write better computer code more efficiently. She also explained how AI was being used to counter cybercrime and deliver process efficiencies through collection and pre-population of data.
It was interesting to hear how accountability in a regulated institution is always still going to end up with humans despite the advancements in technology and how staying curious and continually learning are key things we must all do in a business environment moving so quickly.
Collaboration and partnerships were stressed as crucially important by Tiina, as no one bank can do everything they need to do on their own. A walled garden protected product development approach was highlighted as not being the most efficient in an industry that needs to be more integrated and interoperble.
Dr. Ruth Wandhöfer, Partner of Leximar and author of the recently released report from Fintech to Ubiquitech and Prof. Michael Mainelli, Lord Mayor of the City of London, participated in a wonderful fireside chat about accelerating the digital economy.
Ruth mentioned how it is important to move from Open Banking to a Smart Data Economy, given how important data and technology will be in all our futures.
Ruth highlighted five key pillars from her report to build a UK digital economy, namely 1. Sustainable mobile & broadband network in all areas nationwide. 2. Cybersecurity (there are GBP500 million in losses coming from App scams currently). 3. Digital identity to deliver a secure way of authenticating individuals. 4. Digital skills & inclusion. 5. Digitisation of global trade.
Prof. Mainelli mentioned that there are many existing standards and frameworks including ISO 42,000 to support the ethical use of AI. He also highlighted that creating your own standards in-country doesn’t get you very far and the finance industry should leverage many of the existing tools and standards already in place.
Ruth went on to advise there was a payments strategy developed for the UK in 2016, which still has not been implemented. In the meantime, there has been a review that called on the Government to set a payments vision. In her opinion the UK still does not have a modernised payments system, for example the open API economy and data highway previously recommended has not been moved forward.
For modernisation of payments, you need network and availability, you need identity, strong security and multimodel biometrics. Without the right identity layer, you cannot have a secure digital currency.
Prof. Mainelli advised there are even more immediate issues to address such as fully enabling UK retail payments to be ISO20022 compliant and enable interconnectivity with other countries payment systems such as India’s Unified Payment Interface (UPI).
Not having this integration capability between countries can affect trade and with the UK being behind on implementing ISO20022 to global standards can affect overall digitisation and international trade efforts.
Prof. Mainelli made a very interesting point in that no one has actually figured out a way to make money out of AI yet and create a new revenue stream. It’s doing lots for share prices he mentioned but not necessarily generating net new revenues.
Prof. Mainelli went on to mention that AI will become a regulated technology and should be regulated by ISO standards as other industries such as marine, food safety and aviation are. He highlighted an example in the USA just around insurance, where twenty-seven forms of AI regulation have recently been developed for different states. Prof. Mainelli advised the audience there are existing regulations and protocols that can be used.
There was a fascinating session on digitising real-world assets and how big the market will be and how soon.
Multi asset manager abrdn with GBP160 billion in assets under management see the technology as having immense potential and DLT being transformational.
Abdrn see big cost efficiencies through embracing on chain technology and have already tokenised money market funds in Euro, Sterling and Dollar.
Russell Barlow, Global Head of Multi Asset and Alternative Investment Solution abrdn made a great point in highlighting that no one is going to come and buy something that isn’t interesting. The underlying asset needs to have a pull factor and have an incremental yield pick-up. Most panellists agreed tokenisation of assets ultimately needs to deliver net added value to the investor.
Richard Skeet, Managing Partner at digital assets company Hivemind highlighted that building new DLT infrastructure takes time.
Russell went on to mention that many tokenisation projects are being run in silos and that this is not necessarily helpful in delivering a consistent investor user experience.
Representatives from Citi, SWIFT, Bain & Co, and EY held an insightful discussion on the future of cross border payments.
The session was framed by explaining that wholesale business flows significantly dominate (90% plus) retail cross border flows, but most of the accelerating change and consumer expectations are being set at the retail banking cross border level.
Cross border payments were U$150 trillion in value in 2022, but this is set to jump to U$250 trillion by 2027 as more businesses do business cross borders. It was mentioned that the cross-border infrastructure we will be using in ten years’ time will look a lot different to what we use today and different organisations are making different bets on what that future infrastructure will be.
Ultimately end customers are requesting faster, more transparent and less expensive forms of cross border payments, which is causing a battle for market share amongst established incumbents and new digital disruptors and challenger banks.
Many Financial Institutions see that cross-border payments will become more of a 24/7/365 model over the next two to five years, replicating what has already happened in many domestic real time payment schemes. That being said the move to 24/7/365 operations has a profound effect on corporate back offices, operations and banks themselves that may not have been fully thought through according to Erin McCune of Bain & Co.
What is an overnight deposit in a 24/7/365 world? Was an interesting point raised by Dawid Jawas, Head of Global Clearing at Citi. David also noted that whilst messages are usually moving in real time the money itself is not always moving in real time.
Nick Kerrigan, Head of Innovation at SWIFT also raised a very valid point in that any system 24/7 or 22/7 needs a high level of resilience built in so that critical business payment flows are never significantly affected and global business can continue without interruption.
Technologies impact on the investment and wealth management industry was also discussed. It was mentioned how more private individuals will start to tap into alternative asset classes which are currently only really accessible to the worlds top 2% most wealthy and sophisticated investors.
Citi forecasts that around U$100 trillion of new wealth will be handed down to the next generation over the coming ten years, this is money today’s millennials and Gen Z’s will inherit from their parents and grandparents.
Citi’s Global Head of Wealth, Hannes Hofmann raised an interesting point in, if cars can drive without human intervention, why can’t investments take place without human intervention?
After lunch there was a session on the state of tokenisation today and importantly what is real and happening now.
Sharyn Tan, Global Head of Cash Management at PayPal gave a fascinating perspective from a Treasurers viewpoint highlighting that liquidity in an Ecommerce business like PayPal needs to have low cost, fast speed, high transparency and certainty. Sharyn explained that obtaining 24/7 liquidity where PayPal needs it is of high importance. That said it is not practical or cost effective for PayPal or other corporates to do multiple integrations with multiple banks.
Being able to move liquidity in real time within one bank in an organisation that uses multiple banks, does not really provide a full solution. Sharyn went on to say that visibility of cash across an entire organisation is critical and that it is not always possible to do this with a global multi-bank corporate infrastructure.
Ultimately a more efficient 24/7/365 digital money that is easily visible will drive cheaper funding through just in time event driven transfers and allocations. This is a future that is appealing to all corporate treasurers.
To learn more about how you organisation can increase revenues in a rapidly changing financial ecosystem where the corporate customer needs more, check out Realise the Revenues in Corporate Banking.
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