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Banking Newsletter - December 2012

We cover regulation, customer/channel trends, ATO liquidity charges, consumer protection, Sibos conference and results from major banks and mutuals.

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Banking Newsletter - December 2012

Sibos Banking & Payments Conference: Transformation takes centre stage 

As 6,000 of the world’s payments and transaction participants gathered in Osaka, Japan for this year’s Sibos conference at the end of November, KPMG was there to share best practices, debate emerging issues and – ultimately – to help participants make the most of the changes underway in the market. Daniel Houseman, Director IT Advisory and Payments Specialist attended and provides his views on the key trends and considerations for the payments industry.

We identified five key themes that – whether they were on the Sibos agenda or not – dominated the discussion at this year’s conference.

 

Coping with unrelenting regulatory change

Regulation was the linchpin that connected almost every conversation at the 2012 Sibos conference. Few (if any) participants were bold enough to suggest that they were coping with the pace of regulatory change; most admitted they were struggling – or worse, failing – to keep up.

 

For example, few were aware of the detail of the potential impact of US Dodd Frank rule 1073 which will by extrapolation require payment service providers to give detailed data to a US originating bank on timing, charges and local taxes applied to a transaction in advance, so that full and final information can be provided to a customer at the initiation point for remittance transactions originating from the US. The rule comes into force in February 2013, so there is no time to waste.

 

That being said, there were very positive signals that many of the participating organisations were starting to recognise the need to develop a more strategic approach to managing regulatory change, particularly its impact on technology systems and infrastructure.

 

Move towards faster payments picks up pace

One of the hottest topics at Sibos and around the industry globally is the move towards executing immediate payments. Following in the footsteps of the UK, we will soon see Singapore and Australia move forward quickly on this. For most banks, this move towards instant payments will require a significant transformation in their technology systems and processes.

 

Banks will need to do significant preparation work to be able to make and accept real-time payments and this will demand significant investment. The challenge is how to develop a business case for investment that quantifies and articulates the benefits to the bank and its customers.

 

The rise of Asia

If there was an unofficial theme at Sibos, it was the shift towards the East. For Asian banks, the focus was on identifying new strategies to grow their business and leverage lessons from the West. Those from outside of Asia, however, took the opportunity to learn more about the region and will undoubtedly be going home to assess their capabilities and presence in the market.

 

Competitive threats change the rules of the game

Banks are increasingly recognising their payments revenue is slowly being eroded by new and non-traditional competitors in the marketplace. From successful payments organisations such as China’s AliPay or TenPay through to telecom and mobile service providers, banks are starting to feel pressure on their transactions margins.

 

Transformation takes centre stage

Given the prevailing currents within the payments sector, many attendees and speakers at this year’s Sibos conference were focused on developing transformation strategies to help banks and payment providers adapt to the realities of the new market environment.

 

There was general agreement that agility and flexibility would need to be core characteristics for the industry going forward. The old days of implementing large legacy systems across the organisation in 3 or 4 year cycles are clearly gone, to survive in today’s environment, banks must be able to make changes and adjustments on an ‘as needed’ basis.

 

Those who attended Sibos this year will no doubt have left the conference with a
pervasive feeling that the payments industry is in the midst of a dramatic and evolutionary change. And, while it remains to be seen how the payments sector will evolve by the next Sibos conference in 2013, one thing is sure: banks and payments providers simply cannot afford to wait to respond to the deep need for transformation in the industry.

 

Read more insights on the payments industry in the Great Payments Transformation article series written by payment professionals from across KPMG’s network.

 

Daniel Houseman

Daniel Houseman
Partner, Analytics, Information and Modelling

+61 3 9288 6820

dhouseman@kpmg.com.au

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