So we just had our opening plenary for SIBOS2014 from Jamie Forese, Co-President Citi and CEO of Citi’s Institutional Business.
This was OK but, like many bank CEO presenters, was an autocue read rather than a charismatic punch.
Nevertheless, there were a few key notes I took out of Jamie’s presentation.
First, there are three defining trends that have been defining Citi’s strategy, namely:
Globalisation – the increasing connectivity of all the world’s nations, economies and markets although, as Jamie noted, this is a trend that is stagnating or even reversing;
Urbanisation – the growing concentration of people and GDP in cities; and
Digitalization – the transforming power of technological innovations, and the efficiencies they create.
These three trends are interrelated and reinforcing, as digitisation fuels the shrinking of the world and supports globalisation, and globalisation demands that cities are centres for work and growth.
Jamie talked quite a bit about digitisation which, for the guy in the audience who wrote Digital Bank, was gratifying to hear.
Jamie noted that banks and corporates are being forced to digitise the way they interact with clients by their clients, and this means they have to digitise their own operations or be left behind or worse. Even so, even with all that digitisation, 85% of global consumer transactions are still paper-based. In other words, for all of our digitisation efforts, we have only reached 15% of consumer economy.
In a study recently produced by the Imperial College in London and sponsored by Citi, the college found that just a 10% increase in digitisation of the consumer economy would release a trillion of revenues into the global economy and $100 million in tax revenues. As this happens, some banks will win and some will lose and it is obvious that the winners will be those who embrace digital.
For example, we worry about the Shadow Banking market and there are now shadow finance comprises who are experts in the technology space and can circumvent us. That is not just the Apple’s or PayPal’s, but the rise of cryptocurrencies and more.
Equally, for us, there is a money laundering issue. Money laundering represents about 2 percent to 5 percent of global GDP. It represents about two trillion dollars as a market, and that is why Citi now has 30,000 staff in control functions, checking the checkers (that’s a phenomenal overhead!). It’s a necessity to do this however, and that is why Citi will continue to make big investments in all AML and KYC programs.
It’s also a competitive differentiator in that Citi operates in 101 countries and has 62 custody and clearing markets. That is more than most banks and makes it very hard to compete with us as it cannot be done organically, and inorganically is difficult to do due to the regulatory regimes
Finally, there is now a considerable danger that securities markets will go national, breaking the globalisation trend, thanks to all of the nationalistic laws that have been introduced over the past five years. This is because officials are wondering why their taxpayers should be responsible for issues that occurred somewhere else in the world. For banks, the risk is that creating the economies of scale and global consistency will be lost, as they have to introduce redundancies to meet local requirements. We have to keep the trend of globalisation alive. (Urmmm .. too big to fail here somewhere?). As a community, we need to work with regulators to create a consistent global regime, and work together as advocates to get the regulators to listen.
SWIFT is the way to do that.
After a light round of applause, a virtual Yawah Shah, SWIFT’s Chair, appeared. He was virtual due to his father being suddenly taken ill and so made a pre-recorded speech about how SWIFT had doubled transactions and halved costs since the last time SIBOS was in Boston (2007).
We then had Gottfried Liebbrandt, CEO of SWIFT, lead us through his views of SWIFT's future.
Gottfried focused upon disruption as a theme, asking whether banking was going the way of music (Apple), books (Amazon) and taxis (Uber).
He highlighted a few history lessons from the colonials dumping the British tea in the Boston harbour 240 years ago to Bill Gates called banks technology dinosaurs twenty years ago (and now, SIBOS welcomes him as keynote on Thursday).
Gottfried was asked recently whether, if you had access to the Delphic Oracle, what question would you ask about banking ten years from now?
Is the dollar still the reserve currency of the world, Gottfried thought first. Then no, as it will be. Will banks still be around? No, they will be.
And so the question he would want to know the answer to is: What’s a bitcoin worth in ten years?
That’s a good question as it would tell you whether it remain on the fringe, dies on the regulator’s sword or becomes mainstream. It also tells you whether to invest or not. Sneaky.
Anyways, on that note, the session finished although personally, I liked its opening the best.
Now off to steal some gifts from unsuspecting exhibitors and find out if cloud is good or bad.
More later …
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...