The future of opportunities for fintech in the UK – and the rest of the world – remain resolutely strong, according to the general vibes from the Sibos 2021 conference.
Organised by SWIFT (Society for Worldwide Interbank Financial Telecommunication), the first Sibos event was held in 1978. It’s a show that attracts a lot of attention from the fintech community, and as with last year it was a virtual affair.
According to Sibos, this year it had over 150 conference sessions, featuring more than 250 industry experts, and 19,000 attendees from nearly every country in the world.
Therefore, in the interests of space and time this report will focus on a few relevant insights about the future of tech, Banking as a Service (Baas), APIs and AI.
AI Will Revolutionise Business and Finance
The opening speaker was Dr Michio Kaku, the famous theoretical physicist, futurist and science expert from New York.
He wasn’t here to talk about string theory but how AI will revolutionise business and finance in the next decade. Kaku’s vision of the future is incredibly upbeat. It wouldn’t be that difficult to offer criticisms or alternative views, but in reality Kaku’s intellect would be able to dismiss such negative thoughts with ease.
For Kaku, true wealth comes from science and technology. There are so many opportunities for tech firms out there… and on the way.
He noted three waves of great importance to development. The third wave is the high tech one – where quantum theory has made possible lasers, transistors, computers and the internet. The fourth wave comprises physics at the molecular level, thereby opening the way to AI, nanotech and biotech. (As reported last month, biotech was feeling blessed when Oxford Nanopore Technologies launched a £3.4 billion IPO. The CEO noted: “We are living on the cusp of the genomic era.”)
The fifth wave is physics at the atomic level, and the worlds of fusion power, quantum computers and the brain net. The latter is the “internet of the future”, which Kaku predicts will come in the middle of this century. The brain will be digitised, and emotions, feelings, memories and sensations will all be set on the net.
These are certainly exciting concepts, but Kaku knew his audience and offered a perspective on how to make money with all these inventions. This is where AI and analytics step in, so they can make sense of this vast ocean of data.
In fact, the number of news stories on UK companies making progress with their AI and data ambitions is already very lively. The nation is capitalising on the chances at speed. Some recent examples include 9fin in the field of capital markets data and Kao Data’s digital infrastructure systems. Last month, the UK launched its first National Artificial Intelligence Strategy as it seeks to be a “global science superpower”.
Kaku also shared other imaginative ideas – such as the internet will be in your contact lens (just blink to activate), and cellphone screens will be flexible and foldable like paper (with AI and VR features included).
While some may perceive these are fanciful notions of a science fiction lover, they can represent opportunities. Whatever new technology comes along will need hardware and software.
Kaku finished by pointing out that computers and AI eliminate the friction of capitalism. They remove inefficiencies, middle men/women and the choke points. Capitalism today is “imperfect” and full of “guesswork” – and people don’t know when they are being cheated.
The future might be one of robots and AI, but as befits his relentlessly positive mood, humans represent something that robots cannot provide – “intellectual capitalism”. Humanity offers innovation, leadership, analysis, creativity, imagination and planning.
Away from future dreams and desires there was a more pragmatic discussion around BaaS. Bright minds from Finastra, Visa, SAP and HSBC talked about this rather juicy market. The view was that the market is “not embryonic” – but is presently looking at use cases.
According to Future Market Insights, the demand outlook for the BaaS platform market remains “impressive” as it forecasts sales to surpass $12.2 billion (£8.88 billion) by the end of 2031.
The ultimate belief of Finastra and friends was that no single entity can do a good BaaS alone. This is something that comes up at every Sibos – and on every theme – “collaboration”. No firms in attendance want to rock the boat. Anyway, the speakers see a good BaaS as a “network of networks” – with certain banks or firms providing components, rather than the whole package.
BaaS is an area of great interest in the UK. Just yesterday (14 October), core banking provider Yobota announced its move into the BaaS market through a new partnership with Chetwood Financial.
By the way, the panelists did mention UK challenger bank Starling. It is a “regulated entity and the embedder”. As reported in September, the bank said it plans to make its BaaS solution offering available in the EU, including France, Germany, the Netherlands and Spain. If it can do it all alone then “Starling as a Service” could fly high.
The API Labyrinth
APIs have been around for quite a few years, and initiatives such as open banking and PSD2 have brought them to the fore to provide interactions between the ecosystem of banks and fintechs.
In the UK, the Open Banking Implementation Entity (OBIE) was officially set up in 2016 to create technology (i.e. APIs), data standards and the governance structures enabling the country to implement open banking. The aim of this regulation was to increase competition and choice for consumers and small businesses.
The latest stats on OBIE’s site show there are 319 regulated providers, 230 third party providers and 89 account providers. Across the country, companies are doing well in this area. Last month, London-based open banking platform TrueLayer closed a $130 million (£95 million) fundraising round – giving it a post-money valuation of more than $1 billion (£730.9 million) and taking it into the realm of unicorns.
At Sibos, experts from JP Morgan, cloud banking platform Mambu, Unicredit and Nigerian fintech startup Lidya discussed APIs.
For JP Morgan it has an “API-first strategy”, while Mambu notes that APIs may have been around for a long time, but they have only recently become mature and should not be treated as a silver bullet.
The view from JP Morgan is that over time APIs will be less costly to implement. Unicredit sees APIs in the future as “the new normal” but did call for more standardisation and the regulations to be imposed in a much stronger fashion.
Lydia pointed to Gen Z customers and the way they will access financial services. There will be a “fundamental shift” as that generation will be “comfortable with Amazon being their bank as a traditional one”. That is how the power of APIs could be used.
All About AI
As Kaku noted above, AI has a big part to play in tech’s future. That will surprise no one. And there were plenty of other analyses at Sibos on this theme.
For instance, experts from C3.AI, Societe Generale and Deutsche Bank discussed how AI and machine learning solutions have the potential to create material business value for banks and customers.
The viewpoint from Thomas Siebel at C3.AI is that the business world is “just beginning to scratch the surface of this market” and that in the future “all software will be AI-based”.
Societe Generale has 130 AI use cases at present. But it should be noted that developing a chatbot is not a simple task as the bank took three years to develop its version. Societe Generale believes AI is “no longer an option in finance” – as it will be used “everywhere”.
A lot of good points did come up, but in the interests of brevity C3.AI’s Siebel warned of the ethical implications of AI and how it can perpetuate social bias if used for credit and lending. (This comes up at most conferences.) AI could invoke ethnic and racial basis, which will put a firm’s CEO in a “real bad place” and potentially testifying before US Congress or a similar institution in Europe.
As Siebel noted, such a situation is a “trap”. While AI is useful, it’s vital to keep humans in the loop and so they “make the decision to pull the trigger”.
Ultimately, all the words above are just a glimpse of what went on at Sibos. The message from people like Kaku and Siebel is that technology is great, but humans are greater and here for good.
The Sibos programme looked at so much more around banking, payments, sustainable finance, digital identity, et al.
For those UK firms looking to learn more about fintech next time around, then Sibos 2022 won’t be a virtual event. It will be a short journey away and in the fine city of Amsterdam.