Thursday, 2 October 2014

Sibos: day three round-up

Sibos entered its third day with the introduction of new forums, a focus on real-time payments and the conclusion of the annual Innotribe start-up challenge.

Moving swiftly on: It was a busy day at the Swift auditorium as the business case for the Society's much heralded KYC registry was laid out by some of the participant banks. Panellists from Raiffeisen and Commerzbank explained how internal KYC resources had been stretched, with multiplication of efforts, evolving requirements making internal systems redundant and sales staff distracted from revenue generating activity, forcing both banks to evaluate outsourcing options. Questions from the floor broached the issue of multiplication of KYC utilities, and Swift responded by confirming it was cooperating with some of the other bodies on the market (such as DTCC, Genpact/Markit, Accuity and Thomson Reuters) to establish best practices and common standards. Swift also announced that its Alliance Lite2 platform would be extended to business applications, with nine treasury solution providers signed up to add their software applications to the cloud-based platform.

The innovators: Swift's yearly Innotribe stream came to a close with the announcement of this year's winners, Epiphyte (the start-up of the year) and MatchMove Wallet (the innovator of the year). Epiphyte has brought to market a platform which generates sales contracts and provides irreversible payments before releasing funds upon the completion of the trade. The company has $360,000 in revenue and six employees. MatchMove Wallet is Singapore-based and offers a mobile wallet based on prepaid virtual accounts. It can be topped up with MasterCard, Visa or American Express or direct from bank accounts at DBS and POSB in Singapore. It can be used for online transactions.

Faster payments: Real-time payments came under the microscope, given the news that the system selection for the Australia New Payments Platform has concluded. Simon Newstead, head of financial institutions advisory group at RBS, defined the business case for banks to embrace real-time in two words: consumer expectation. The panellists, including representatives from the Polish, Mexican and Australian payments councils, all acknowledged that real-time infrastructures cater predominantly for consumer retail payments, and that it was a tough sell for the major banks to invest between £10-100 million (which UK banks had done) to get their systems up to speed with the new standards. This was emphasised with an analysis of the flows of UK payments following the launch of UK Faster Payments, whereby BACS payment volumes had fallen away, whilst larger bulk payments on the CHAPS network have continued to grow. The proliferation of alternative payment schemes on the market, and the threat of disintermediation of the banks in the value chain, however, have forced industry bodies to take the plunge and make the investments.

Two become one: Clearstream's big announcement of the day was the closing of the acquisition of Citco's hedge fund processing business (the official closing will take place this Friday). The project has been underway for 18 months. Philippe Seyll, head of investment funds services at Clearstream, said that Clearstream has been itching to get into the hedge fund technology space for some time, and even set up a small dedicated unit in Ireland. This is how Citco, which has its hedge fund ops unit located in Cork, found out about Clearstream's aspirations and reached out. Citco, which has a claim of being the leader in this space, was looking to offload the business. As for Clearstream, Seyll said that it evaluated whether to build, partner or acquire and concluded that the latter was the optimal choice. Clearstream lacked the in-house expertise in the hedge fund space, so building a solution was not feasible. The partnership route was not viable either, as the vendor could find only one suitable partner and it was its client. 'We did not want to put pressure or complicate our relationship with this customer,' he said. With Citco, Clearstream has acquired 300 people, $50 billion in hedge fund assets, 60 clients and two million transactions per year. 'All customers will migrate onto the books of Clearstream,' he stated. It has also gained 'great exposure to Asia'. In terms of revenue, Citco's business constitutes 20 per cent of Clearstream's business, but there are plans to double it in the next three years.

The integration will take place during that time. There will be two separate front-end platforms, for Clearstream's existing mutual funds business, and the acquired hedge fund business (this platform has been developed by Citco's in-house team and Clearstream now owns the source code and perpetual licence), and the back-end will be unified on Clearstream's system, Vestima.

Follow Jan and Tanya on twitter.

No comments:

Post a Comment