The call for banks to change the way they handle payments was loud and clear in yesterday morning's plenary session at Sibos. A distinguished panel of bankers, infrastructure providers and IT vendors all addressed the session titled 'Daring to Transform: what's really at stake?'
They all concurred that the risks of not changing the way they do business are now greater than the risks of carrying on as they have done before.
"Your customers are fed up," said Leo Apotheker, member of the executive board of SAP. "They feel that enough is enoughà and they do not understand why it is such a huge problem and why banks still have to do small payments at huge cost."
Apotheker said that the banking industry had not yet been forced into the situation that other industries have faced where they have to embrace wholesale change or go out of business. However that day is not far off. "Sooner or later someone will demand that you change and you need to make sure you do it to yourself before someone does it to you."
The session began with Johan Kestens, head of marketing at SWIFT, saying that fixing global payments systems now when banks are making good profits was like fixing a roof in summer; it makes sense to do it now before it becomes a real problem later on.
At root it is about serving customers better. It is also about ensuring that the banks can remain profitable in the business.
Kestens predicted that the trigger for starting this transformation would likely come from outside competitors, such as PayPal, which has revolutionized the customer to customer payments space. Regulatory attacks on the industry as well as ongoing banking consolidation would also cause the transformation to occur.
But Kestens did say that effecting these changes would be difficult. "We as an industry have so much to lose if we do transform," he said. The inference was that banks would have even more to lose if they did not change.
Mark Greene, the general manager of IBM's banking group, noted that the bank payments business was structurally inefficient. While changes had occurred, these had tended just to be changes of tactics. Now banks need to effect deeper more structural changes to their processes, IT systems and governance if they were to really transform.
One idea that found resonance with the panel was the call for all banks to appoint a 'payments tsar', a senior manager to oversee the overhaul of banks' internal payments systems. This manager should have the power to force change and keep it disciplined.
One panellist who supported this view was Erik Dralans, head of operations and IT at ING. He explained how ING had undertaken some transformations over the past few years, including the establishment of ING Direct, its internet banking platform.
A lot of the drive to transform came from keeping it simple and having strong leadership. But in the end he acknowledged that getting banks to change was very difficult. "Banks very often change the surface, but they do not change their insides," he said. "In this, we are chameleons."
