Trust me, I’m a social media company

Facebook’s cryptocurrency Libra will need to gain the trust of the financial community, as well as the social media platform’s one billion active users. Perhaps its aims are too radical, writes Thomas Morris, Senior Partner at Moorgate Finn-Partners.

 

Some recently-announced heavyweight recruitment at Libra Association, the body overseeing Facebook’s stablecoin project, suggests both that the launch of the cryptocurrency is still on the horizon and that the intention remains the same: nothing less than a revolution for the payments industry.

The appointments in May and June this year (Sterling Daines has joined from Credit Suisse as Chief Compliance Officer, Robert Werner has been appointed General Counsel – with a CV that includes HSBC, Goldman Sachs and Bank of America Merrill Lynch – and Stuart Levey has been made CEO, joining from HSBC Holdings where he was Chief Legal Officer) prove that Facebook’s nascent cryptocurrency, Libra, is more than just a PR stunt. Rather, the scale and seriousness of its recent recruits tell a different story: that Facebook is on the brink of attempting a major shift in the global payments industry.

Whether it succeeds, however, may well depend on how the platform’s users now perceive their host.

The idea behind Libra is obvious and rational. There’s little doubt that the “bigtech” companies of Silicon Valley (and increasingly, China) are keen to re-shape the financial services landscape particularly with respect to payments. In fact, Facebook can be seen as a latecomer in this respect. Amazon Pay was launched in 2007 and even that was in the wake of Chinese online retailer Alibaba’s “digital wallet” Alipay, which was launched in 2004 and claims around one billion users. While both retailers – making a foray into the US$2 trillion payments industry highly-logical – it’s the bigtech companies’ data that gives them the edge over the traditional payments providers (i.e. the banks and credit-card companies).

Facebook has thousands of pieces of data – voluntarily submitted – that paint a detailed picture of who its users are friendly with, their tastes, and even their thoughts (well, public ones at least). As one of the world’s biggest advertising platforms it knows how to commercialise this data, and the temptation to add uplift services such as payments (which then feed-back yet more data about users) may be too large to ignore. Yet mining this data for commercial ends is ethically difficult – one not helped by well-documented data indiscretions at Facebook in the recent past. The scale of Libra’s impact will therefore come down to trust in Facebook.

So those new appointees at the arms-length Libra Association are part-and-parcel of Facebook’s attempt to convince clients – consumers and corporates – to swap traditional currency for Facebook’s algorithm-generated and maintained Libra coins. To trust the platform with their money: not just in holding dollars, euros and pounds but in converting their hard-earned post-tax savings into an invented currency (albeit likely backed by hard currency).

Trust – as many PR people will tell you – comes down to “being transparent”. Having clear and published policies – underpinned by strong ethics – and being open when it comes to day-to-day operations and regulatory compliance. Certainly, this is Facebook’s playbook: the Libra Association is nominally independent (like a central bank) and Facebook has doubled-down on trying to build trust: spending time and money updating its policies and products and advertising that fact (even on the old media its spent 16 years undermining).

But such transparency could equally be seen as an attempt to restore lost trust. And that, says “trust expert” Rachel Botsman (author of books such as Who Can You Trust?) makes transparency not quite the silver bullet PR practitioners propagate.

Speaking at Sibos in London in 2019, Botsman said that “if you need for things to be transparent, then you have practically given up on trust. By making everything transparent, you are reducing the need for trust”.

“Trust enables us to navigate uncertainty, place our faith in people and take leaps into the unknown,” says Botsman, which seems to be a long way from Facebook’s position with respect to Libra, despite the heavy investment.

Meanwhile, the purveyors of more traditional forms of payments such as banks and credit card companies – using old-fashioned central-bank issued, government backed currencies – will drive home the security and safety of their age-old method of value exchange.

So, given the above, how should the Libra project position itself? First, it should position itself not as a revolution but as complementary to the existing system. The “fintech disruption” narrative may help win over some customers, but not enough to make the investment viable over the long-term. The most trusted companies, meanwhile, are those that collaborate and cooperate with existing structures. Just as the best – and most trusted – financial institutions are those that don’t communicate fintechs (or even bigtechs) as a threat, but as innovators able to enhance their trusted products and services, so should the best fintechs return the complement. They are not “exploding” or “revolutionising” a particular corner of finance but rather improving it by making it more efficient, more consumer-friendly and (yes) cheaper.

Just as banks should be embracing the idea of Open Banking and welcoming (approved and compliant, of course) fintechs into the fold, so should fintechs embrace the existing payments infrastructure – that generates trust for all its inefficiencies and costs – and seek to enhance it. Win:win communications, in other words, rather than a zero-sum war that will only play well with youthful radicals that have little money to invest.

Given this, Libra’s grand “we’re going to change the world” claims may ultimately result in it doing no such thing.

BNY Mellon’s Carl Slabicki discusses the changing climate of US payments in an article for Finance Monthly

For a long time, banks in the US have competed primarily on price and service rather than as providers of payments solutions. But now, with the emergence of real-time payments, updated legacy rails and a new layer of overlay services, the US payments landscape is beginning to transition to an entirely new payments culture.

Amid this change, as the importance of expediting the journey from paper to digital transactions becomes increasingly clear, Carl Slabicki, Head of Strategic Payment Solutions, BNY Mellon Treasury Services, explores the need for faster payments and more streamlined and feature enhanced capabilities around validation, security and risk mitigation.

To read the full article, please click here.

How can banks support trade in a time of crisis? Citi’s Parvaiz Hamid Dalal examines in an article for Global Trade Review

The impact of the Covid-19 pandemic on trade has been profound. Disruption to both supply and demand dynamics and supply chain logistics have resulted in the entire trade value chain coming under pressure.

Operationally, however, trade flows have shown remarkable resilience. Banks that have invested heavily in trade technologies are now able to deliver digital trade finance solutions that enable their operations and documentary processing to continue remotely and their clients to initiate these transactions remotely, with little (or even no) disruption. Such banks can connect clients and counterparties digitally, enabling end-to-end transactions to be carried out seamlessly, with funds delivered electronically to buyers and suppliers across the globe.

With global trade having to adapt to these unprecedented levels of disruption, Parvaiz Hamid Dalal, Citi’s global head of strategy and solutions, working capital finance, TTS explores how banks can play an important role in keeping business moving.

To read the full article, please click here.

How are banks laying a path for the digitalisation of trade finance? BNY Mellon’s Joon Kim explores in an article for Global Trade Review

The Covid-19 pandemic is presenting global trade with exceptional challenges. With disruption to many supply chains due to large-scale logistics obstacles, and many sectors seeing significant decreases in demand, exporters must traverse an uncertain, unfamiliar landscape.

Prior to the pandemic, significant efforts were already being made by many banks to enhance trade finance through technological innovation. But events of the past few months have spurred a flurry of activity from blockchain to optical character recognition (OCR). Participants have been required to move away from ingrained, paper-based procedures and adopt digital solutions in order to ensure their businesses can continue to operate effectively.

In an article for GTR, Joon Kim, Global Head of Trade Finance Product and Portfolio Management, BNY Mellon Treasury Services, explains how banks are addressing these short-term challenges, and looking to a digital future.

To read the full article, please click here.

What is being done to optimise the flow of trade finance transactions? BNY Mellon’s Joon Kim explains in an article for TRF News

As a result of the global lock-down, almost every aspect of trade – from value chains and logistics networks, to pending and production – has faced a series of profound challenges. With the grip of the situation still being felt the world over, what is being done to optimise the flow of trade finance transactions? In an article for TRF News, BNY Mellon’s Joon Kim, Global Head of Trade Finance Product and Portfolio Management, explains.

For one, there has been a significant shift in attitudes towards the digitalisation of trade finance. As a traditionally physical, paper-intensive business, trade finance, when performed from a ‘working from home’ environment, has encountered a number of challenges. And, as it became clear that lockdowns would remain in place for the foreseeable future, the industry reacted swiftly – coming together to adopt a series of digital initiatives.

To read the full article, please click here

In an article for Trade Arabia, BNY Mellon’s Joon Kim and Bana Akkad Azhari explore the impact of Covid-19 on trade in the MEA region.

 

 

 

 

 

 

The ongoing pandemic has brought significant disruption to trade across all corners of the globe. Responses from countries in the MEA region , including strict social distancing guidelines, work from home requirements and a host of travel restrictions, have had the unfortunate effect of creating a number of logistical obstacles that are now proving a barrier to trade. As a result, the trade finance industry – not known for its ability to swiftly enact change – has had to rapidly adapt to keep trade flowing.

But what changes have banks in the Middle East been making to keep trade flowing? BNY Mellon’s Bana Akkad Azhari, Head of Relationship Management MEA & CIS, and Joon Kim, Global Head of Trade Finance Product and Portfolio Management, explains that in response the the trade finance industry has turned its attention to an array of digital initiatives – a move that is paving the way for a more agile future for global trade.

To read the full article, please click here.

How is the US payments landscape changing? BNY Mellon’s Carl Slabicki explores in a video interview with FinTech Finance

For some years, the payments landscape has been experiencing a shift from paper to digital solutions, with developments, including new real-time payments systems, the emergence of innovative overlay services, and the modernization of legacy rails, coalescing to meet evolving client needs.

Speaking on Fintech Finance’s Virtual Arena, Carl Slabicki, Head of Strategic Payment Solutions, BNY Mellon Treasury Services, explains how the Covid-19 pandemic has acted as a catalyst to drive forward this digital transformation. “As more and more businesses made the move to a remote working environment, BNY Mellon has had to adapt to better support their clients with accessing data, to afford capabilities from remote settings, and to provide increased assurances” says Slabicki.

To watch the full interview, please click here.

In an article for The International Banker, BNY Mellon’s Isabel Schmidt and Marcus Sehr explain how to best prepare for ISO 20022

The introduction of ISO 20022, the new payments messaging standard, is set to revolutionise the payments industry. The existing infrastructures, including SWIFT MT messages and their proprietary equivalents, are no longer suitable for modern payment needs. By replacing them, the industry aims to create a messaging ecosystem that can facilitate an efficient, value-added payments experience for clients.

Of course, these benefits will come at a cost. Preparing for the new standard will require substantial efforts and resources from banks. It crucial that banks be fully apprised of the impending developments, understand what is required and have effective strategies in place. BNY Mellon’s Isabel Schmidt and Marcus Sehr explore in an article for the International Banker.

To read the full article, please follow this link.

 How can you best prepare for ISO 20022? BNY Mellon’s Marcus Sehr and Isabel Schmidt explore in an article for TMI

The introduction of ISO 20022, the new payments messaging standard, is set to revolutionise the payments industry. ISO will replace existing SWIFT MT messages and their equivalents, which are unsuitable for supporting evolving transaction needs, as the format for the transfer of cross-border and high-value payment information. Crucially, the new messages will incorporate more structured, robust and comprehensive data, thereby driving enhanced speed and efficiency; reducing false positives, manual intervention and costs; and helping to pave the way to 100% straight-through processing (STP).

As these deadlines draw nearer, considerable efforts and resources from all participants will be necessary to meet the associated challenges. But, by establishing a clear transition roadmap, educating staff and upgrading their systems, banks – and their clients – can unlock the full benefits of ISO 20022.

The article can be read here

In an article for GB&FR, BNY Mellon’s Marcus Sehr and Isabel Schmidt explore the impact of the upcoming ISO 20022 migration

During the next five years, ISO 20022 is set to transform the payments industry. The migration will touch the payment lifecycle end-to-end and, as the implementation deadlines draw near, the implications and considerations are set to be far-reaching – requiring significant efforts and resources from banks and their clients.

The upcoming changes should not be underestimated. In the lead-up to and aftermath of the transition, banks will face a myriad of challenges. If they can overcome these hurdles – by establishing a clear, comprehensive strategy, educating and supporting their staff and clients, and preparing their systems – they have an opportunity to deliver a truly improved end-to-end payments experience for clients.

The article, published in Global Banking and Finance Review, can be read here.