My key takeaways from the Sibos 2017 closing panel of Microsoft CEO Satya Nadella and Swift CEO Gottfried Leibrandt and the "Coolest thing at Sibos 2017".
Microsoft CEO Satya Nadella hit a nerve during the closing panel discussion at Sibos 2017 in Toronto when he said when it comes to succeeding in artificial intelligence (AI) there is no such thing as "cool by association." Organizations with ambitions to succeed in AI and machine learning (ML) will have to do their homework first, in this case getting their data and governance in shape. There is no way around developing your own capability.
In an interview with Swift CEO Gottfried Leibrandt, Nadella also covered other key focus points of Sibos 2017 — the difficult task of balancing security with the latest advances in quantum computing and what that will mean for security best practices. Only a few weeks ago, Microsoft announced a milestone in its pursuit of quantum processing and sees this as critical to countering the flattening of Moore's law. Microsoft recently announced it will release a new quantum computing programming language, with full Visual Studio integration, along with a quantum computing simulator. With these, developers will be able to both develop and debug quantum programs implementing quantum algorithms. While today's encryption and security mechanisms may not withstand the processing power of quantum, the future will also have quantum-level encryption.
Nonetheless, we need to take security much more seriously and become more proactive if we are to stand a chance against the next generation of attackers. This boils down to a couple of critical capabilities: network segmentation and isolation as well as best practice information sharing and patching. Nadella says: "The frontier of technology is the endpoint. You can't get fit by watching others go to the gym. One weak link is all it takes — that's why network segmentation is so critical."
The two CEOs also discussed how to break the innovators' dilemma, with many innovative organizations losing their innovative edge and becoming a victim of their own success. Nadella's solution is that organizations and individuals should be guided by a sense of purpose, almost to a level of asking the existential question: "Why am I here?" This is a continuous process, as one of the reasons why innovative companies lose their way is that they fail to come up with an audacious new goal once the initial goals have been achieved. Nadella sees Microsoft's audacious purpose as being the company that makes technology that enables and facilitates it for others to use — a mission clearly recognizable in many of Microsoft's cloud, quantum, and artificial intelligence initiatives.
The question of what is the next audacious goal for the financial industry is a difficult one, as much of the industry is best characterized as a dinosaur that struggles to adapt to the new, open, and fast-moving ecosystem emerging around it but also plays an existential role in the functioning of the economic ecosystem. Having said that, for decades financial services companies have done an outstanding job of reinventing themselves and adapting to changing operating environments driven by regulation, risk, market trends, and changes in customer requirements. So the question is not whether the financial services industry will face disruption, but what customers will expect from financial services providers of the future.
The last day of Sibos also brought the chance for a couple of meetings with the startup scene and their ideas for transforming FS industry. After announcing my quest to find the "coolest thing at Sibos" in my first blog, I tend towards two particular ideas.
The first is Identitii, an Australian startup that leverages distributed ledger technology not trying reinvent the wheel but to address existing key painpoints within the existing SWIFT message-based global transaction banking model. Given the limited ability to store data in a SWIFT message, Identitii adds a unique identifier to the message that references to a private distributed ledger. The ledger itself does not hold any data, which remains safely within the bank's datacenter, but eventually allows relevant parties to share more information in a safe environment. This creates a platform to exchange and corroborate value-added information for banks and corporates. Developed on the back of Idenititii's anti-money-laundering (AML) solution that allows FSIs to access, enrich, and exchange payment information in a similar fashion, I believe this is a simple and very efficient solution to a long-standing problem and will greatly increase the ability of corporates to reconcile payments, understand behavioral patterns, and tackle AML, among other things.
The other "coolest thing at Sibos” is Token's smart token concept, a "traditional security token on steroids" that transmits the value and all the information needed to authorize a transaction together, in one go, including enhanced counterpart identity, transaction, and invoicing data. The smart token not only authorizes a particular one-time transaction, but uses a set of rules to execute, automate, and optimize transactions. For recurring payments, for example, not every subsequent transaction requires a new token, but the smart token's rule authorizes monthly transactions for a certain validity period. It also keeps track of the overall value of the transaction, ensuring that at the end of the transaction the correct value has been booked. Using smart tokens will allow banks to simplify their business rules, reducing the complexity of monitoring and managing the growing number of open banking transactions and as a result perform transactions faster and at a vastly reduced cost, without relying on third parties to validate the payment. The application of such a security token is pretty much universal and will in my opinion play a critical role in ensuring efficiency and security in open banking. But the thing I liked the most about smart tokens is that they take the idea of a smart contract used in DLT and apply its operating principle to a traditional SQL database. As the industry is still figuring out where DLT makes sense, I believe it would be a very valid approach to take a close look at its unique advantages and apply them to traditional networks, databases, and processes.
Many thanks to the SWIFT team for putting together another great Sibos event with plenty of food for thought and countless meetings and networking opportunities — an event that is bringing together some of the greatest minds in the GTB universe.