Collaboration at Scale: Powering Global Digital Finance

Transcript

on stage. It's my pleasure to welcome Nick Carrian, head of innovation at Swift. Please put your hands together. And the fireside will be moderated by our amazing Niki Chani. She is the executive director from the CVA and the main organizing and gene of this event and actually all our events. Please put your hands together for Nikki. The floor is yours. Thank you.

Hi everyone. Uh I think we're Nick and I were just listening to the panel before us and we're just looking at each other that this is actually the perfect transition of panels because everybody was talking about you know the closing words about uh liquidity fragmentation interorability and that actually rather than reinventing and starting from scratch which is let's be honest is not very possible. Let's use what we have and let's build on the current financial infrastructure but make it better and innovate it with blockchain technology and digital assets. So first of all I before this I wanted to start with the fact that let's just take a pause and

realize how significant it is that I'm sitting here today with Nick from Swift. Now, two years ago when we had the first edition of the Web Banking Symposium, the conversation was about let's bring banks and traditional financial institutions in the room and let's try to convince them that digital uh digital assets and crypto and blockchain are nothing to be afraid of. And in two years, which is a very short amount of time, we have Swift, one of the backbones of international trade and financial infrastructure, here with us on stage, uh, talking about how they have announced their blockchain based ledger um, and what they are doing to

integrate blockchain and digital assets into their infrastructure. Um, an interesting stat statistics that Nick shared with me, um, when we had a prep call was that, uh, Swift processes the equivalent of the world's GDP every two to three days. That's pretty mind-blowing. So now imagine part of this um volume and eventually maybe all of the volume will be processed through blockchain based ledgers and the um anyway I don't want to take more of your time. Nick, please introduce yourself.

Tell us what you do as a head of innovation at Swift. Um let's set the stage. >> Great. Um well, thank you very much for the kind introduction uh Nikki and uh thank you so much to the Crypto Valley Association for inviting me uh here today. It's a real pleasure to be in Zurich in this beautiful venue with a beautiful uh beautiful weather outside. It's certainly nicer than it was in London when I left. So um I and I'm very happy that we're now having this infrastructure conversation here today because I think it shows how the uh the discussion has moved on around blockchain technology and digital assets um in particular. A bit about Swift for those who who know us less well. Um we are the world's largest financial

messaging provider. We connect 11,500 banks and corporates from across the world. And as you said, Nikki, we operate already at at very high levels of scale to as well as high levels of security and high levels of resilience because those institutions rely on us every second, every minute, every every day. And uh in terms of the mix of what we do about 50% of of of our messaging today uh is around payments in particular crossber payments and roughly 50% is around uh securities settlement uh and enabling the post trade processes which was talked about a little bit bit earlier and we're constantly trying to improve uh the experience the speed at

which we operate. So um maybe one stat for you because people often say you know have stereotypes around crossber payments. Well I can tell you that today uh 75% of the payments across our network reach the beneficiary bank within 10 minutes and often within seconds. So this is a system that is operating now at much greater speed. >> And I was guilty of that too. I I assumed that it would take much longer and then when you told it to me at the call I was surprised but nonetheless there are still improvements that can be made and of course we consider blockchain's benefit one of the main one is 247 and instant settlements and instant communication. Um but as we

talked you explained to me that there's so much more so many more doors that this new implementation will um will open. But first let's take a step back. So you introduced or announced um the blockchain based ledger late last year uh but it has been in the works for a while now. So do you want to give us a little bit of a backstory here? How has it been evolving? What were the main drivers? Um, was it driven by internal desire for innovation? Was it driven by by your uh user base and your clients?

Um, let's hear why why the shift >> of course. Um, so so so as an innovator, I mean, we've been working in the blockchain space now for uh well over well over five years. Um and in initially our focus around that was how do we enable institutions to adopt digital assets and digital money and thinking about how we could enable interoperability between different uh blockchains and and and infrastructures that that were that were emerging as you rightly said late last year we announced that we're going to be uh implementing a blockchainbased ledger on top of the Swift's existing network. And and really this is about a kind of almost like a twoprong strategy but one that's that's

very much linked together because we're all about increasing the speed, transparency uh and cost dynamics of crossber payments. And so on the one hand we're enhancing the existing rails so the existing rails really improve uh and continue to get better. And second, we're we're actually building the new rails. And this is where that that ledger comes in because we're really thinking about how does this uh technology really upgrade the Swift network to provide things to our clients that they that they want from us, but that they they also uh they also kind of struggle to do uh today. uh and so we think about the the functionalities that blockchain can can give us and therefore

really bring together the the existing and the new. I mean our vision really in this space is to have a network that is seamlessly interoperable. So whether you have an existing asset or existing money or you have new assets or new money, you can transact with them in a very very seamless way and use your your swift connectivity in order to do that. >> So the old system is not going anywhere but you're adding this as an improvement and enrichment and then see how it can transform later.

>> Absolutely. >> Intertwine. >> Absolutely. >> That makes sense. >> Absolutely. And so Swift is a messaging system, not necessarily a settlement system. But with this new blockchain based ledger, >> has is this going to change? How does how does it affect >> so? So we're we're not fundamentally changing our role in in in in this space. Um Swift is very much going to be providing this ledger as a coordination and orchestration layer for uh for for clients. Um and and within that context, we really want to be able to connect in to different settlement venues, whether there's the sort of uh the more traditional uh settlement venues like like RGS systems or whether they're new

settlement v venues with with digital money on them. So uh we're going to provide a range of those those venues and then be able to enable the coordination and orchestration on on the top of that. I should also say we're really um you know proceeding in a very pragmatic way here. So what we want to do is start with this this use case around wholesale crossber payments figure that out get an MVP live in the in the coming months and then look to expand out into other use cases as well as we see the demand from our our clients to do so. And um you know I guess why are we doing this now would be a good question because we've been at this for five years or so. I mean, I think it's it's as we're all very

conscious in this room, it's because tokenization has really really accelerated, right? I mean, it was the top conversation at Davos in in January. Um, and and we're we're talking here, I think, now the right conversation. It's not a conversation about the price of Bitcoin. It's a conversation about institutional adoption. And that's now happening, I think, because we're start, you know, as as Ilia actually alluded to at the start, right? It's a it's it's about uh the the maturity of the technology. It's about regulatory clarity that gives people confidence to adopt. And it's also about I think the policy relevance here because and and you know you can see this with all the geopolitics that's going on at the

moment, right? People have realized that financial infrastructure is actually, you know, very critical to the global financial system and the and the the global economy in a broadest sense. And therefore, if blockchain and tokenization is going to be the future of that, then we need to be right at the forefront. >> And that's actually a very crucial question for us in Switzerland. And and and Ilia's slide had um one slide with the flags, right, of which each um sort of main hub moving into which direction. um in terms of regulatory um requirements versus um how important crypto and blockchain and digital assets

are for the economy. And we hope that for Switzerland we will keep continue moving in the right direction um and making it easier for companies to to implement digital assets and and blockchain solutions. So crossber payments, right? Um what doors are we opening with this new blockchain based ledger? You mentioned a couple during our our session. Yeah. >> Um I let you >> Yeah. >> expand on that. >> Yeah. I mean I think there are some some sort of very um obvious kind of foundational things that we can enable with this blockchain based ledger and there are ones that will actually also then be able to create further revenue upside and commercial upside for for for

our for our members. I mean the the very the first and very obvious one obvious is around faster payments uh is around 24 by7 availability of those uh th those systems and also is about and I don't think we talk about this enough in the blockchain space but really having that that the value of having that single view of state of a transaction um is is something that I think is extremely useful for financial institutions because you start to get those efficiency benefits in terms of uh reduced reconciliations uh reduced risk in terms of where my position is at any one time. So those are really I think the sort of important foundational things. Um having said that there's also the things that we can

unlock in terms of use cases that really go further than you know than we can today that we give opportunities to Swift members to be able to do things that are actually quite challenging or difficult to do with the with the current infrastructure. And so, you know, we talk awful a lot about things like, you know, atomic settlement, but that then leads into being able to optimize liquidity and be able to do that intraday, uh, not overnight, right? >> And that's going to be a huge commercial win for for everybody, right? >> Absolutely. Abs, absolutely. And it also to the previous panel starts talks about evolving business models as well because um you start to be able to optimize your your your borrowing requirements uh in

intraday but then you also get you know liquidity providers who can then generate yield intraday and that's where it starts to get very very very uh very very interesting and you you see those platforms uh growing. So I was reading uh you know the Aphme report that came out just a few days ago and and uh some of the platforms in the US are looking at you know hundreds of billions of dollars of uh intraday repo type transactions already right and that's you know that that's volume that's bigger than the entire stable coin market right so so you know you're really seeing some significant growth people are starting to recognize these use cases and then as you go further you think about you know programmability onchain FX settlement things that you

can achieve with netting. So I think you know these use cases will open up and and as Swift we're we're the enabler here right we we're going to enable the innovation that financial institutions want to put on top of this ledger >> and you can push the envelope right because you have 11,500 u institutions that you work with. So it may be a few core for now um but I think the sky is the limit right. Um, you mentioned that you have 30 to 40 partners at the moment that you work with. Um, what do you think? I think this is important for the people in the room here because there's a lot of banks, traditional financial institutions. Um, what does this mean on a day-to-day

basis for these institutions? How should they prepare? Um, are there steps that they can take to take advantage to join? >> Yeah. So, so when we announced back in September, we had 30 institute just over 30 institutions working with us. We're now working with with over 40 on this. So, it's real kind of almost like a global coalition, all regions represented, which is which is which is great because we want to design uh design globally. Our efforts here are always inherently collaborative. We don't do things on our own. We always collaborate. and and here we're taking something that we want to get into a production environment really pretty pretty uh quickly. Um so I think it's an

an exciting space. I think about financial institutions in in this room. We're also very conscious that you know Swift is not first to blockchain. We didn't suddenly discover it from under a stone, right? Everybody in this community's been working for a while. But the advantage we can hopefully provide is that because of that existing connectivity, we can really help institutions to adopt and scale this very rapidly. And the other component to that is all around standards. Um, and so I really like that container analogy before because why was the container successful? Because you had the standardized box, right? You wouldn't have infinite variation. You have a standardized box. And we need to be able to create the standardized boxes now for

the digital assets and digital money uh in environment. And that I believe will help help scale and indeed it didn't get picked up so much but but actually back in Cybos we also announced that we are creating a a standardization platform which will enable people to be able to come and plug and play to create standards compliance tokens and smart contracts. >> That's wonderful. And I see my red sign is flashing that I'm out of time. Unfortunately, Ilio is >> he has a question. So I will allow him because this event was his uh his brainchilds.

>> Uh that's a really interesting question. I think actually it's a good analogy and um I didn't make this up. Uh somebody a good friend of mine Tony Mccclaclin who's >> and let me repeat the question for for the recording. Right. So IA was saying that um Swift is becoming a WhatsApp of of the financial world. Is that what you said in terms of um messaging um >> for blockchain rails? Correct. >> I'm sorry. Using blockchains. >> Yes. So, so, so, so, so one of my my my good friends and colleagues likes to say that if you're organizing a dinner party, it's much more easy to organize it on WhatsApp than it is via email. And so, yes, I think we are moving from the

email era to the to the WhatsApp era. I think the good news is in this space is that we don't have to create everything from scratch. We actually have loads of these components for what will be the f future financial stack. be they blockchain, AI, a trust and governance layer and richer data. So all of this is going to come together uh I think in in a in a much improved experience in the next five to 10 years. >> Thank you so much. Please put your hands together for Nick.