Sibos 2024 day 2: What you need to know

On day two of the landmark Sibos 2024 conference in Beijing, HSBC’s experts have turned to the key themes of payments and trade. This is a pivotal moment for the industry: the approach of the ISO20022 deadline when the world will shift to new messaging standards; signs of urgency in the quest to build a truly digital world of trade; and the growing application of new technologies like distributed ledger technologies (DLT) across financial services.

A new cross-border payment solution

Let’s start with payments. HSBC launched a new cross-border virtual e-commerce payment solution for banks worldwide. This will allow merchant business customers trading on e-commerce sites to receive EUR and GBP payments seamlessly through their local bank account, removing the need for them to use cross-border payments.

The new solution also allows Chinese businesses trading on platforms to receive funds in these currencies through their local clearing system and their own bank accounts. Lewis Sun, Head of Domestic and Emerging Payments, Global Payments Solutions, spoke of helping clients in a digital age. “The launch of virtual accounts solutions to banks is an important part of this vision, helping to empower clients in a digital economy,” he said.

The future of cross-border payments

HSBC’s virtual account announcement comes at a time of rapid innovation in cross-border payments. Mark Evans, Global Head of Cross Border & Cross Currency Payments, Global Payments Solutions, and Yvonne Yiu, Regional Co-Head, Global Payments Solutions, Asia-Pacific, studied the influences that will shape the future of this fast-moving space.

They contrasted the 12% growth in international payment volume in the last four years, as measured by Swift, with the 73% growth HSBC has experienced in executing cross-border by alternative mechanisms.

“What does this tell us?” asked Mark. “It’s a clear sign that there is growth and huge potential in cross-border payments – and that clients are increasingly looking for alternative ways of doing this.”

Yvonne noted a sea change in the adoption of the RMB in payments. According to Swift data, the currency accounts for 4.7% of international payments¹. “You may think that a small number, but according to recently published PBOC [People’s Bank of China] data, year-on-year it grew 21% cross-border.”

The evolution of payments will be affected by customer expectations. Customers expect speed, transparency and traceability, Yvonne said. “All these things have to be delivered without compromising security and trust.”

The final lap to ISO20022

One of the main themes of the event is ISO20022 as the November 2025 deadline for transition approaches. HSBC is preparing, said Ralph Nash, Global Chief Risk and Compliance Officer, Global Commercial Banking: it can already receive and forward messages in the new MX format in all markets.

“But HSBC’s technical readiness is only part of the transition process,” he said. Financial and market infrastructure providers also need to be ready, and corporate clients will need to transition. For that to happen, “work in demonstrating the benefits of the new format – and the challenges of non-transition – needs to occur.”

Those benefits are easily demonstrated, Ralph said: they include speed, certainty, transparency and flexibility, all of it reducing resilience risk. Richer and structured data may reduce false positives and allow discounting to be completed without client contact. “Looking ahead, the additional flexibility in integration may allow innovation on payment platforms and alternative value chains to proceed more quickly and easily,” he said.

“We can expect ISO20022 to contribute to a more flexible and innovative landscape of the movement of value that will reflect the underlying economic landscape that our clients are likely to operate in,” Ralph said.

Digitising global trade

If one positive came out of the pandemic, it was the realisation among banks and corporates of the need to push harder on their digitisation agenda, said Aditya Gahlaut, Regional Co-Head of Global Trade Solutions, Asia Pacific.

The benefits of moving from paper-based to digital trade “move beyond efficiency,” Aditya said. “Digital documents enable transparent and secure operations leading to lower risk of fraud.” That, in turn, allows banks to bridge the trade finance gap that affects the SME level.

Aditya called for further progress in the fields of legislation, common interoperable standards, adoption and partnership. He spoke of progress, such as the adoption of the Model Law on Electronic Transferable Records (MLETR), and the commitment of ocean carriers in the Digital Container Shipping Association to convert 50% of their bills of lading to digital by 2027, and all of them by 2030.

“There are a lot of things coming together at the right time,” Aditya said. “With a push from all of us we are getting closer to the end of the journey.”

Fund tokenisation: a question of value

In a panel looking at the benefits of DLT for the asset management industry, John O’Neill, Group Head of Digital Assets and Currencies, focused on fundamentals. “It’s all about liquidity,” he said.

“The critical question is, what’s the point of DLT?” John asked. “Why does it make the world better?”

There are many ancillary benefits, he said, but “what is transformational is more rapid settlement finality. It’s about achieving legal asset transfer more rapidly and completely, and performing the associated payments more rapidly and completely.”

That’s the characteristic that will drive liquidity, he said: the speeding up of transactions – “whether it’s buying a fund or a bond or your lunch” – frees money to be reinvested in new transactions. “That means you get a more liquid market.”

Look out for our day three update tomorrow. See you then.