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Money from unexpected places

Information is power. Now, it’s money, too. Ignore it at  your peril

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  • Written by  Orla O’Sullivan
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By Orla O’Sullivan, freelance writer

We have seen the future of banking and it is Play-Doh, ponytails (on men), purple hair and pantyhose (on women), and executives called Yobi.

If those unanticipated elements of the SWIFT Operations Forum earlier this spring sound like mere gimmicks, along with the now predictable slew of people with “innovation” in their title, consider how the fantastic and intangible are already translating to cold, hard cash. Some developments mentioned at the event:

•    Online gamers buy fantasy weapons with virtual currency then sell them for dollars (Bitcoin users via eBay);
•    Another virtual currency, the Ven, now trades on Thomson Reuters;
•    A de novo, The Good Bank, plans to give eco-friendly businesses better terms;
•    Another start-up reportedly will base an individual’s credit ratings largely on his influence online.
•    Flanked by SWIFT’s resident futurologist Heather Schlegel (she of the purple hair and hose), tie-wearing Kosta Perric, a SWIFT lifer, now Head of Innovation, said recent developments raise the most basic questions. “What is money?” for example.

He flew to the conference on an airline that allows him to buy goods with his frequent flyer miles (which airlines must account for as liabilities, Schlegel noted). Recently, he bought drinks in a Toronto bar with the Ven, a currency originally created for internet micropayments that exists only as a symbol on his cell phone. A seller’s reputation on eBay translates to better business, Perric added. Effectively it’s money, he said: “It has another value but there is no way to express it.”

Participants later expressed their inner entrepreneurs with Play-Doh, among other props, while pretending to be start-ups in a workshop facilitated by Innotribe, SWIFT’s innovation unit.

SWIFT itself is a good example of creative reinvention, commented market observers on background. Its universal system of communicating payments’ information has benefitted from a crisis where the collapse of one investment bank (Lehman) had huge implications, leaving other financial institutions leery both of being tied to any one bank and of hidden links in the financial chain. SWIFT’s expansion from banks to corporate customers, from payments to the paperwork around them, is something of a metaphor for the financial industry.

As play met dough in more practical sessions of the two-day conference, a common hypothesis remained: networked information is (almost) the ultimate value. The common question: How do you bring elements outside of the system into the (automated) information loop? Those elements are both cash/competing currencies and paper. Several SWIFT paper-replacement initiatives should help identify who stands behind monolithic entities, such as counterparties (the electronic bank management utility) or securities (legal entity identifier—or LEI). 

Bringing finance back to its most tangible, Sharon Petrey, assistant treasurer with Coca-Cola, noted, “We collect $3 billion off the street every day.”

In a later interview Antonio (Yobi) Benjamin, global chief technology officer and managing director of Citigroup’s Global Transaction Services, spoke of a hugely successful initiative the GTS unit introduced last year to collect 47,000 small payments from mom-and-pop businesses via mobile phone.  Lack of internet service sometimes makes cash the only option, he said. GTS is taking its mobile payment service to China, he added.

The ponytailed Yobi said in his session on innovation that GTS views disruptive payment technologies differently from the retail bank: “Anything that can increase flows is good.” (Thriving GTS is outperforming its parent and represented 16% of Citi’s 2011 revenues.)

Fellow panelist Susan Skerritt, head of business strategy and market solutions at BNY Mellon Treasury Services, when asked about the effect of Google Wallet, Facebook Credits, etc., said most potential bank competitors still rely on banks for payments. “It’s second-hand, but we’re still in the business.”

However, Schlegel, in her session, warned banks to heed the “mistrust of large corporations” evident in Occupy Wall Street protests and, as yet, emergent currencies.  Her research shows small businesses willing to trust their social networks over banks. “There’s a huge shift in values. Ignoring that is going to make it hard for us to grow as an industry.”
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