• Regulation can be seen either as a challenge and a cost to a business or an opportunity to improve business processes and propositions
• Technology helps financial institutions comply with regulatory requirements, but whether regulation can keep up with innovation remains an unanswered question
• Partnering and collaboration amongst banks, fintechs and other technology providers open up significant opportunities.

Siddharth Chandani (SC): We’re here at SIBOS speaking with Jacqueline Keogh, head of global payments sales at Western Union. In the white paper published by Western Union Business Solutions, it describes the current state of the market ecosystem and how regulation is taking away some of the budget or resources that can be utilised for more business purposes. But on the other side, we also see these regulations are driving the financial services [industry’s] transformation. What are some of these regulations, and how are they impacting the industry and your clients?

Jacqueline Keogh (JK): The payment industry has always been subject to regulation. In the last 10 years, we've faced more regulation than historically. Some of those have been to protect the ultimate client and some of those ensure that we, as an industry, behave appropriately and rebuild the trust in the industry. Those regulations can be looked at in two ways: either as a challenge and a cost to your business or as an opportunity to do things differently and better. 

Let me give you an example of one central regulation: PSD2 or open banking, depending whether you look at the regulatory environment in one country or the opportunity overall. It can be looked at as a challenge that is going to require you to invest significant money in your organisation to ensure that you're meeting both the security requirements and the trust and identity requirements of the organisation. Or, it can be looked at as an opportunity around how do you acquire additional data so that you can enhance the product offering that you can give to your clients. Now, an innovative, creative organisation looks at it from the perspective of, ‘How can I use these regulatory requirements to enhance my proposition?’ 

In Western Union, we attempt to do both. We attempt to balance both of them, but we always look to take any requirements that we need to fulfil and enhance our products with more value added to our ultimate client. 

SC: Ultimately, where do you see the balance between regulation and innovation?

JK: It's a very hard question. I suppose I’ll present the question to you another way. With the level of significant innovation happening today driven by the advancement of technology, can regulation keep up with innovation? I actually look at it the other way, rather than [ask] ‘Can the industry keep up with regulation?’ I'd ask the question: can regulation keep up with the advances in technology? Because as the industry moves more to cloud technology, uses more AI and improves machine learning, all of those capabilities can ensure that we meet the regulatory requirements and can improve our compliance capabilities as an organisation. I have no doubt that the technology can help us meet the regulatory requirements. The question I would ask is, can the regulators keep up with the innovations and technology enhancements?

SC: Could you also talk about some of the cross-border solutions your financial institution has planned? How are these solutions outliers or how do these set you apart from nascent and emerging players?

JK: The propositions we offer to our clients are firstly, truly global. We can reach any country in the world, we can meet their currency requirements in all currencies – almost any country; there are two countries we don't support. We can meet their currency requirements and we can do that in an environment that will give them choice of the type of payment instrument they want to use, whether their use case or need is for a low volume, high volume or urgent payment, whether that payment needs to have with it accompanying information. We can give our clients choice and visibility, cross-border and multi-currency. 

Most organisations have limitations around currencies, have limitations around countries and have limitations around choice. It is our ability to provide choice of currency, geography and also visibility. That differentiates us. 

SC: Are you targeting specific payment corridors? Let's say XYZ Company targets emerging market payment corridors. Is there a certain specific strategy for that?

JK: Our strategy from a payments perspective is very much driven from verticals. We focus on particular industries, but we become an expert in that industry. The reason we do that is because then we can fundamentally understand the needs of that industry and of those clients and tailor our proposition to those needs. 

Let me give an example. We have very strong propositions in the education sector, where we meet the needs of the universities to both collect money from the students and to pay money away to their suppliers. It's an industry where we've got a lot of expertise. Today, we support eight of the top 10 universities in the world and have university coverage globally. 

We focus on a particular industry the same way as we focus on the needs of the legal industry, we focus on the needs of not-for-profits. We look to understand the particular industry, tailor our needs to their requirements so that it's more around them than it is around us and the payments that we deliver. 

SC: Trade volumes are volatile with the ever-changing geopolitical landscape and trade restrictions. In terms of trade revenue, the market pie and the revenue pie seem to get bigger and bigger. We spoke to a number of our bank clients and they always try a somewhat wait-and-watch approach. Where do you see this going?

JK: International global trade continues to grow, that’s positive for all of us. What I see from that trade business, that trade industry is that we're seeing an increase in velocity – the speed at which the growth happens, the speed of which payments need to be processed, and also the change in terms of size. Because there is more choice, because there is more ability to process payments faster, with better speed and better visibility, we're also seeing the size of the payments reduce. In the past, you may have only made an international payment for a large transaction. Now, more and more small and medium enterprises (SMEs) are trading internationally, so the average size of payments are reducing across the industry as well.

SC: We've seen tremendous uptake of the SWIFT gpi service. In your opinion, what is the next big thing? What is lacking? And, what is your opinion of the non-banking community being a larger part of SWIFT gpi?

JK: SWIFT gpi is a great capability from a client's perspective. It would give them the visibility they want. That visibility has been lacking or it has only been available in a particular environment. So, the collaboration around the financial industry to deliver the SWIFT gpi proposition is very positive. Like all things that happen in this industry, the pace at which it is being adopted is slower than most people would like. That in its own right is very positive. 

What I find very interesting at the moment is the next stage of SWIFT gpi: the request to pay, whereas instead of just tracking the outgoing payment, the beneficiary can ask for a payment to be made, and then can have some comfort that they are going to receive the payment in the future. That request to pay, I think, has a great opportunity to differentiate the propositions of many institutions who adopted quickly and also provide significant value to the beneficiary. 

From a non-bank perspective, my understanding is SWIFT are actually open to work with non-bank institutions. As long as you are a regulated organisation, you can become a member of SWIFT gpi – and that gives capacity to other players to participate. To be truly successful in the payments industry, we all need to learn to partner and collaborate and I think that is fair for the SWIFT gpi initiative as well. 

SC: Last question, what is your key takeaway from the conference this year? 

JK: My key takeaway comes down two things. One, I’d go back to my partnering comment. To be successful, we all need to learn to partner better. There are significant opportunities for partnering between banks, fintechs and many other technology providers. 

My second takeaway is, with all of the work that's now happening globally around instant payments, we as an industry have some more work to do around how we manage the liquidity associated with those instant payments. Instant payments are 24/7 today. Central banks, payment systems, we as individuals, generally don't operate 24/7, but if you need to manage your liquidity, you need to think about how you address that time zone. It's the challenge that all of us still need to continue working on and address globally.