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The financial industry has undergone significant transformation in recent years, driven by technological advancements and changing customer preferences. One of the most notable developments in this space is the emergence of multi-network ecosystems. This was also the topic of yesterday’s session at Sibos 2023: ‘Partnerships and interoperability in a hyper-connected world’. An inspiring session where a diverse, multi-disciplinary panel offered perspectives on the topic. In this blog, explore the insights and conclusions from this session.
Fragmentation and collaboration
Fragmentation has been a persistent challenge in the financial industry, with various networks and systems operating independently. This fragmentation can result in inefficiencies and increased friction for both businesses and consumers. The key to overcoming this hurdle lies in harmonising and collaborating across networks. Tom Scampion of GSS noted that: “Fragmentation can lead to friction unless you harmonise and collaborate.”
The importance of multi-network ecosystems
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Joanne Strobel from Wells Fargo emphasised the importance of multi-network frameworks, stating “Bilateral is painful.” Financial institution clients increasingly prefer multi-network ecosystems, especially in the context of diverse settlement mechanisms such as Central Bank Digital Currencies (CBDCs) and instant payments. Multi-network ecosystems provide a seamless and efficient way to navigate this complexity.
The benefits of multi-network ecosystems are manifold. During the panel discussion, the audience was asked what they saw as some of the benefits. Many indicated that they believed that these ecosystems offer ubiquity, enabling transactions to take place across a wide range of networks and platforms. Besides this, the audience also mentioned that they offer speed and frictionless transactions, making financial interactions smoother and more efficient. One-time integration into a multi-network ecosystem can significantly reduce the complexity of connecting with multiple networks. Surprisingly, capacity was named as one of the biggest advantages by the public, as multi-network ecosystems have the potential to handle large volumes of transactions.
Potential and challenge
To fully realise the potential of multi-network ecosystems, it is crucial to provide seamless, robust, secure, and resilient network environments. Trust is the cornerstone of any successful ecosystem, and clients must have confidence in the reliability and security of these networks. Achieving business growth in a multi-network environment requires a solid foundation of trust.
Despite the promise of multi-network ecosystems, challenges remain. Governance of multi-network ecosystem schemes is a complex issue, requiring agreement on standards, operating rules, and regulatory rules, including digital identity. Legal and business frameworks also need to be established to ensure smooth operations.
Setting standards for multi-network ecosystems should ideally come from the industry itself. As Jorn Lambert, Chief Digital Officer at Mastercard, suggested: “Technology enables, but standards make the difference.” Industry players must take ownership of this topic and collaborate to establish the necessary standards. Building blocks like ISO20022 and FIDO are already in place, making it feasible for the industry to drive the standardisation process.
In conclusion, multi-network ecosystems hold the potential to transform the financial industry by enhancing connectivity, reducing friction, and enabling seamless transactions. To reap the benefits of these ecosystems, industry players must work together to establish standards and address governance challenges. Trust remains paramount, and organisations that prioritise collaboration and agility are poised for success in the ever-evolving landscape of multi-network ecosystems. As the financial industry continues to evolve, multi-network ecosystems will play a pivotal role in shaping its future.
By: Edward van Dooren (STRATEGIC ADVISOR WORLDLINE FINANCIAL SERVICES)
Originally published at: Worldline