In our latest episode of StreetsTalksTo we are joined by Philippe Morel and Marjan Delatinne of SETL, a London-based technology provider with a proven track record in delivering distributed ledger technology for financial markets, asset management and payments.
We discuss some of the transformative technologies of our time: we touch on blockchain, the world of payments, digital identity and digital transformation. We look at how central banks are assessing the feasibility of Central Bank Digital Currencies, dive into tokenisation and the securitisation of tokens and digital currencies. We also discover how SETL has successfully completed the world’s first CBDC live funds transaction in collaboration with the Banque de France using the SETL blockchain.
SETL is dedicated to building blockchain-based solutions for Financial Markets, Asset Management and Payments. Their proprietary technology is designed specifically for regulated, high performance, low latency applications, and powers financial market infrastructures that are both active and operational, including IZNES and ID2S.
As CEO, Philippe leads SETL’s overall strategy and operations. Prior to joining SETL, Philippe was the worldwide leader for Capital Markets, as well as the EMEA Leader for the Private Equity and Principal Investor Practice at a top-tier strategy consulting firm. Philippe has over 25 years of experience in financial services across the European markets, particularly in advising Corporates and Financial institutions on their strategies, organization, and change management.
Marjan Delatinne is Head of Payments with overall responsibility for growing SETL’s payment business, alongside its market infrastructure and asset management offerings. Marjan joins SETL having most recently served as Global Head of Banking at Ripple, in charge of defining and executing the go-to-market strategy and sales of Ripple’s products and services. Prior to Ripple, Marjan served in various senior business development roles at SWIFT, where she was responsible for the commercialisation of large scale projects both in securities and payments, namely Target 2 Securities and SWIFT gpi (Global Payments Innovation). Marjan began her financial markets career in sales and relationship management at BNY Mellon and Euroclear. Marjan holds a degree in Business Administration and a Research Masters degree in Experimental & Clinical Psychology from the Université Catholique de Louvain.
Julia: Hello, my name is Julia Streets, and welcome to the podcast series StreetsTalksTo. In each episode, I interview leaders from some of the most influential firms, bodies and initiatives in the financial services industry. On each episode, we explore what’s at the very forefront of innovation and change. We think about the challenges facing clients and also the industry at large, and we uncover the opportunities that exist, both today and as we look ahead, particularly as we all navigate to these extraordinary times. We really hope you enjoy this series, which you can find on all good podcast channels and all the episodes are listed on our website, streetsconsulting.com. You can find these episodes using the hashtag #streetstalksto, and thank you for listening. Welcome to StreetsTalksTo SETL.
SETL is a London-based technology provider with a proven track record in delivering distributed ledger technology, or DLT, for financial markets, asset management and payments. SETL’s proprietary technology is designed specifically for regulated, high performance, low latency applications, and its technology powers regulated financial market infrastructures that are both active and also operational. When I talk about these, think about Central Securities Depository such as ID2S, and fund distribution platform such as IZNES. Most recently, SETL has successfully completed the world’s first Central Bank Digital Currency live funds transaction in collaboration with the Banque de France using the SETL blockchain.
Today I’m delighted to be joined by two guests: Philippe Morel, CEO, and Marjan Delatinne, Head of Payments. Let me tell you a bit about each of them. Philippe Morel is the CEO of SETL, and prior to joining, he was a worldwide leader for Capital Markets, as well as the EMEA leader for Private Equity and Principal Investor Practice at a top-tier strategic consulting firm. He has more than 25 years of experience in financial services right away across Europe, including advising corporates and financial institutions on strategies, organisation and change management. Philippe, it’s wonderful you could join us. Thanks for being on the show today.
Philippe: Julia, always a pleasure to talk to you.
Julia: I’m really looking forward to this discussion, and I’m delighted that today you are joined by Marjan Delatinne, who is the Head of Payments at SETL. She has overall responsibility for growing its payments business alongside the market infrastructure and asset management
offerings. Now she most recently joined having served as Global Head of Banking at Ripple and has served in various senior business development roles at SWIFT, where she was responsible for the commercialisation of large-scale projects, both in securities and in the world of payments. Think particularly Target 2 Securities and SWIFT GPI. So Marjan, wonderful you could be with us. Thanks for joining us.
Marjan: Great to be here today, and thanks for having me, Julia.
Julia: It’s a pleasure. I can’t wait to get into the discussion. What we always start with is rather than talk about SETL.I hope I’ve done you proud in the way I’ve described the business, but actually I’m more interested in thinking about, what is it your clients are thinking about? What is it that’s particularly keeping your clients awake at night? Philippe, can I come to you first of all? Love to hear your thoughts about what clients are talking to you about.
Philippe: Thank you, Julia. Well, I would say obviously we’re in the midst of a pandemic and this combined with Brexit keeps a lot of our clients very aware of the environment, but specifically to our area of concern, which is technology, I would say after so many years of having to adjust to regulation, our clients are now thinking of making a move and using the new technologies available, and really challenge their business models. They know specifically to a blockchain, that they have a platform which will allow them to make their transactions faster, more efficient, at a lower cost, yet the level of investment required can be significant. So I think a number of them are asking themselves, is this the right time to make the big move in the unknown and start changing infrastructures, which have been in place for the last 30 years? So I think this point is really, I would say, top of the agenda of a number of CIOs, CTO and CEOs of our clients.
Julia: Marjan, you’re talking to clients of the payments world in particular as well. I’d love to hear your thoughts. I mean, does that chime? Are they talking about digital transformation, or are they talking particularly about payments change?
Marjan: Coming back to payments because this is a very noisy world. Almost every day you’ll have something new, you’ll have the regulation, actually, in specific markets pushing for change and bringing competition in terms of solution to the customers. But at the same time, the underlying factor of this transformation is technology, And I think throughout this noisy world, we still haven’t been able to deliver to the promise of cutting costs and bringing a real experience. I think that that’s where blockchain or DLT has been introduced in the last few years, but they haven’t yet managed to deliver the promise fully. I think what we see with COVID and the pace of transformation, that it is really accelerating, is giving a new opportunity, a new, I would say, momentum to DLT.
Julia: If we think about, there’s been an enormous amount of hype around DLT, we have to admit that as well. I’d really love to get your thoughts in terms of, where do you see people really doing business? Where is there a real change? Philippe, love your thoughts on that.
Philippe: You’re absolutely right, Julia. I would say there has been a lot of hype about blockchain, and for several years now only a few proof of concepts, or actually quite a lot of proof of concept have been delivered, and so more and more clients or general industry commenters are asking, is this technology just about delivering proof of concepts? But I think for probably the last six months, we’ve seen a real acceleration in the number of projects coming live. And you were kind enough to mention what we’ve done with the financial bank and what we’ve done actually 18 months ago with IZNES and ID2S. But I would say in the securities loan area, in the equity issuance, In the bond issuance, in bond trading, I would say we see more and more of projects coming live.
As we see more of those projects coming live, I would say the industry in general realises that this technology can really change the way that back offices and front offices alike work in terms of cost, in terms of speed, in terms of impact. As those projects come live, I would say that the impact on the overall industry landscape is changing. You can see banks who are actually taking the lead in this area versus banks who aren’t. It’s probably too early to say, but my bet is in 18 months’ time you will start seeing impact on the banks’ results; those who are really making the effort to make the investment, understand the technology, understand its impact on their business model, and those who prefer to take more of a laid-back approach. And there’ll be winners and losers. And obviously our point is, winners will be those who embrace this technology with energy and really make the most of it.
Julia: Wonderful. Marjan, Philippe was just saying about those who can really take a lead here, but there are some very specific areas that are changing very fast. As what I know in the world of payments, there’s some very keen areas you’re paying attention to right now. Love to hear your insights into that.
Marjan: I think I would like to demystify why transformation and why transformation in payments, and I think the root cause goes back to the experience that we have with internets. The Internet has shifted completely alive in terms of communication, in terms of entertaining ourselves, and in terms of even daily life. What COVID’ has actually reminded us is that the priority that, the way that the financial industry is working is not fully yet catered to cope with this world of internet. And I think that’s the, let’s say, tipping point that we are facing with payments. Even though you have lots of fintechs that are proposing new experiences and new solutions, but let’s say that the back-ends, which are today handled by the banking institutions, is not necessarily shifted completely. Is still based on legacy, very costly. And fintech doesn’t like necessarily to take up the back-end.
They [fintechs] love the front end. They manage the front end, they bring you experience that they use open banking, but at the end, who is the real actor in the financial industry today? It’s still banks, because the accounts are still held with the banks. So I think this is where we have this tipping point of how we can change and transform the payments into the digital world.
Coming back to what Philippe said in terms of, who are the fast drivers, who are the challengers? I think a few years back, we had fintechs trying to disrupt what we see today, that some of the large banks as well getting not into the disruption, because payments is a regulated world; you can not disrupt it. You have to build it, an internet of value, based on regulation. I think that’s the part that we see today in the payment space.
Julia: Philippe, just building on what Marjan was saying there, when you think about the fact that this is a very regulated world, but yet blockchain itself isn’t necessarily regulated, but then in the middle, there’s a whole discussion about central bank digital currencies. And I mentioned in my opening remarks that you’ve been running the test with the Banque de France as well. I’d love to get your thoughts about why it’s important that central banks are involved in the discussion, what that actually means for the market as a whole, and therefore your role within that.
Philippe: I would say blockchain has a bit of a Salesforce reputation; a lot of people associate blockchain with Bitcoin and cryptocurrencies. There’s much more to blockchain than just cryptocurrencies, and I think the fact that the central banks are now stepping into this space, shows that they are taking the technology seriously. They understand the impact. They understand that with blockchain, they can actually get rid of a commodity which has been in the world for the last 20 years or 40 centuries, which is cash. With COVID, people have started to realise that cash is actually not as useful as it used to be, and I would say individuals are moving away from using cash. Now central banks are stepping in and trying to substitute, I would say, physical cash with digital cash. That’s what CBDC’s are all about. Now, that’s just the first layer.
The second layer behind that is central banks are sending a message, which is: using blockchain as a regulated way of distributing cash or securities is becoming acceptable, so the technology underlying it can actually be a change agent for what Marjan was describing earlier, i.e. the large commercial banks in the world who are still owning a large part of the back-end transactions, and which is still running on very obsolete technology. And so I see the message central banks are sending is: it’s not just cash that can be digitalised. It’s also any kind of underlying assets; assets which are already, I would say, on stock exchanges, like equity or bonds, but also real assets like real estate, etc. So I think it’s a really important message, which is well received, I would say, by the financial community as a whole, and for which we will see significant impacts in the coming years.
Julia: I wonder if I can move the discussion on just a slight shift, if I may, which is to take this on to the conversation around tokenisation. And we talk about tokenisation quite often, and the securitisation of tokens and digital currencies, etc. But I wonder whether we could think about the role of tokens in the world of payments. Marjan, just picking up on your comment there about the internet of value, thinking about some of the processing of sort of the back office function as well. Mind naturally goes to things like digital identity, which is a common challenge that people are trying to tackle right now, and I know that’s something you’ve been looking at. Do share your thoughts.
Marjan: Yes, indeed. I think it’s a very good question, Julia, when we are talking about the payments today, and in a regulated market, everything goes back to the accounts. An account means who you are. When you’re talking about token, and as was mentioned by Philippe, a token could be any kind of asset, so payments, securities, whatever… a painting. So whatever that you can digitise and represents a value is a store of value. So when you are moving from a world… and we see that through CBDC, and if CBDC will use DLT that we see this is a trend because of their experimentation that we see in the markets. If they are using DLT, you are moving from an account-based model, which is heavily dominated in the payments, securities world, to a token world, where token is a representation of the digital signature based on an immutable ledger.
I would say, it’s not a small shift in terms of change because it is no longer your identity but is immutability of digital signature in a ledger. That means that the trust that it is the most important element in finance now becomes true through this immutability. So I think, therefore, when you look at the way that today we manage identity, well, of course it has improved a lot. You don’t go to the branches to show your passport. You do that in, I don’t know, three to five minutes high-level, let’s say, verification. But still, it is very much far from the world that the money and assets are fully digital. So I think, therefore, our approach, in addition to that organisation, which is the essential part of the real time settlement and finality, is to build the overlay services that enables a real experience.
I think digital identity, and I’m sure that this is a very common trend in the market, is the most essential part, and I think using DLT, with the immutability and all the trust elements that you have in DLT, makes much more sense on the top of existing solutions that are still based on physical certificates that you show, you take a picture. This is very transformational, but if you get swift full digital onboarding or with the capacity that goes with it, digital identity is very important. We have launched a solution; VERAFIDE is an open-source digital identity platform open to all the providers out there that are looking at implementing or integrating digital identity to payments. Obviously, it’s a big step for us in terms of open-sourcing our solutions. This is probably not the first one, I would say. They have these habits and experience of building future-proven infrastructure and put that at the disposal of the industry in terms of the usage and continuity.
Julia: It’s going to be very interesting to continue this discussion about digital identity, and it’s wonderful to see about the product. I’d encourage listeners to go and check it out because I think there’s going to be great demand, certainly from early conversations that I’ve been having as well. I wonder if we could just have a moment of caution because I think our appetite’s to talk about innovation, the pace of change, digital transformation, thinking about the world of payments and some of the innovation there; I worry that there are some things that we have slightly set aside, particularly in the context of, COVID has reframed how we work, or thinking about Brexit and some of these big drivers as well. Can I just ask you both if there are areas that you think may be put on the back burner or that we are at risk of overlooking? Marjan, can I stay with you, first of all; what are we at risk of overlooking?
Marjan: I think we shouldn’t overlook the complexity of building a digital transformation strategy and implementing a digital strategy in a big organisation. This is very complex, especially if you want to move legacies towards a new world. Some of the banks, the way that they handle that, they don’t even touch the legacies and they open new banks, But we see that it doesn’t work either because somehow the heritage of a bank is lying with the legacy. So I think what we realise is a lot around handholding and helping banks to build this strategy with the right partner. I personally spend lots of time in terms of helping my clients to understand, what is the value that this brings? And what can be reused as a utility, that to somehow bring profitability to multiple business lines? Because this is about a new infrastructure that will somehow be connected to multiple business lines of the banks. I think that’s very important, and that’s the time we spend.
Julia: Certainly as people are considering how to do that, you need to have somebody by your side who not only understands the big picture, has the experience, but also understands the new innovations that are happening as well. That’s a really salient pause for thought, if you like. Philippe, can I ask you the same question? What are we at risk of overlooking?
Philippe: I would absolutely second what Marjan just said. The technology works. DLT works. It’s been proven for the last three or five years, so that’s not in question anymore. The question is more, what for? And how do we design solutions which work, which are implemented in an environment where our clients essentially get their money’s worth? So having a team who was able not only to understand the technology but it was also able to understand the environment in which securities, cash, settlement, custody are all aligned in a way which is working properly, I think is really where the difference is. The good news is DLT cannot be challenged anymore because there’s been so much proof, at SETL and elsewhere, that it is a technology which works and is here to stay.
But again, take Marjan’s example earlier, going back to 2000 when the internet was just a starting thing and a bit of a hype, what we see is that it has taken 20 years or 15 years for it to have the impact it has and really change our life. Now, I think what blockchain is doing is exactly the same thing on our clients’ back office, back-end, and also creating new opportunities, new business models. It is true that the banks are absolutely here to stay, but at the same time blockchain allows to decentralise finance a number of instruments and interactions, which so far were in the hands of only a few players. I would say this decentralized finance is opening new business models, new ways of working, and we’re just at the beginning of seeing the impact.
Julia: I can’t help to wonder, we’re heading into arguably quite tough economic times and the fight for budget. Here we are in the summer of 2021. Budget season comes around faster every year, so the longer my career goes on the cycle goes around faster, but there is this constant pressure on, how do you unlock the internal resources on your client side when you have to run the bank as well as, and I say the bank, financial institution… as well as changed the bank? and I hear these stories about, that pot of budget is just getting smaller and smaller. I’d love your thoughts on, what advice do you give clients when they’re making the call for that innovation pot, if you like? Philippe, can I address that to you?
Philippe: This debate clearly started in 2008 with the first big financial crisis of the century, and I would say a lot has been learned since then. We can certainly see now the difference between a number of our clients, who have mastered this change of bank versus run the bank dilemma. And I’ve managed to set aside a sufficient pot of money to actually manage to start changing the institutions. I would say, it’s only recent, maybe for the last two/three years, probably delayed by a few years because of COVID but still it is going to be there, where a number of institutions, not necessarily the largest but the more agile and the more I would say innovative, have managed to set aside a sufficient amount of money to actually use what the new technologies have to offer, and not just scratch the surface and pretend they are doing some investment and pretend they are doing some stuff, where in reality they are not doing much.
What strikes me is, and unfortunately I can’t quote names but I have names in mind, is the difference between those leaders and the followers. And my bet is, as usual, if we fast forward ourselves in 10/15 years we will see those leaders continuing to gain market share in the financial industry where there’s an endless trend of concentration, as we’ve seen, I would say, for quite some time now. The differences are going to become more obvious because what technology is doing, it is enabling those innovative companies, innovative financial institutions, to actually grasp what technology is actually allowing them to do, and is absolutely phenomenal and fantastic.
Julia: Of course, the greatest drivers of change in this industry are always found in the conversation about compliance and regulation. And we’ve talked a little bit about regulation of the industry, we’ve talked a little bit about blockchain and its contribution and how the central banks are paying attention to it as well. I’m going to ask you a slightly odd question, if I may, which is, I’d love to know when you look at the regulatory landscape, do you have a particularly
favourite piece of regulation you’re paying attention to right now? Marjan, I’m going to come to you, first of all. What’s your favourite piece of regulation?
Marjan: I wouldn’t call it really a regulation, but I will call it, I think this transformation. We are all in the same boat. And we see that this is not only with a commercial sector or a private sector; you see as well, the reflection is today that the central banks and the oversight is doing around how you want to build regulated markets around this new technology, that is completely different than what we faced before. So I would say that for DLT, and if the choice is going to DLT for CBDC, I think is the best use, but because it will make this technology more scalable, it make that mainstream, and it will finally help to bring the promise to both the business side and the retail side.
Julia: Wonderful. Philippe, so it’s a similar question to you, really. As you look at the landscape, and well, we’ve talked there about infrastructure, we’ve talked about payments, we’ve talked about asset management as well; is there a favorite piece of regulation you’re paying attention to?
Philippe: Well, I would say my favourite regulation is the next regulation, the one which is going to be put into implementation. If I just take one example I have in mind, because that’s one we’re working on at the moment; we know that CSDR, the Central Securities Depositories Regulation, is going to impose fines on failed trade in certain circumstances. Now the question is, we don’t know when and we don’t know how much, but we know for sure this is coming. So the question for a number of participants is, how do we actually take advantage of this from, I would say, a settlements perspective to create new business opportunities, implementing, for instance, blockchain-based or to borrow facilities that will allow to take over those trades when they are about to fail? I see this as a wonderful example of innovative financial companies who, instead of saying, “Oh my God, regulation’s coming. It’s going to continue to dampen our margins,” actually grasp the opportunities that regulation is opening to create new opportunities for revenues for themselves.
Julia: Fantastic. Well, we’ll be paying attention to that for sure. And I hope the listeners are enjoying this conversation as much as I am. It’s StreetsTalksTo SETL. I’m delighted to be joined by Philippe Morel, CEO, and Marjan Delatinne, who’s Head of Payments. If you’re wondering how to find more episodes like this: streetsconsulting.com, hashtag #streetstalksto, is how you can find us.
I want to go into closing remarks, if I may. It’s been a fantastic conversation. We’ve been talking for the highest level about some of the industry drivers, digital transformation, CBDC, central banks, thinking about the world of payments and digital identity. I would like to hear your thoughts about, as you look ahead, the remainder of 2021 into 2022, and by all means even further and beyond, if you can take that view; it’s, what are you particularly paying attention to right now? Marjan, let me come to you, first of all.
Marjan: I think the rest of the time, and this again is not going only beyond 2021, but I think the work that we are doing in currencies around making sure that whatever we are doing with our technology is addressing and solving a problem. And we continue that, and I think this is becoming more and more a momentum for us. If two years ago it was only talking about, what is the problem, and let’s use this technology, I feel that we are reversing the situation as to, what is the problem, and we are solving it. I think tokenisation is going to be a big, big change in the coming years and definitively in the agenda and roadmap of some large banks in 2021.
Julia: Fantastic. Well, we’ll keep a keen eye on that for sure. Similar question to you, Philippe; now you’re thinking about the business and you’re thinking about the roadmap ahead. What are you paying attention to?
Philippe: Well, I’d say, well, first of all, let’s hope that we’ll have COVID behind us soon. Let’s hope that we’ll have Brexit done as well, because these are two significant roadblocks on, I would say, the way forward for any economic actor. Now, assuming those boxes are ticked and we can move forward and go back to business, as Marjan was saying, the question for us is speed of innovation, and will we manage in 2022 and forward the same speed of acceleration, or the same acceleration, as the one internet managed back 15 or 20 years ago? I think that we now see the regulators aligned or getting aligned. We see a number of important changes in our clients on the way they consider our technology. We see that we are bringing real innovative solutions. Now, will this suffice to change an industry which we know likes to procrastinate and take time to adopt to innovation.
As we are talking not necessarily to the fintech but to the big players, I would actually appeal to them and say, “Look at this technology. This is going to make a real change on the way that your back offices work. You’ve never managed in the last 30 years in making any changes in the way that your back office operates in a significant manner. Well, we are now bringing the tools to make those changes. Please seize them.” And it doesn’t matter if it’s from SETL or from our competitors; I think globally, we have an aspiration to change this industry for the best.
Julia: Incredibly rallying call, and it feels like now is the time. It’s been fantastic to have you both on the show. To the listeners, if you’re wondering how to find out about SETL, the website is www.setl.io, and that’s S-E-T-L, setl.io. You can find them on Twitter and on LinkedIn. Marjan Delatinne, it’s been a joy to have you on the show. Thanks so much for joining us today.
Marjan: Thank you very much indeed for your time, it was a great conversation.
Julia: It was a great conversation. I really enjoyed it. Philippe Morel, thank you very much indeed.
Philippe: Thank you, Julia. Always a pleasure.
Julia: Wonderful. And to everybody, I hope you’ve enjoyed the conversation today. I’ve been Julia Streets, and thank you for listening to StreetsTalksTo SETL. Tune in again for future episodes.
Kieron Yates: This episode of StreetsTalksTo was produced by me, Kieron Yates, on behalf of Streets Consulting Limited. Streets Consulting is a business development, marketing, communications consultancy that’s focused on helping fintechs from the smallest startup companies to some of the world’s largest global organizations. Everybody’s trying to innovate and everybody’s trying to grow. You can find this episode on the streetsconsulting.com and using the hashtag #streetstalksto. We can be found on LinkedIn and on Twitter at @StreetsConsult. Thanks for listening.