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We are proud to be payments nerds – we love sharing perspectives on all things payments. The Payments Nerds podcast features expert guests who explore the most important issues, topics and trends to consider in payments today. If you are a payments nerd too, or are a little bit curious about what’s going on the payments world, just download the “Payments Nerds” podcast from The Clearing House.
Speaker: You are listening to Payments
Nerds, a podcast where we share
perspectives on all things payments.
If you are a payments nerd too,
or are a little bit curious about
what's going on in the payments
world, you are in the right place.
Let's start the show.
Speaker 2: Hello, and welcome
to Payments Nerds, the official
podcast of the Clearinghouse.
I'm Greg McSweeney, and I'm your host.
Today we are recording live
from Sibos 2025 in Frankfort.
Now, Sibos is one of the largest banking
payments conferences in the world.
I was talking to some
folks at Swift today.
They actually have over 12,000 attendees
at this event that sets a record.
I think it beat the London
Sibos, which was, I don't know,
more than a couple years ago.
Pre COVID.
So it's quite a lot of people here.
It's very exciting.
There's a lot going on, a lot of sessions.
Michael spoke on a session yesterday.
Sibos is really more of
a marathon than a sprint.
It's a five day, sometimes
a lot, a lot going on here.
So today we're gonna talk about high
value payments, a liquidity efficiency,
and what's going on in that space
with our chips product as well.
So I have two great speakers here today.
I have John Foran, who is
product manager institutional.
Cash management at Deutsche Bank.
And I'm Michael Knorr Senior
Vice President of CHIPS Product
Management here at the clearinghouse.
And one of the things that we're
gonna start talking about is
liquidity, liquidity efficiency.
We released a a white paper today,
the strategic role of CHIPS network
and the modern liquidity management,
and really about how CHIPS and the
clearinghouse unlocks significant
liquidity savings for participant banks,
which Deutsche Bank is one of them.
Um.
We're gonna dive right into that and, uh,
I'll start out talking about the three.
Core principles are the three,
three highlights in the white paper.
The first being resiliency.
Um, it said the benefits, uh, I'm
reading right from the white paper here.
One of the benefits of chips outlined
in the white paper is resiliency.
It strengthens resiliency by maximizing
liquidity, efficiency, and giving banks
the capacity to absorb market shocks
or support overall market stability.
So let's talk about that a little bit.
Uh, Michael, I'm gonna turn to you first.
Why is that important and.
Where does this resiliency come into play?
Speaker 3: Sure.
Thanks Greg.
And maybe for the listeners that
are not so familiar with high
value payment systems, allow me
to, uh, elaborate first, right?
Sure.
'cause I think it's important, unlike
in the retail space where you have
a volume and low value, this is the
reverse chips process around, uh, 600.
30,000 transactions per day, but we
do 1.9, sometimes over $2 trillion
of payments on a daily basis.
Wow.
And that's now where really liquidity
matters because when banks make
payments to each other, they can
only do that if they do it through
normally in Central Bank money.
Right.
In the us that's the Federal Reserve.
And you can only make a payment
through the Fedwire system if you
actually have cash in the bank, right?
If not, the payment doesn't go.
Um, so you try to have enough
cash in the bank in order to
facilitate your payment traffic.
Now what CHIPS does, it allows
you to net payments right
across the participating banks.
So, uh, our algorithm finds the
most efficient package of, uh, of
transactions in real time and nets
these off and then only requires,
right, a specific amount of liquidity
to be available for the settlement.
And that's really the key, uh, advantage
that, uh, that this system has.
It can do basically your.
Well, the market can do its, uh, two
trillions of, of settlements, but
with a lot less, uh, liquidity, right?
On average, what we're saying is for
each dollar of liquidity you put into
the system or in central bank money.
You settled $29.
Right.
And you scale this up now on the amount
of, of, uh, or value of payments We do.
And that creates now savings, right.
For, uh, for the market, uh, o
overall and having less liquidity
need also improves in that sense.
Your resiliency in a sense.
Mm-hmm.
Because you might need your dollars
for other settlements in the market.
Right.
A lot of banks and.
Definitely, you know, hu Banks like
Deutsche Bank, they're not just
participating in the payment space, right?
They're pursuing security settlements
and derivatives and so forth.
And all these different, uh, uh, systems
have their liquidity needs, right?
And if you can save on one, it's better
than having readily available right?
For the other, and that's
sort of a key advantage.
Speaker 2: Yeah.
Describe the netting, like put that into
an example is that if, so, if Deutsche
Bank is sending, uh, free payments to
another bank and that bank is sending.
Four payments to another bank and, but
that other bank is sending payments back.
Is that, how can, can you, can you put
that into kind of a, a real world example?
Speaker 3: Yeah.
Good.
Yeah, absolutely.
So the more banks are participating
and the more payments are flooring,
the more efficient the netting.
So it exactly that, right?
It figures out if bank A sends
to B. B2C, c back to a, the
system knows about that, right?
It looks at the sendent receiver and the
values, and then, uh, determines that
these payments, if I group them together
in a, in a little packet or batch and
settle them in one go, then I only need
to worry about the net amount, right?
I mean, in two payments, if you sent
money to me and I sent it to you.
The system says, oh, great,
there's money from Michael to Greg.
Instead of, you know, a hundred dollars
one way, 120, the other, it's just net 20.
Right.
That basically need to be recorded.
Um, now we, we do obviously capture the,
the underlying payment amounts itself.
Right.
And that's what everybody gets in their
reporting to make sure they can reconcile.
But from a value perspective,
we record it right.
In the ledger.
We only care about the net 20.
Right.
Sure.
And that creates that efficiency.
Speaker 2: I see, I see.
So, so John, how does
this resiliency play out?
As a participating bank on chips, um,
you know, how does it work for the
bank and how does it help you plan for
funding and prioritize transactions?
Uh, can you give some examples?
Speaker 4: Sure Greg.
So first, very happy to be here.
Thank you for inviting me to
participate for podcast here.
Uh, really a, a fantastic, uh,
conversational opportunity.
So the nature of our business really is
as, as a global bank and a correspondent
bank in the us, um, we facilitate.
Payment transactions for
financial institutions, you
know, all around the world.
So, um, we have the honor and the
privilege to be serving, um, fis
in over a hundred countries for
their US dollar payment needs.
So for us running that business, the
efficiency, liquidity that is unlocked.
From CHIPS as a payment market,
infrastructure A allows us to service
our clients in the optimum manner
to deliver payment capability.
The speed of payment, uh, settlement
transactions, uh, enabling
us to deploy our liquidity.
Efficiency means that we are able
to dynamically route our client
payments, um, down the optimum route.
So be it, uh, a chips payment, it's
settling with another correspondent
bank, you know, inward outward payments.
Or be it a payment settling
into the domestic market here,
let's say to a, a regional bank.
So, um, being able to, um, maximize
our liquidity efficiency means that
all channels that we use in the US to
settle US dollar international payments.
Um.
Benefit.
It's a kind of a, a virtuous circle.
So the, the liquidity, efficiency
that CHIPS gives us, um, has this
outsized, uh, positive impact across
the entirety of our payment operations.
Right.
And not just here yet, that expands
Speaker 2: globally.
Right.
Michael, what, what do you hear from
other participants on the network,
uh, when it comes to this resiliency?
We're talking about, um, feedback you're
receiving from other participants.
What, what, what are they saying
about how CHIPS helps them?
Day to day.
Speaker 3: Yeah.
That, that lines what
John just mentions, right?
I mean, the bigger participants
in the US dollar ecosystem, right.
Seek obviously out, uh, chips
as, as means to have an efficient
way to settle their payments.
Um, you know, with less, with less,
uh, in central bank money, right?
Than they otherwise would,
would need to, to do so.
Um, so where this also is important,
especially to facilitate, uh,
payments across the globe, um.
US dollar payment system and chips in
particular sort of unique because we
open already right on 9:00 PM on the
following, on the previous day for
the existing value day and close only
at 6:00 PM that creates now, uh, 21
hours, right, that payments can flow
and hence obviously more time to cover.
Um, you know, there's more
interest also in sort of the
net settlement to find efficient
offsetting peers during that time.
So we have a lot of participants.
That do service, for example, the Asia
Pacific market and then early in the
morning right when we opened at 9:00 PM
they submit payments into the system.
And since they also support the similar
market, meaning Deutsche Bank or the city
of Wells Fargo in the same marketplace,
these flows then into the system and
create sort of an offsetting effect that
benefits them on a net settlement amount.
And that's sort of what
attracts them to the system.
Now, you could have the same
probably via an RTGS system.
That is a much shorter period of time,
but the longer your day is, the more you
benefit also from the netting process
that CHIPS provides to its participants.
Speaker 2: Right.
And chips.
Uh, chip's Operating day is 21 hours.
2020 hours.
Speaker 4: No, 2021 hours.
21 hours, okay.
Yeah.
Yeah.
And I think it's always an interesting
fact that people in, you know,
it kind of confuses at first,
but yeah, the chips business day.
Uh, for tomorrow, starts today.
So at 9:00 PM New York time, uh, we,
we are already starting into tomorrow,
uh, because in Asia Pacific, you know,
their business day has already begun.
So it gives you sort
of an insight into the.
Particular aptitude of the US dollar
financial system in supporting that
global trade and US dollar being at the
heart of so many business transactions,
you know, all across the world.
Speaker 2: Most definitely.
So I wanted to stay on the
topic of liquidity savings.
You mentioned earlier the 29
to one talk in the white paper.
Uh, the liquidity savings that CHIPS
provides over the course of a year
is over $5 billion to participants.
It's about $14 million per day.
It's quite astonishing.
And the way Piper goes on to say that
without the liquidity saving mechanism,
that 1.9 trillion in payments would need
to be routed in less efficient liquidity,
saving ways, requiring banks to maintain
much higher, uh, reserve balances.
I mean, that's
1.9 trillion in the core
over the course of a year.
Saving, you know, $5 billion
is, is quite fantastic.
Um.
Michael is there, we can
break that down for listeners.
Um, you know those numbers,
you know, they're big numbers.
It's kind of hard to imagine sometimes.
Uh, what, what, you know, when you
talk about those savings at 5 billion
per year for, for the participants,
what, what, what does that mean?
Speaker 3: The other way to look at it.
Right.
And the way we did this calculation,
obviously if you edit all up
between course of the year, right?
It always sounds good having this
very large, impressive number.
Yeah.
But if we focus sort of on a, on a single
day, and that's how we've performed this
calculation, right, is okay, we know
how many, uh, the value of payments we
settle on a, on a daily, uh, daily basis.
And we said, okay, if we wouldn't
be here, what would need to happen?
Right?
Uh, then these payments would flow
through a regular, uh, realtime gross
settlement systems like Fed Wire.
And so we took a look at, um,
historically, you know, what, what's
the cool liquidity needed there?
Right?
To settle those, and that sort of, uh,
well, it's assumed as one to four, right?
I mean, obviously payments
go in and out, right?
Also of your, um, of your
central bank account.
And then we compare this back to,
okay, now CHIPS is in play and we,
we basically just, um, you know,
have a ratio of one to 29, right?
Mm-hmm.
Um.
And, uh, then worked backwards
from there to compare.
Okay.
What's sort of the net savings?
Right?
Because, um, now it can settle $29
for just $1 compared to, let's say,
uh, put $1 for liquidity for $4 and
look at that difference and, uh,
multiply it out right by, uh, the
value we settle on a daily basis.
And, um, then it gives us a certain
amount and say, okay, if a bank now
takes those funds instead of keeping
them in their reserve account, they're
now able to deploy it in other.
Uh, risk-free sort of assets in the
market, they make a better return.
Right?
And then we multiply this
return out from a daily basis.
So it's a spread between what you
would receive in the center bank and
what you get sort of in the market.
And we'll take that net difference and
then multiply it out over the year.
Mm-hmm.
And that's how we drive sort
of those $5 billion in savings.
And on a daily basis,
that might vary, right?
There might be days where,
obviously the savings potential,
because the value in the.
And the system is much
higher, we'll be even bigger.
Right?
But on average, sort of, uh,
what we do, we multiply that
out and that give us those five.
Speaker 2: John, turning to you these
liquidity savings, what does that afford,
Deutsche Bank, how does that benefit
your customers and what does it allow
you to do differently, uh, because of
these savings to offer new products
or solutions to your customer set?
Speaker 4: Sure, Greg.
So I think Michael kind
of nicely demonstrated at
delving into those numbers.
You know, we see this as.
Sort of the liquidity, efficiency of
chips and if that wasn't there, the
sort of opportunity cost of having to
buffer those reserves at levels that are
unnecessary today given the liquidity,
efficiency of chips and that opportunity
cost, you know, what would mean to
various business lines within our banks.
So again, we are a, a global
bank, international bank.
You know, we operate in cash
management, trade finance businesses,
loans, business, et cetera.
The opportunity cost of not having that
capital available to put into those
value adding activities for our firm
is something that is very real and
um, I'm gonna say, uh, CHIPS is a very
respected, liquidity saving mechanism
for us as we conduct our day-to-day
operations in the payment business.
That makes lots,
Speaker 2: you couldn't do other things.
Could capital be tied up elsewhere?
Exactly.
Exactly.
Anything else on the liquidity savings,
the white paper you wanted to point out?
Because I wanted to move on to
other topics such as ISO 20 0 0 22.
Um, anything for
Speaker 4: either one.
Yeah, I think one thing I'll mention
echoes what Michael was saying
earlier, so, um, CHIPS as a market
infrastructure, you know, has some.
Very dynamic features and capabilities
available to participants such as
ourselves, apart from the initial
funding that goes in when ships opens,
participants have an opportunity
to inject supplemental funding
into the clearing system in, in
response to, um, the, the sort of.
Happenings of the day or, or any kind
of idiocentric transactions that are
taking place in the global markets
or, or for our particular clients.
And there's also the capability
to withdraw funding dynamically
during the day as well.
And basically, these levers enable us as
correspondent bank to really, I'm gonna
say, be quite focused and precise in
the way that we maximize that liquidity
efficiency on the clearing system.
So I think.
Again, Michael, to echo a point
you made, you know, a large part of
our business is servicing financial
institutions in the Asia Pacific
region or in Europe, obviously.
So during those overnight hours where
the Asia Pacific and European time zones
are in the height of their business day
with the maximum requirements or payment
traffic between those economies, those.
Facilities to enable us to supplement
funding and assure the sort of
smooth operation of payments for our
international FI clients are really
an excellent match to our business.
And our goal, obviously is to deliver
the maximum client service possible
and CHIPS facilitates that for us.
Speaker 2: And so an example
would be if Asia Pacific region
was very active overnight, we
can supplement that in the day.
On the flip side, if.
You know, there wasn't much activity.
There was a, it was a, maybe a
bank holiday there, you could weth
Speaker 4: throw money out.
Absolutely.
So, so that, that, I'm gonna say it's,
uh, the global economy is very dynamic.
Conditions change, you know, continuously.
And, um, having that flexibility,
uh, is something that we have leaned
into, let's say, to allow us to
deliver that level of client service
that our clients to manage from us.
Okay.
Speaker 3: Yeah, maybe to add, right.
The capability to supplemental
a fund during the day, withdraw
supplemental funds is also further.
Um, sort of aided by the ability
to prioritize transactions, right?
So it's not just send a payment in and
then we can't control it any further.
We do allow participants to set a priority
flag, for example, right on the payment
that the algorithm takes into account
from a settlement perspective, right?
So the users do have a great, as John
mentioned, high level of control, right?
Through funding prioritization, right?
When these payments, uh, go out.
So it can be made interactive, but
you know, some might not, right?
Because it's just the
nature of the businesses.
They're saying, Hey, as long as
this settles during the day in a
most efficient way, I'll just, you
know, submit it to swift to chip,
sorry, and, uh, let it go, right?
Um, so it allows you right, a
different adjust in a sense, right?
Your process, uh, with chips to
your, to your business needs, right?
Speaker 4: And I would say
we've, we've been on a journey,
you know, uh, in terms of.
Tapping into those type of
capabilities offered by chips.
So, um, uh, in light of just of the
environment, the last number of years,
uh, around interest rates, you know,
the cost of capital so on, um, our
financial resource management, uh, team
have really started to look at those
capabilities that chips, uh, uh, allows
us to avail of in a different way.
Um, so.
Our, our own teams who manage the
liquidity work with our treasury teams,
um, have developed their skillset, uh,
over the last sort of two, three years.
Uh, and, and really, um, are
seeing the value from this sort of
capability, like Michael says, to
prioritize the rank payments, uh, as
well as to use the supplemental, uh,
funding and withdrawal facilities.
Mm. It's
Speaker 2: interesting you bring up
in rates 'cause you know, there was a
period where, a long period where it was
very, very low interest, interest rates.
I imagine now with.
Fluctuating incident rates are obviously
a little bit higher than they used to be.
This is much more important, um, depending
on when you're talking this, this volume
of, or this value, uh, of, of transactions
and what you're funding every day.
Yeah, definitely.
Okay.
Um, I wanna turn to, uh,
iso uh, ISO 20 0 0 22.
Um, it's a standard, uh, message standard
that the high value system payments are
on and also other payment systems as well.
Uh, CHIPS migrated ISO in 2024.
Fedwire followed in 2025.
All banks are now on board, uh, chips.
The chips migration was very efficient.
Um, everybody got on board on day one and
we actually had a higher value that day on
our first day, which was very nice to see.
Um, but now we're a year past.
Chips on, Fedwire is on.
Um.
How are banks leveraging the
capabilities of ISO right now?
I mean, first of all,
are they leveraging them?
And if they're not, what can
be done to move that forward?
Because there are a lot
of benefits, uh, messaging
capabilities when it comes to this.
I'll turn to you, Michael.
First, what are you seeing, uh,
for some of participants and
what does it have to go with iso?
Speaker 3: Yeah, good,
good, good question.
Actually, we had a lot of.
Deep discussions here at SWAs
with, um, you know, other market
infrastructures and, uh, members
of those as well as Swift, right?
And we do see still a lot of.
Banks haven't, while their messaging
is ISO 2022, they haven't fully
adopted yet in their backend system.
So there's a lot of still translation
going on, um, which doesn't enable them
necessarily to take all the advantage
of sort of the rich, uh, rich data.
Right?
Uh, but we've seen now examples
where there's been more focus also
by market infrastructures to, to push
really participants to make sure that.
The standards used in the correct way.
Right.
And in some markets, unless, and
yes, we don't really use, for
example, regulatory reporting Right.
Uh, in any way.
But if we look across border context,
it's, it's important in some markets
and can lead to delays, right?
If certain codes are not included
or not in the right field, then
it, uh, leads to, um, you know, a
manual follow up sometimes right?
With originator before
then the value is applied.
We have seen some examples there now
where, you know, active engagement
with local market infrastructures.
Um, they, they've been, you know,
doing a better job understanding
these codes, requesting them, and
now suddenly a lot of this becomes
straight through processing, right?
Pay payments don't get held up anymore,
but a lot of this stuff is really.
Uh, you gotta get down the weeds
with everybody, with originator
side, with market infrastructure,
some, and chips does a good job
regulators and reporting entities
to make sure they understand right.
How to use these codes, how to interpret
them, how to use them in the reporting.
So, uh, you gotta go
down the detail right?
And, uh, the next opportunity we
have as a market to do that is,
uh, adoption of structured and or
hybrid address data as we call it.
Um, that starts actually this,
um, this November, uh, with the,
uh, intent that by next year
November, we actually eliminating
free format, address information.
That is widely still prevalent,
uh, out there in, in payments, but
also has caused a lot of stoppage,
sometimes right in sanction filters
where free format data leads to a lot
of alleged hits that later turn out
not to be really proper hits, right?
Sure.
And, uh, use of hybrid address data
at a minimum, which requires full town
name as well as the ISO country code.
Should dramatically improve hopefully
right efficiency in sanction
screening operations for banks.
It's still a little bit a daunting task,
I think, for the market, but I think
we've seen, again, push here at at iVOS
to say, yeah, this is happening next year.
Be ready.
Right.
To get rid of your unstructured addresses.
Sure.
So we'll see a lot of activity.
In the next year for the market
to really adopt those much
more structured addresses.
And that will help right everybody else
to a better idea on payment flows, right?
Because we have proper ISO
codes in there on countries.
So it'll help definitely the
whole, um, you know, from overall
payment compliance perspective.
Speaker 2: In your conversations here at
Sibos with other market infrastructure
providers, were you able to gather
any lessons, learned, any tips that
other jurisdictions have used to.
You know, move iso far a little
farther, a little faster.
Speaker 3: Yeah.
So it's really the ongoing
engagement, right, with participants
and especially the vendors, right?
Because most banks do rely
on their vendors from a
payment systems perspective.
So getting those vendors on board
early on, highlighting the roadmap to
them, where we going as an industry?
Will be really, really critical, right?
'cause if they are delayed, the
participants are delayed, right?
So it all hinges on having them sort
of fully engaged in the discussion.
So they know what's coming.
That's, I think, uh,
very, uh, very important.
And the other thing that marketer
structures have done, and so the
clearinghouse is really offer the
right level of testing support, right?
So using testing tools that
participants can test out their
messages as early as possible, right?
Through certain common industry tools.
And then also in what we call
our bank test environment, right?
Allowing sort of intern testing.
To be conducted there with participants,
and that's really important and we've
probably gotta provide more specific
test cases maybe in the future, right.
To make sure this really
works properly, end to end.
Speaker 2: Got it.
John, you know, when you think about
ISO and, uh, you, we've been through
the conversion and you've, you've seen
everything going on there, you know,
how do you see ISO the message standard?
How do you see that helping
Deutsche Bank, and how do you
see it helping your clients?
Speaker 4: And Sure, Greg.
So, great question.
So, um, I think, uh, you know, that
does come up a lot in our client
meetings, you know, so, okay, ISO has
done so, so what, uh, the, so what?
Right now?
Now what do we do?
So, you know, for us, you
know, we've been using the.
ISO transformation as an opportunity,
not just to treat it as a, a messaging,
uh, undertaking a loan, but to look
at our products, our processes,
some of our infrastructure, um, and
really sort of, um, I'm gonna say,
uh, treat ISO as a catalyst to drive
forward some improvements, innovations
a new capability for clients.
So one example that I'm going to.
Give you now, uh, is something
that we identified early on
as a big opportunity for us.
So again, you know, if we're, we're
a dollar clearing bank, we process
over $100,000 wires on a bad day.
Um, um, many of those wires transversing.
The chips market infrastructure
clearing system, for example.
But one of the largest categories of
exception and investigation handling is
what happens when a wire gets rejected.
So, you know, it's a simple case.
Let's say somebody mistyped an
account number and that wire has
to come back along the chain.
So with iso, um, for the first time
I'm gonna on a global scale, there is a
dedicated message now for payment returns.
For anyone who's technical in nature,
it's the pax uh, 0 0 4 message.
Um, so when we looked at this, we
really saw the chance to put the,
I'm gonna say, um, the whole of
Deutsche Bank behind driving towards
a solution around payment returns, a
real point of friction for our clients.
Our return could take anywhere
from sort of a day to a week
to handle in the legacy world.
Um, and ISO gave us a chance to say, look.
That's gonna be one message
standard, globally applicable.
Uh, so equally as applicable on
the target clearing system in
Europe as it is in the US on the
chips or fed bar clearing system.
Indeed also on swift for
cross-border communications.
Um, so which.
That background, we were able
to make strategic investments
into sort of dedicated product
capabilities around payment returns.
Um, and that has been rolled out
here in the US for our clients,
uh, as our, as our first market.
Uh, given the maturity of the US
landscape, um, we, we really saw
us as a. Front runner on this.
Um, and we have actually been successful
in transforming quite a large number
of the returns we handle on any given
day can now be processed in minutes.
Um, and this same day?
Same day.
Same day, a minute, yeah.
Minutes.
Uh, it's, it's quite a contrast.
Uh, and what does that
mean for our client?
Well, actually, when you're.
Operating international payments,
uh, you, you seek certainty.
Um, and, and anything that causes
uncertainty, uh, creates, uh,
friction, anxiety, uh, sort of,
uh, I'm gonna say has real world
impacts in terms of global commerce.
So being able to fail fast is
actually, uh, a powerful value add
for customers in this day and age.
So if you're sending a wire, uh, transfer
abroad, you know, uh, uh, knowing.
That why wire transfer has an issue,
and not only just knowing about it,
but actually having that cash back
on hand to be able to remediate
and, and, and you fail fast.
You fix fast.
So, um, we, we, we see that as, uh, one
of the sort of shining stars, uh, in
terms of what ISO has already given us.
Now.
I think there's loads of use
cases developing, uh, and, and
lots of innovation that will
be coming down the tracks.
But already that is one that we've
been able to put those strategic
investments into and leverage ISO
to sort of, uh, deliver on the value
that has promised for all these years.
It's a, it's a great
Speaker 2: example.
It's applied to, you know, supply
chain or, uh, settling an account.
Um.
Avoiding late fees because, you know, you
knew the, the payment failed right away
rather than waiting a week and mm-hmm.
Getting interest charges
or whatever it may be.
It, it's a fantastic example.
Speaker 3: So it's like, like
another liquidity topic now from
the corporate, not intraday,
but over multiple days, right?
'cause in the past you had cash
in a sense, tied up, um, in, in
these failed payments, right?
They, they came back later, right?
And you didn't know.
Now if the money comes back
faster, your account or you can
make the next payment, right?
Whatever you're supposed to do.
Much quicker instead of always having
sort of certain value out there.
Right.
That then later comes back.
So I think that's a really, um,
important fact I had to highlight.
'cause it makes the whole process
a lot more efficient, right?
Yeah.
From, from a corporate equity perspective.
Speaker 2: I, the, the size of the
transactions we're talking about
here, it's, this is significant
liquidity tied up in could be
one or two fail transactions.
Yep.
And if you know about it right away,
you can do something otherwise you're.
Surprised sometimes three or four
days later, which is not good either.
Clients don't like surprises.
Um, fantastic.
Um, anything else on iso?
Anything else we need to discuss on that?
Uh, I
Speaker 4: think I would say, um, you
know, getting, getting to next month,
uh, end of coexistence on, on the SWIFT
network is an important milestone.
Um, but that, that is
more, I'm gonna say the.
End of the beginning.
So ISO is, uh, a journey.
Uh, yes, important
milestone coming next month.
Um, but really that sort of, uh, next.
Trach of, uh, of topics, uh, starts
to, uh, come up, uh, now that,
now that the world is on the one
standard, um, and that's everything
from, you know, data quality.
So, yes, uh, many banks have implemented
ISO and perhaps they've had to take
sort of certain tactical solutions, uh,
and now the chance to re-look at what
the quality of their data and, and,
uh, to, to Michael's example around the
hybrid address and structured address.
You know, what is required to, to lift
up and, and, and take advantage of
those, uh, next, next phase topics.
Um, so we saw, you know, uh, quite a
good improvement in terms of our, um,
sanctions, embargo screening, uh, false
positives, which have allowed, you know,
I think double digit improvement, uh,
in terms of payments that can process
through our, um, books and records, uh,
more quickly than they were in the past.
Uh, and as data quality continues
to increase and as the ISO standard
encourages and enables that, uh, we
see a good story there that, uh, this,
the speed, uh, of, of payments as they
transverse, you know, international end to
end, um, can continue to be improved Hm.
As the standard matures.
Sure.
Speaker 2: Well that's a great point.
And, you know, talking about next
month, it's, uh, I mean, we're
in October already, so November's
right around the corner for the
next, uh, the next milestone.
Um, so that, that, that's
really cool to hear.
Again, we're, as I said,
we're almost in November.
We're in October going into November,
but let's look towards 2026.
Um, John, I'll start with you.
You know, when you think about what
your clients are looking for, what
they're demanding, um, what, what
do you see coming, uh, both for your
clients and from Deutsche Bank in 2026?
What, what, what's on
Speaker 4: your priority list?
Um, okay.
So one of the sort of trends we've
seen in the market, uh, over the last
number of years, uh, is sort of client
expectations have evolved in line with
what we see in retail payment space.
So in the retail payment space, we've
seen the evolution of instant payment
schemes, you know, that are not time
boxed or they're not Monday to Friday
schemes, they can run sort of 3, 6 5.
So, um, one of the things we've
been spending a bit of time
looking at is, well, how can we.
Start to take some of that sort of
capability that has been developed
in these domestic schemes, um, and.
Offer some of those advantages to clients
operating in the cross border space.
So, um, here at Deutsche Bank, we are
using our US dollar clearing as a, a
pioneering market for us, and we are
launching, you know, very shortly, a
capability for clients to be able to
transact cross-border during weekends.
And now this will be
rolled out in increments.
We are gonna start with what are
called book transfers, where both of
the clients, both of the, the CFIs
maintain accounts with Deutsche Bank.
Um, but what we see is that over time,
this is a, a capability we want to evolve.
Um, and, and again, we, we know that
this change has to start at the center.
Uh, and as use cases develop, uh,
and as banks, uh, in all corners
of the world, start to see it
in action, uh, it will stimulate
further innovation in this space.
Um, and for our.
Roll out that we're going to announce
actually today, uh, here at SBOs.
Uh, breaking News right here.
Yes.
Uh, DB ever on for, for US dollar.
Um, we already see that there are a subset
of our clients who today instruct us to
make payments on a Saturday and a Sunday.
Um, and being able to confirm those
payments, uh, over the weekend enables
them to get ahead of their own workflows,
their own client needs and expectations.
So, um, that is something, uh,
that we see continuing to evolve,
uh, into next year as well.
And we've starting here in the US
and, and obviously, uh, we are.
Our home market is, uh, here in Frankfurt.
Uh, we are the world's
number one Euro clearer.
So it is a capability that next
year we would, would very much
hope, uh, to roll out to our Euro
correspondent banking space as well.
Speaker 2: Fantastic.
I mean, that makes a lot of sense.
Everybody operates 24 7.
You know, you do business on the weekends,
you bank on the weekends, corporates
and banks wanna move money on the
weekends too, so it makes a lot of sense.
Michael, what about chips?
Uh.
Yeah, we, we kind of, we we're
still building on iso, it's still
a journey there, but what's in
line for chips heading into 2026?
Speaker 3: Yeah.
Beyond sort of supporting.
The ongoing message changes
in harmonizations, right?
The industry with SWIFT and market
infrastructures are doing on annual basis.
Beyond that is really what John mentioned.
We recognize there's an increased
demand in moving towards more
24 by seven payment operations.
We have the story with real time
payment systems, but we see this
trend now also spilling over
into high value payment markets.
So the bank financiation settlements
and BIS sort of encouraged
as part of their roadmap.
Market infrastructure is to
really look at this in earnest.
We've seen this in Europe,
commitment to expanding operating
hours and chipsy exploring.
Can we add another operating day?
Right?
We won't be able to do 24 by
seven in one go, but the question
is, can we add another day?
Right?
Um, maybe the Sunday.
So we're working, um, exploring
that further to help, you know,
customers like Deutsche Bank.
That John just mentioned with their new
product as well as other banks over there.
Right.
Also are investing in this
capability so we can interconnect
them right through chips.
'cause that's what all we do.
Right.
We call it CHIPS network and the network
lives off, uh, participants who can use
it at, at these certain times, right?
We've done this early mornings, right?
So we're supporting customers there,
as I mentioned already, and now we're
looking, can we add, does it make sense
to add another day to interconnect banks
that have this capability already, right?
This will then strengthen our
proposition as well as their proposition.
And um, you know, if we do it step by
step, then obviously eventually, right?
We also get there with 24 by
seven, but we think we don't
have to do it in one go, right?
We can focus on what our current
infrastructure can provide.
Through fine tuning it sort of
at that, that additional day.
And then we'll, we'll need
to take it from there, right?
As, as markets further, further progress.
But that's definitely a big topic where
we see, uh, see movement happening.
I mean, in prior years was
sort of always dismissed a
bit, will this really happened?
We've seen now more credible commitment
and there's probably more coming
out there and the rest of the year
of plans for market infrastructures
to, uh, to support, uh, sort of
these 24 by seven propositions.
Speaker 2: Yes, it's a, it's a
real time world, I guess, right.
Fantastic.
Um, anything else we need to cover?
Anything else that we didn't touch
on today that's on top of your mind?
Anything you heard here at Sibos that
you thought was pretty interesting?
Speaker 3: Obviously there's a big,
I mean, all these shows that has
been for many years, uh, if you
come to SWAs very often, right?
There's always a lot of buzz, right?
Of what's the next big thing, right?
We had obviously, uh, in the past
of, of digital currencies and we've
seen now again, uh, big pushy also,
um, you know, swift launching some
new services in digital space, right?
How we can connect sort of
the existing world, right?
Of, that we exist in, in, in of, of, uh.
Uh, central Bank and, uh, deposit
accounts and, and messaging
right to the digital world.
So there's some new products
being launched, how we can sort
of interconnect these worlds.
So it's something obviously we need to pay
attention to right from the clearinghouse.
Sure.
Uh, as we want to be, stay relevant right
in, in that market where we've seen,
these are good examples to show, right.
That the, the, the very,
uh, important world, right.
Correspondent banking.
Right.
Interconnected payment systems
still fully remains relevant.
If we can also figure out
right to interlink right.
With the emerging world that's,
that's, that's coming Right.
And provide really that, that bridge.
So that will be interesting.
I mean nothing that will
happen in 2026 for sure.
Right?
Mm-hmm.
But for us to, uh, to think about right.
How this world's, something to think about
them, the how wheel take home with you.
Yep.
Speaker 4: Exactly.
Anything for you, John?
You know, I think, um, the world
of payments, uh, never stays, uh,
still it's continuously evolving.
And, uh, one of the things that,
um, I think, um, maybe was aided
by, by isa, but not just a messaging
standard, but the sort of, uh, we, we
see, we see an evolution of the way
payments work on across border basis.
Uh, a topic that is getting some traction.
Last number of years has really
been this concept of one leg out.
So the ability of a cross-border
settle, uh, payment.
To tap into, uh, instant payment
schemes for that last mile.
So that settlement is a domestic market.
And, you know, the, the, I'm gonna say.
The improved payment experience that
that type of instant payment scheme can
give even to a cross-border parties.
So, uh, you know, TCH and, and what
you guys do as a, a network operator,
you know, operates, uh, across a number
of different worlds, instant payments
being, uh, one of those as well.
And, uh, we, we see that as both here
in the US and also in Europe as, uh.
That's sort of a, an exciting
development over the next number of
years where we, we expect to see some
interoperability between the high
value payment networks, uh, and those
instant payment networks that have
really, uh, taken off in the last sort
of 5, 6, 7 years, uh, around the world.
Speaker 2: Yeah,
Speaker 4: that's definitely
Speaker 2: something we're
hearing a lot about here.
Definitely cybers this year.
Excellent.
Well, those are all the questions
that I have, but actually, no,
I, I have one more question.
Uh, and we do this as a tradition on the
show, which is called Payments Nerds.
I always ask our guests what
makes them a payments nerd.
So John, uh, I ask you, you know,
uh, what makes you a payments nerd?
Speaker 4: Um, well, I think, uh, you
know, Greg, you reached out to me a
number of weeks ago to see what I'd
be available to, to sit in and join a
podcast, uh, with you guys here at TCH.
And, um, you know, you gave
me in the email you were.
Explaining a little bit of the
background of, of the podcast
payment nerds, and I was like, yeah,
I can, I can stop you right there.
And I, I, I know the podcast,
not only do I know payment nerds,
but I have a favorite episode.
So I think, uh, you know that
that in itself, uh, is a telltale.
Uh, what, what is your favorite episode?
My favorite, I have to write it down here.
Season six, episode three.
I would recommend
anybody to give a listen.
I think it, uh, it, it, it.
Talks about the Instant Payment network,
uh, operated by TCH here in the us,
uh, from the perspective of, uh, one
of the credit unions in, in Virginia.
Mm-hmm.
And it was just, uh, uh, I'm
gonna say an episode that really.
Shines a light on what it is that
instant payments can deliver to
clients and to retail domestic
account holders when done right.
Mm-hmm.
Fantastic.
Speaker 2: Yeah.
Good.
Well, payments turned right there.
Michael, what makes you a payments nerd?
Oh,
Speaker 3: I, I have the t-shirt.
Speaker 2: Oh yes, we did give that those
Speaker 3: t-shirt for a while.
Yeah, for a while.
Yeah.
So I still have that.
Yes.
So, no, I'm very reactive, obviously with
for many years with the payment standards.
Evolution so closely working
with standards bodies as well as
Swift, and we always plan ahead.
Right.
We're looking already at 2027.
Speaker 2: That's right.
That's right.
Yeah.
I mean, Michael's been going
to the market infrastructure.
Correct.
You've been payments,
uh, high value payments.
You've been doing all the payments
nerd events here at at iOS for sure.
Speaker 4: Michael is a, I'm gonna
say a, a, a veteran of the industry.
So, uh, I, I moved over to the US a number
of years ago to take up this role and
Michael's name was already well known
to me, even though I had never met him.
So it's been an absolute delight to get
these opportunities over the last three
years to work with the legend himself.
Fantastic.
Speaker 2: I feel honored.
Well, on behalf of a couple of legends
here, I'd like to thank everybody for
joining us, the podcast for John, Michael,
and myself, um, for tuning in today.
Uh, if you enjoyed today's episode and
you want to hear more about podcasts,
you can find payment nerds podcasts on
the podcastPage@theclearinghouse.org,
or where you subscribe to your podcasts
on Apple Podcast, Spotify, or Pandora.
Simply search for payment
nerds in your podcasting app.
Thank you everybody.
Thanks for joining us, and
that's it from SBOs 2025.
Have a great day.
Speaker 5: The Clearing house is full
of payments nerds who just can't wait
to tell you about how the RTP network
helps us financial institutions create
a faster and smarter experience for
their corporate and retail customers.
Check out the schedule for online and
in-person events@theclearinghouse.org.
Speaker: You've been
listening to Payments Nerds.
To ensure that you never miss an
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Thank you so much for listening.
Until next time.