Bruno Campenon is BNP Parbias’s global head of banks, brokers and corporates for the firm’s securities services arm. Now based in Paris, after running departments in Hong Kong and New York, he oversees digital strategy, among other things.
He sat down with DigFin to argue that “digital transformation” is now moving from a marketing pitch to specific services that benefit clients. This reflects how far some technology has evolved, and therefore its importance to global players such as BNP Parbias – and it is also a reality check, because global financial institutions are above all designed to be compliant.
Campenon’s business provides a variety of support functions, including clearing and settlement for securities and derivatives, cash management, middle-office outsourcing, corporate trust, custody and a variety of financial solutions such as foreign exchange and collateral management.
With that array in mind, he says BNP Paribas has four digital priorities: distributed-ledger technology, data, digital assets, and user experience.
DLT
Campenon says the bank is ready to enter this space when the regulatory landscape allows, and when the industry begins to mature.
“We will be ready as soon as something takes place,” he said. “Today it’s just about crypto, which we don’t touch.”
But the bank has not been passive. It has a stake in vendor Digital Asset Holdings, and has been engaged with DA’s work to deliver solutions to the stock exchanges of Australia and Hong Kong, as well as Swiss exchange SIX’S digital-asset arm. The bank is also following DLT-related experiments by America’s DTCC, the entity that clears and settles virtually all transactions in the U.S.
“We want to see these able to interoperate,” Campenon said. “That is what will make the difference.” Unlike in traditional markets, where stock trading coalesces around one or two national exchanges, the virtual space has hundreds of global venues, making it too costly to connect to them all – and fragmenting liquidity.
He expects this will be a slow process, given the variation among systems and protocols. “Each system needs collateral or other measures to ensure one exchange doesn’t jeopardize another,” Campenon noted. This implies virtual asset exchanges will need to follow bank-like rules around capitalization if they are to cater to regulated financial institutions.
One trigger that can accelerate interoperability is the expected arrival of regulated digital cash. This is necessary to create DVP, or delivery versus payment in a securities transaction.
Digital cash could take the form of stablecoins (including a commercial bank’s own token), but Campenon expects the winner to be central-bank digital currencies.
Given the European Union’s messy history of merging currencies into the euro, Campenon doubts its regulators will want to see multiple stablecoins take on this role, including those minted by commercial banks. The U.S. will eventually issue a digital dollar to ensure its currency remains dominant.
Similarly, most big banks will welcome a CBDC, because it’s safer to default to using central-bank money than take a risk with another kind.
Digital assets
Solving digital cash will encourage other financial institutions, corporates and investors to embrace tokenized securities – that is, regulated instruments that exist in purely digital form.
BNP Paribas can’t take custody of crypto, and Campenon says the bank won’t bother with DeFi (decentralized finance) so long as it relies on unregulated instruments. Nor does he worry about missing an opportunity, or being disrupted.
“DeFi right now is all about crypto, and if it’s crypto, I’m not concerned,” he said. “Anything not in a regulated contractual framework is not a threat. New technology doesn’t automatically make things simpler.”
For example, he agrees that the current settlement cycle involves too many reconciliations among many players – a process that transactions executed in pure digital fashion could consolidate. Campenon expects technology to make the industry more efficient.
But it won’t eliminate roles such as custodian, executing broker, or central counterparty. “Technology will push us to work better, possibly in partnerships,” he said. “Clients still need funding and the lending of securities, cash and repo. They need someone to connect them to regulators, to guarantee the security of their assets.”
For example, the bank is exploring ideas with crypto players such as Metaco and Fireblocks, to connect it to blockchain and enable BNP Paribas to custody digital assets.
Data and cloud
The ability to operate in new environments requires a tech stack ready to handle things like blockchain and smart contracts. Banks are also being attacked on all fronts by fintechs, from payments to transactions, that are built on cutting-edge tech.
Campenon says for big banks, however, the focus must be on security and compliance.
BNP Paribas has made the decision to work with IBM to bolster its on-prem use of servers, and not gone to public cloud.
For now, Campenon says it is better to continue augmenting the legacy I.T. infrastructure, and focus on becoming more agile internally with data. BNP Paribas has worked on consolidating banking services data in basic areas such as settlement, custody and cash management, as well as commingling this with external reference data.
“Once we see a business case, then we invest more in cloud and big data,” Campenon said. “But for how we rely on legacy infrastructure.”
This dovetails with his reluctance to put client data on public cloud. “You can’t be more secure than what you master internally,” he said. The bank is also not prepared to allow third-party fintechs into its data environment.
It does work with fintechs when a client requests it, in which case BNP Paribas can run an API to feed third parties the relevant data.
Otherwise, Campenon fears that throwing open the doors to a cloud-based working environment will be a waste of resources, and probably too ambitious to be practical. “It would take you ages to reach it,” he said.
He is not too worried about being outmaneuvered by fintechs or neobanks that are building agile tech stacks on cloud. “Clients come to a bank to get funding and related services,” he said. “Fintechs aren’t banks, and can never provide funding.”
Instead he says he is open to partnering with fintechs, which the consumer bank has done. “They are not a threat, but a chance to see what we can really do.”
Client experience
Lastly, the bank is using a variety of artificial-intelligence tools to service its clients. This begins with chatbots (Campenon calls them “virtual agents”). These not only help clients with basic queries. The bank is building additional capabilities on top.
This could include APIs to fulfill client data requests, or building a network of robots to run calculations and analytics. It’s early days, and Campenon feels the bank has only scratched the surface of what robotics can deliver.
“With A.I, we can develop more use cases over time,” Campenon said.
