2018 - 2019 Edition of Citi Perspectives for the Public Sector

14 In past years, governments drove the development of Real Time Gross Settlement (RTGS) systems and Automated Clearing Houses (ACH) but these cannot fully meet evolving consumer needs and buying behaviors. More recently, they have helped to create national real-time payments systems that operate 24 hours a day, 365 days of the year. As importantly, governments have created regulatory frameworks for non-banks to operate e-money schemes and offer services to third parties. Several countries have also implemented Open Banking regulations to force banks to open services to fintechs. And at the international level, SWIFT — the global standards body for international payments, trade, securities and foreign exchange, which provides a secure global network supporting correspondent banking — has introduced end-to-end tracking of payments and almost real-time payments to beneficiaries through its SWIFT gpi initiative. Given that these systems underpin the majority of the world’s financial flows, they should perhaps receive more media coverage than crypto developments. At the same time, financial institutions reacted to evolving consumer needs and leveraged technological innovation, investing heavily in the development of new products that enable users to achieve operational and economic efficiencies. Virtual Accounts, machine learning programs and API platforms are already in use by many financial institutions. While governments and public sector agencies often drive new developments in the fiat money system and create frameworks for other parties to innovate, they must also ensure that they take advantage of the emerging environment. In recent years, governments have adopted similar models to corporations. In many instances, hundreds of departments performing different functions now combine functions, such as finance, treasury, HR and accounting, to improve efficiency. In addition, they often seek to centralize liquidity management to minimize external borrowing requirements. This centralization provides a valuable foundation for taking advantage of new developments in the payments world, as well as the broad swathe of new technologies and innovations that are transforming society. Leveraging the fourth industrial revolution The fourth industrial revolution — the first driven by water and steam power, the second by electricity, and the third by electronics and information technology — has already begun. Big data storage and retrieval, real- time cloud computing, mobile platforms, high bandwidth and secure internet, and powerful API technologies are upending industries and changing social interaction. These disruptions are creating new business models, driving annual growth in digital transactions of more than 20% a year, enabling regulatory changes such as Open Banking and facilitating new payments infrastructure. Data driven intelligence should help all organizations make better decisions. How Governments Can Harness the Innovation Revolution