If FTX’s collapse has taught us anything, it’s that stability is still highly relevant.
As Shaunt Sarkissian, group chief markets officer at The Bank of London (TBOL), put it in a recent interview: “People are looking for three things [today]: stability, quality in management and governance, and they’re looking for safety.”
He added that unlike previous months where businesses were either trying to stretch for yield or take more risks with their assets, there’s been a dramatic shift in attitudes, with more businesses seeking to work with partners that uphold high safety standards when moving money.
In fact, he said the pendulum has now swung in favor of increased scrutiny when vetting vendors, banks and the payment partners companies work with. “We always talk about KYC [know your customer] in the banking and payments world but now there’s KYP — ‘know your business partner,’” Sarkissian told PYMNTS.
And because of how connected the world is, businesses that already have good governance structures in place are not immune to these risks. It’s all the more reason why choosing the right partner is key to avoiding the situation in which companies, many of whom had large amounts of capital with FTX as a vendor or partner, now find themselves.
In all, these challenges have vindicated certain banks and payment partners that have long been considered “boring” or too conservative in their dealings, he further noted, adding that in many ways, these players have suddenly become “the belle of the ball.”
Stability and Innovation: Not Mutually Exclusive
According to Sarkissian, the notion that safe businesses don’t make money or lack innovation couldn’t be further from the truth: “Those aren’t mutually exclusive.”
For a clearing bank like TBOL, which serves a broad range of clients including banks, corporates, money service businesses and FinTechs, the need for safe practices is all the more critical which makes maintaining a sound balance sheet, strong capital management and correctly utilizing financial leverage non-negotiable. As he pointed out: “Clearing and highly leveraged don’t really go hand in hand.”
Moreover, contrary to popular opinion, he added that a combination of capital, stability and sound financials is what creates the presence of mind needed to spark innovation.
So, for partners and financial institutions (FIs) that have played it safe all along and have had solid safety practices that the market has overlooked, Sarkissian suggested that it may be time to hold their heads up, dust off the playbook and show others how it’s done.
“Companies that have those practices should now bring [them] back to the forefront, be proud of those business practices and emphasize them,” he said.
Real, Tangible and Meaningful Innovation
Asked to characterize 2023 in one word, Sarkissian predicted the new year will be “choppy,” and gyrating markets will fuel businesses’ desire for safety and stability in the money moving market.
And although businesses tend to put innovation on the backburner during volatile economic times, he said there was no better time to roll up their sleeves and pursue real and impactful innovation.
“If you have the capital and you have the time, [improve on your established processes] such that when the market does emerge more stably, you’re in a great position with the war chest of innovation that you can deploy.”