Svante Hedin was named as SEB’s Chief Information Officer a year ago as part of a wider reorganization at the Swedish bank to establish a new business unit. Markets Media Group Senior Writer Julie Ros spoke with Hedin about the Banking-as-a-Service (BaaS) model and “co-innovating” around new markets.

Tell me about your early start in financial markets and the intersection with technology over the years?

Going way back, I graduated with a degree in engineering and after a brief stint in digital X-ray imaging, I started my career in consulting in London. I was not in finance then and had no plans to get into it. But one of my consulting engagements was with Citigroup, related to their early entrance into e-commerce and electronic trading, and I was totally fascinated by it. Fast forward a couple of years to 2006 and I was approached by JP Morgan to get involved in their equivalent efforts.

JP Morgan was making a couple of strategic hires into FX around that time, including Troy Rohrbaugh initially to lead FX options, and Eddie Wen – also originally from an engineering background – to lead e-commerce globally. So we started working on the next generation of e-commerce and electronic trading for JP Morgan, taking it from a relatively small scale to what it became a couple of years later. At the time, Eddie and I and our team represented a bit of an odd group within the global FX team, with our background in technology but also an acute interest in financial markets.

So the team grew, the product matured, the business grew, and relatively quickly became a core and large part of JP Morgan’s total value proposition in FX, and further down the line in FICC more broadly. Of course, that was also what was happening in the industry at large at the time. But that was my way in, and a very defining part of my career.

What made you trade JP Morgan for SEB in 2013?

The move was driven entirely by family and personal reasons. I’d been living in London for nearly 15 years and wanted to raise my children in Sweden. I worked out close to a full year of notice with JP Morgan, and initially had no plans to start working for a bank again once I moved to Sweden. But I realized pretty quickly that I missed it a lot. I love the financial markets and I loved what we were doing at JPM.

At SEB, I found that I could have the cake and eat it too. I got my Nordic Swedish lifestyle and SEB provided me an opportunity to continue doing what I really like to do, in a role similar to what I’d been doing at JP Morgan.

When you joined, it was as Head of FX & Commodities Electronic Trading, but your role gradually broadened into additional markets and global responsibilities – first to Global Head of Electronic Markets, and then Co-Head of Trading, Deputy and Acting Head of FICC, before your current Group CIO role. Can you talk a bit about the progression of responsibilities?

Obviously SEB’s business is significantly smaller than JP Morgan’s, but that also meant that as an institution the distances are much shorter. I found that I could be impactful in a different way in a smaller organization where the paths are shorter and the different parts of the bank work together in a more joined-up way.

Since I’ve been here, as you noted, I’ve moved around in a number of roles within Markets and wholesale banking. Then, a bit more than a year ago, I took a larger step into a strategic role at group level, leaving wholesale banking, and with a strategic focus more towards technology, or more crucially, aligning business and digital strategies at bank level.

So you were named CIO a year ago, which tied in with the rollout of SEB’s BaaS model, SEB Embedded. Can you explain the basics of the BaaS model and how the CIO role ties in?

SEB Embedded started inside an innovation hub called SEBx, run by Christopher Malmer at the time, previously co-head of our Swedish retail division. His remit was to explore new technologies and business models independently from the main bank. Several of those initiatives showed promise and we spun-off one of them into a new line of business within the bank called SEB Embedded, with Christopher still overseeing it. The product is Banking-as-a-Service and he continues to build and run it today.

We then restarted a new SEBx from scratch and appointed our then-CIO Nicolas Moch to pick up the reins from Christopher. In turn, I was asked to step into the vacant CIO role. So that was the three-way shuffle that led me to this current position.

My role stretches through retail banking to private banking to wholesale banking and all the different types of products and services that we offer. The technology landscape spans everything from mainframe computers and our most robust technology infrastructure, all the way out to bleeding-edge technology in algorithmic trading, AI, and data science, and everything in between. It’s fascinating.

What are the basics of the BaaS model?

The idea is to allow companies to offer and monetize banking products to their customers, under their own brand, without becoming a bank. So building upon our own banking license and everything that we’ve built around it, we take our banking products – which can be anything from accounts, to loans and credit cards – and offer them out via APIs and in addition, provide data and insights for the companies to understand their users and create better products. Everything behind the scenes is “powered by SEB” – including all the heavy lifting around KYC, transaction monitoring, fraud prevention and such like. It’s a win-win because corporates can expand their value proposition and gain insights, and we build great partnerships for distribution of our core products.

Looking at the broader financial markets landscape, where do you see opportunities in terms of new services (eg, FX settlement, clearing, fixed income electronification, etc)?

Fixed income and commodity markets will continue to move towards being more digital and more STP in nature. That’s the direction of travel and the question is only how fast they move and what changes along the way. But one area altogether different – or rather it connects with commodities – is around sustainability. This is a field that SEB is deeply engaged with, and it links clearly to technology as well. Some of the initiatives we are involved with is co-innovating with clients and partners around emergent markets ecosystems such as carbon removal certificates and emission rights. Our goal is to be able to offer customers solutions to meet net-zero targets and succeed in the climate transition, and as an active bank in this space we see large opportunities to contribute.

Another example relating back to fixed income is the issuing of digital bonds – as an example, we worked with the European Investment Bank (EIB) last year on issuing a digital, sustainability-linked bond on blockchain. It’s an area of innovation where we are both interested and progressive.

Can you tell me a bit more about the sustainability-linked bond?

We co-launched together with Credit Agricole a blockchain-based platform – so|bond – with the EIB the first issuer with a SEK 1 billion digital Climate Awareness Bond. Proceeds will finance loans for climate-related projects.

The platform uses a type of validation logic that enables low energy consumption and encourages banks to improve the carbon footprint of their infrastructure. This is done through a reward system tied to minimal environmental impact, to create the right incentives.

What is SEB looking at beyond the digital bond – do you see the technology touching traditional FX, for example? How does SEB view crypto generally?

We look at crypto primarily in terms of how we can reuse ideas from the underlying technology. Those can be reapplied elsewhere for other purposes than trading crypto assets per se, such as the digital bond platform we just mentioned.

In terms of FX, stablecoins and CBDCs are obviously active areas. In Europe, the ECB is very publicly experimenting with Euro CBDCs, and the Riksbank and Nordic countries have been involved in the space as well. It is moving slowly overall, but these things tend to, because you need to get them right. But it’s an interesting space and we’re involved.

Do you see a disruption to traditional FX caused by these developments?

I’m not sure that the actual representation of the currency would make such a big difference whether it’s on a blockchain ledger or not. But when it comes to the settlement of the trade, if or when that moves closer to real-time, that would change the dynamics of the market quite considerably. For example, it would create the corresponding burden on all market participants to make all other related processes outside of actual trading real-time as well – all the checks and balances that are built into the entire process flow today, from trade inception to finally exchanging cash flows, and the room for error would approach zero too. This would represent a massive change, as well as challenge.

Also, in proportion with getting closer to real-time settlement, credit becomes less of an issue. And that could significantly change market structure too.

Are your clients in Scandinavia concerned about the US move to T+1 settlement in May?

I’m not sure it fundamentally changes that much. There are already some securities that have been T+1 for some time. But should it become T+0, then it makes a difference. That said, with all the development in crypto markets and with the combined know-how and insight from the world’s stock exchanges and clearing houses, the technology is mostly there to make this happen. In a way, solving the credit component is a bigger problem than technologically solving how money should be exchanged at T+0.

But solving all those other parts that I mentioned earlier are perhaps the harder bits – how do you align all the actual processes and steps that banks and other market participants must take to be able to manage a truly real-time trading and settlement environment? That would be the bigger step.