Blockchain potential implications for the financial industry

Transcription

1 Blockchain potential implications for the financial industry June 9 th, 2016 Transform to the power of digital

2 Introduction: Some current trends on the blockchain while the buzz cools down a bit Proof of stake and permissoned solutions are dominating the financial industry Some difficulties for and the success of Ethereum - - the big winner!? Market cap and market interest for the solution are booming, like for other solutions and projects like but the coming year might be a challenge for Ethereum since transition to proof of stake should be implemented The concept of Smart contract has become a main focus point with solutions like offering their integration into private solutions Last but not least: Central banks show now confirmed interest

3 The following use cases are gathering most interest in the financial industry since promising real improvements over existing solutions Cross border payments & correspondent banking Faster (real time), more cost-efficient & worldwide transactions without intermediaries Securities trading Digital securities trading: ownership and transfer Issues of current process equivalents Trade finance & Smart contract management Software based contracts for trade finance and financial products management Unpredictable (slow) delivery & high costs Manual customer service High exception rates Multiple links in the chain Near-real time delivery (seconds) Predictable costs Automated Customer service Low exception rates Single ledger & bilateral clearing & less intermediaries Duration between trade and settlement of between 2-3 days Many parties (clearing houses, central securities depositories) Benefits of blockchain use cases Reduce time between trade and settlement to 0 days (trade=settlement) Less costs More transparent Available for all market participants Contract based on trust and litigation Analogue relationship between parties Automatic execution of the contract (If-then constructs) Less administrative effort Reduce costs Contracts & relationship between parties digitized Intermediary not needed These use cases are more cost efficient, safer and faster than their current process equivalents (until new developments come up)

4 Before selecting or assessing any use-case, keep in mind that blockchain is not the best solution for all use-cases BLOCKCHAIN MAKES SENSE FOR ALL DATABASES FULFILLING A COMBINATION OF THE FOLLOWING CRITERIA: 1. A NEED FOR VALUE TRANSFER, One or several of these criteria to 2. REQUIRING (NEAR) REAL-TIME FUNCTIONING, be fulfilled 3. WHEN WORKING IN A TRUSTLESS ENVIRONMENT 4. AND CURRENT INEFFICIENCIES This implies that some potential use-cases do not really make sense

5 Potential other interesting use-cases: PSD2 could be partially implemented on the blockchain for TPP registration and access to account management Overview: 1 Relationship Third Party Provider 4 Blockchain Account holder Approve/Withdraw 3 2 Access requests Bank Solution can be single bank / multi third party or multi bank / multi third party

6 Blockchain and smart contracts can be used at various degrees to ease regulatory transaction reporting or addressing it completely Filtering of transactions for reporting Smart Contracts Ease of Access of Reporting data to regulators Participants still hold the data in their repository but provide keys in blockchain Reportable transactions entered on blockchain through a feed Existing core systems continue to be used and feed reportable transactions to blockchain Blockchain used to ease out validation and reconciliation of transactions Transactions filtered addressed through Smart Contract based reporting Blockchain solutions used for both identification of transactions to be reported and reporting, validation, reconciliation, and analysis Reporting as component of a blockchain driven solution Blockchain driven Trade, settlement, and reporting Permissioned access to Regulators on blockchain so that they get a fully transparent view of market activities

7 Smart Contracts can filter transactions to be reported A framework of interlinking smart contracts for regulatory reporting The framework has three components Interfacing contract Tx reporting Rule base contracts Storage contract The interfacing contracts receive transaction details and based on checks from the rule base contracts they are recorded in the registry of transactions

8 In the retail banking sector, following use cases seem to be particularly interesting: 1. Mortgage underwriting and management 2. Loans 3. (Life) insurance management 4. Digital wallets with virtual currencies and fiat currencies 5. Financial products selling 6. Loyalty program management 8

9 Our conviction is that in the long run numerous and different solutions will co-exist End view of associated numbers of solutions which will co-exist in the future: Billions of users Millions of use cases Hundreds of thousands Currency services Pegged Services 1 Thousands Smart Contracts 2 DAO* 3. 3 Evolving to extended service reputational based offerings To offer broad based value added fee services to bank and non bank clients based on trusted brand services Core services to existing customers that pay for the Infrastructure required & can be easily rolled back Increasing complexity & delivery timeframe 4 Extending the bank to a utility service provider that can not be rolled back Services: Transportation Online Storage Mesh Networks Healthcare Wagers Bounties Family trusts Perf. proofs Escrow Naming Identity Ownership Membership Voting Transfers Payments Securities Source: Blockchain: Cryptoplatform for a Friction-free Economy, Capgemini, 2015 * Decentralized Autonomus Organisations

10 Thank you! 10