Blockchain What is needed for a breakthrough?

Transcription

1 Blockchain What is needed for a breakthrough? Oliver T. Bussamnn nrclive FinTech Conference May 11, 2017

2 Digitization is the main driver of key FS trends, impacting both banks and their customers 2

3 Blockchain enables asset transactions Internet exchanges information whereas Blockchain exchanges assets Information Assets PDFs PTT PDFs Slides PTT Slides Docs Docs Photos Voice Photos Voice Internet transfers information by duplication Money Bonds Art Stocks Swaps The Blockchain A duplication is an of immutable, assets is not distributed desirableledger designed to transfer - assets P2P Therefore thereby the discarding internet utilizes intermediaries 3 rd parties to transfer assets Property 3

4 Blockchain could dramatically reshape financial products and processes 24+ countries currently investing in blockchain Global interest US$ 20 billion in blockchain revenues in the enterprise application market by ,500+ patents filed over the last 3 years Research Bank experimentation 80% of banks predicted to initiate blockchain projects by corporations have joined 25+ blockchain consortia Consortium efforts Blockchain Central banks Venture capital Over US$ 1.5 billion in 1140 startups over the past 3 years 90+ central banks engaged in blockchain discussions worldwide Source: World Economic Forum: The future of financial infrastructure, August

5 Blockchain: What is needed for a breakthrough? Key Messages 1 First movers are focusing on selective cases with the highest benefit impact 2 Horizontal, cross industry collaboration in Business Networks and Consortia 3 Convergence of emerging technologies leveraging smart contracts will blur the lines of industries in a highly connected real-time world 4 Blockchain will question today s business model: Shift to decentralized Business Models 5 First mover capability business critical to manage the tipping point and business innovation driven adaption 6 Effective execution depends on collaboration within the Blockchain Ecosystem 5

6 First movers are focusing on selective cases with the highest benefit impact Selective Cases Examples of drivers and benefits Use case Trade finance Value driver Operational simplification Benefits Real-time multi-party tracking & management of letters of credit, enables faster automated settlement Potential industry cost reductions: $14-$17 billion Automated compliance Regulatory efficiency improvement Faster & more accurate reporting by automating compliance processes Global payments Settlement time reduction Near real-time point-to-point transfer of funds between financial institutions (FIs), removing friction & accelerating settlement Potential industry cost reductions: $50-$60 billion Post trade procession Operational simplification Risk reduction Automated processes, reduce settlement time, lower counterparty & operational risks Potential industry cost reductions: $15-$20 billion Source: World Economic Forum: The future of financial infrastructure, August 2016 / McKinsey analysis, January

7 Global Payments: Change from Correspondent Banking to Direct Settlement based on Ripple s Settlement Network with 30 Banks Business Networks 7

8 Business Networks Collaboration in horizontal Business Networks Using Smart Contracts in Trade Finance Transactions: Digital Trade Chain Consortium (DTC) 8

9 Decomposition and rebuilding of business architectures in Business Networks Business Networks Company A Internal app 1 Company A Internal app 2 Companies End client Machines & things Reports/ Analyses Reports/ Analyses Reports/ Analyses Reports/ Analyses Reports/ Analyses Decisions/ Actions Decisions/ Actions Decisions/ Actions Decisions/ Actions Decisions/ Actions Cross Company/Industry Business Processes and Logic Distributed ledger technology (DLT) 9

10 Blockchain will unfold its full potential with increasing technology convergence Convergence Source: Ernst & Young (2016) 10

11 Blockchain will question today s business model Business Model Current-state assumptions Drivers Implications Information silos Lack of a single version of the truth immutability Eliminates need for reconciliation Provides historical single version of the truth Asymmetric information between market participants Lack of transparency transparency Eliminates imbalance of information among market participants Increases cooperation between regulators and regulated entities Lack of trust between counterparties autonomy Ensures agreements are executed to agreed upon business outcomes Disintermediates supporting entities established to resolve disputes Need for central authority oversight in contract execution decentralized No central controlling company Shared contributions and ownership by all involved 11

12 Storj Labs: Industry's largest decentralized cloud storage provider using token sale to advance disruptive technology Business Model System for decentralized file storage Crowdfund through the Storjcoin token No central operator of the network Hybrid asset class between equity and currency Purchase storage on the network with Storjcoin Storjcoin for providing storage to the network Incentivize creators Incentivize partial ownership Shared contributions and ownership 12

13 Blockchain Adaption: Managing the S Curve with a tipping point ~13-15% market share Adaption 13

14 Blockchain Adoption from POC, Consortia, Piloting into Mainstream Adaption Exploration & Development Early Adoption Growth Maturity Bank focus Build-up & consolidation of consortia Cross industry EDGE computing Mainstream Initial capabilities and use-case assessments First movers in production Enterprise ecosystem build-up New services and products Smart Contracts Integral to the capital markets ecosystem Early adaption for internal reconciliation Selective first mover use-cases Payments New services providers and models emerge Post Trade Trade Finance Deployment goes viral across all asset classes Incumbent processes discarded Regulatory sandboxes Regulatory guidance and certainty First rule-making FCA & MAS leading 14

15 Effective execution depends on collaboration within the Ecosystem 6 Collaboration Source: McKinsey analysis, January

16 Summary: What is needed for a breakthrough? Key Messages 1 First movers are focusing on selective cases with the highest benefit impact 2 Horizontal, cross industry collaboration in Business Networks and Consortia 3 Convergence of emerging technologies leveraging smart contracts will blur the lines of industries in a highly connected real-time world 4 Blockchain will question today s business model: Shift to decentralized Business Models 5 First mover capability business critical to manage the tipping point and business innovation driven adaption 6 Effective execution depends on collaboration within the Blockchain Ecosystem 16

17 Appendix

18 Decentralized Business Models: Network with a decentralized token protocol / app coins as the operator Worldwide Supercomputer Venture Capital Industry: Initial Cryptocurrency Offering (ICO) Source: Fred Ehrsam: App Coins and the dawn of the Decentralized Business Model / William Mougayar: How Blockchain Startups Are Revolutionizing The information contained Venture in this document Capital is proprietary. Copyright 2017 Capgemini. All rights reserved. 18

19 Potential ~$80B to 110B efficiency impact has been identified Source: McKinsey analysis, January

20 Edge Computing leveraging smart contracts: Data drives the change - Real World Real Time Cross Industries Edge: Data centers on wheels Sense: Massive volumes of real-world data Infer: Machine Learning as a key driver Act: Real-time smart contract based processing systems Learn: The Cloud Learning Center 20

21 Business innovation-driven adaption Source: Deloitte, The Blockchain (R)evolution The Swiss Perspective, February

22 Blockchain Adoption Life Cycle Business Model Transformation Market Structure Transformation Setup cross industry sector consortium DLT Operational Transformation Prototyping and Market Testing Blockchain Solution Development 22

23 Distributed Ledger Adoption In commercial production and at scale Identified benefits Trailblazers top three DLT-enabled business models Source: IBM Institute for Business Value: Leading the pack in blockchain banking, Survey of 200 banks in 16 countries, September

24 Value drivers for simplicity and efficiency 24

25 Blockchain Enterprise Stack Digital Identity Global Payments Deposits and Lending Capital Raising Investment Management Market Provisioning Application Layer Gateway Services Identity & Key Services Crypto Services BI Services Middleware Layer RIPPLE ETHEREUM R3 CORDA Digital Asset Holding (DAML) Business Logic RIPPLE (RTXP) ETHEREUM R3 CORDA HYPERLEDGER Distributed Messaging Layer INTRASTRUCTURE STACK Base Platform COMMON DEVOPS TOOLCHAIN 25

26 The future of Global Payment & P&C Claims Processing Global Payments P&C Claims Processing Regulator Money Sender and Beneficiary Money Transfer Operator Insuree Insurer Local Clearing Network SWIFT Sender Bank Beneficiary Bank Supporting Data Sources Regulator Reinsurer Correspondent Bank Lower fees Real-time settlement Newer models of regulatory oversight Broker Reduced fraud Customer friendly Seamless access to historical claims 26

27 The future of Deposit and Lending Syndicated Loans Trade Finance Regulator Lead Arranger Correspondent Banks Importer Import Bank Customs Exporter Freight Export Bank Requesting Entity Syndicate Inspection Company Easier Safer More profitable Boost import/export efficiency Streamlined access to trade documents Greater capital efficiency 27

28 The future of Capital Raising and Automated Compliance Contingent Convertible ( CoCo ) Bonds Automated Compliance Financial Institution Auditor Financial Institution Regulator Internal Revenue Service Regulator Accountant Investor Automate regulator reporting Minimize point-in-time stress tests Improve investor confidence Federal Reserve Making financial information available to auditors Eliminate error-prone manual work Reduce reporting costs 28

29 The future of Market Provisioning Asset Rehypothecation Equity Post-Trade Broker/ Dealer Custodian Bank Regulator Investor Exchange Buying Investor Selling Investor Central Clearing Counterparty Central Securities Depository Reduced risk from the secondary trading market Automatic asset tracking Real-time enforcement of regulatory controls Eliminate the need for intermediaries Reduce counterparty and operational risk Faster settlement 29

30 Blockchain: What is needed for a breakthrough? 1 First movers are focusing on selective cases with the highest benefit impact 2 Horizontal, cross industry collaboration in Business Networks and Consortia 3 Convergence of emerging technologies leveraging smart contracts will blur the lines of industries in a highly connected real-time world 4 Blockchain will question today s business model: Shift to decentralized Business Models 5 First mover capability business critical to manage the tipping point and business innovation driven adaption 6 Effective execution depends on collaboration within the Blockchain Ecosystem 30