Technology, Innovation and the Changing Banking Landscape 技术 创新和银行业格局变化 James Lew Technology Director Corporate & Investment Bank J.P. Morgan
Agenda Robotics & Machine Learning 机器人技术与机器学习 1
What is Robotics? 什么是机器人技术? Robotics is best considered as a spectrum of intelligent tools ranging in complexity, that automate a variety of operational activities that humans currently perform, whilst minimizing the changes required to the core technology platforms. 2 4
Robotics can increase efficiencies and free up resources 机器人技术可以提高效率 解放资源 Simple Complex Robotics Process Automation Virtual Assistants / Machine Learning Automates simple and repetitive tasks, with high fidelity Enables sophisticated activities through complex rules..through deployment of BoTs across various stages of complexity continuum Task Bots Meta Bots IQ Bots Can mimic human actions to help automate manual, repetitive and time consuming business processes. Task Bots are best at rules-based tasks that rely on structured data. Can do everything that a Task Bot can do, but they can also be extended for complex, multi-system dependent processes. Can integrate with cognitive components. IQ Bots are best at managing through fuzzy rules and recognizing patterns of semi-structured data. 3
Robotics Process Automation Overview 机器人流程自动化 - 概览 4
Criteria for Bot Automation 机器人自动化标准 Ideal Candidates for Automation Processes that are structured, repeatable, error prone and have fluctuating volumes Processes for which the cost for the existing workforce to perform is high Criteria of ideal candidates are listed below 5
The robotics program is already delivering 机器人计划已经开始显现成效 Simple Complex Robotics Process Automation Virtual Assistants / Machine Learning Operational Efficiency Predictive analytics solutions Faster payment processing rates and greater accuracy Increase scale that gives the ability to react to change more quickly Improved forecasting accuracy Better decision making 6
Benefits of Robotics 机器人的优势 Nimble /Agile Response Ease Migration Process Improved Controls & Accuracy Benefits Increase Operational Efficiency Digitization 7
Benefits of Robotics 机器人的优势 The implementation of robotics in JPMorgan has benefited our clients Nimble/Agile Response Relatively fast turnaround time to requests/regulatory changes Example: Due to changes in Malaysian FX rules, the Bank is required to convert a percentage of a export proceeds to local currency at a short notice Robotics is able to reduce the time to market, thereby allowing JPMorgan and Clients to be compliant with the changing regulatory requirements Ease Migration Process Provision of customized reports for clients to ease migration to JPMorgan Example: A Japanese client requested for a customized statement template that will minimize change impact on their ERP systems and reconciliation processes Robotics is leveraged to interface with various systems to prepare the statement Increase Operational Efficiency Support selected clients processes to increase client efficiency Example: Regulations in Thailand requires client to report all transactions above USD50,000 to the local regulator through a manually generated FX form. Robotics has allowed JPMorgan to generate these forms on clients behalf automatically 8
Benefits of Robotics 机器人的优势 The implementation of robotics in JPMorgan has benefited our clients Digitization Utilizing OCR capabilities to automate traditionally manual processes Example: Human effort was required to manually transpose transactional information in PDF for a specific clearing in China Robotics is leveraged to accurately read, capture and transpose the information from PDF into JPMorgan s core systems Improved Controls & Accuracy Automation of selected manual processes to improve accuracy and reduce human errors Example: A client sends payment instructions with the purpose code in a non-standard field and needs an extended period to enhance their ERP system. Robotics is used to automatically identify and amend the instructions to increase turnaround time and negate human errors 9
Machine learning 机器学习 Machine Learning offers even greater potential to transform our businesses conceptually modelled on the human brain Structure of a Neuron automating more sophisticated work bringing greater benefits Contract Intelligence (COIN) Translation Services Today Manually review hundreds of unique contracts Natural Language Processing Pattern Recognition ~ 360,000 hours per year Machine Learning Classification & Prediction Unsupervised Learning Neural Networks Neurons connected through Axons to human cells Structure of Artificial Neural Networks (ANN) Tomorrow Machine learning will enable processing beyond human scale Near real time results Multiple nodes connected by links to imitate the biological neurons of human brain 10
Agenda Blockchain 区块链 11
BlockChain: Cryptocurrencies, Distributed Ledger & Smart Contracts 区块链 : 加密货币 分布式总账技术和智能合同 Cryptocurrencies Distributed Ledger Smart Contracts Type of digital currency in which encryption logic is used to regulate the generation of currency and verify the transfer of funds A distributed database introduced with Bitcoin which records a continuously growing transaction block with inter-linkages Self executing computable contracts residing on Blockchain which can verify fulfilment of conditions and execute contracts Regulatory purview of Cryptocurrencies is still not clear. Possible emergence of cryptocurrencies as settlement or exchange currencies in the medium to long terms Focus area for banks and financial institutions is Blockchain as a Distributed Ledger and Smart Contracts 12
What is a distributed ledger (blockchain)? 什么是分布式总账技术 ( 区块链 )? Centralized A blockchain is: 1 2 3 4 5 6 7 A data store Holding a log of transactions (events) Replicated across a (public or private) distributed network Using cryptography & digital signatures to determine valid parties and transactions Such that everyone agrees on the order and state of the ledger in real time Without having to rely on a trusted third party to hold the true golden copy With a practically immutable, verifiably true audit trail Decentralized Distributed A blockchain is an immutable and consistent transaction protocol and data store shared by all nodes of a distributed network Once recorded, transactions cannot be practically altered, and every copy of the ledger has the same record of the transactions made Consistency is achieved by a consensus mechanism (mining or another algorithm), a process in which a majority (or in some cases all) of network validators come to agreement on the state of a ledger Transactions are recorded as changes to the ledger, adjusting the assets and obligations of the participants in the network Distributed Ledgers allow network participants to share a single golden record without relying on trusted intermediaries or a central authority. The network can be completely open (public) or open only to known counterparties (private) 13
A synergy of existing, proven technologies 与现有的有目共睹的技术产生协同效应 Cryptographic hashing One-way encryption generating a unique finger print for any piece of data A database with special properties Impossible to alter historical records Comprehensive audit trail E-sign every step in a transaction Public key cryptography Identity-based encryption preserving privacy in a distributed network Public Key Private Key No data silos Standardized data Regulatory transparency Distributed networks Scalable infrastructure creating a network of equal peers with no central authority Robust network resistant to attack Simpler disaster recovery Centralized Decentralized Distributed Byzantine fault tolerant consensus mechanism Can be used to record transfer of digital (tokenized) assets Prevents double spending of tokens Algorithm allowing participants to agree on the current state of the ledger with no central authority 14
Key features and implications of Distributed Ledgers 分布式总账技术的主要功能和意义 Key Features Reduced need for a trusted third-party Trust in the veracity of ledger data is maintained by the technical protocol itself, without reliance on an external governing authority Distributed information Operational risk due to IT failure or cyber attacks is reduced Prevents double-spending Ownership of tokenized digital assets can be recorded on a distributed ledger such that it is possible to verify uniqueness of the asset Consistent and auditable Distributed ledgers house all transactions within one standardized network since inception Customizable Smart contracts can be used to model complex business logic and asset classes while maintaining verifiability of asset class specific standards Permissioned ledgers can capture all these features while limiting participation in the network to known entities only Implications Potential for new, efficient, global transaction processing systems without central authority Middle office processes can be simplified and further automated Efficient, near-instant value transfer Real time settlement reduces risk and frees capital for more efficient allocation Improved data transparency and audit trails Transactions records and logs can be accessed by clients, control functions and regulators in a streamlined process Minimization of systemic risk due to single points of failure Information is evenly distributed and accessible, with modern encryption standards and better data standardization Transparency and immediacy Transactions can independently be verified at any point in time Distributed ledger technology has the potential to fundamentally change: The systems, processes and infrastructure used to exchange, settle and record financial transactions The scope of assets available for investment, trading and custody 15
The promise of the blockchain 区块链技术前景广阔 Business Operations Technology Fast transfer of value and assets without a trusted third party Same version of the truth between all participants Simplified, more robust technical architecture Improved liquidity Potential for new markets Opportunities for supply chain optimization Reduced settlement time Reduced risk, cost & complexity Reduced effort to achieve regulatory compliance 16 Cryptographic trust and enhanced cybersecurity More universal encryption of stored data Improved disaster recovery models
The promise of the blockchain 区块链技术前景广阔 Business Operations Technology Fast transfer of value and assets without a trusted third party Same version of the truth between all participants Simplified, more robust technical architecture Improved liquidity Potential for new markets Opportunities for supply chain optimization Reduced settlement time Reduced risk, cost & complexity Reduced effort to achieve regulatory compliance 17 Cryptographic trust and enhanced cybersecurity More universal encryption of stored data Improved disaster recovery models
The promise of the blockchain 区块链技术前景广阔 Business Operations Technology Fast transfer of value and assets without a trusted third party Same version of the truth between all participants Simplified, more robust technical architecture Improved liquidity Potential for new markets Opportunities for supply chain optimization Reduced settlement time Reduced risk, cost & complexity Reduced effort to achieve regulatory compliance 18 Cryptographic trust and enhanced cybersecurity More universal encryption of stored data Improved disaster recovery models
Market views and potential applications 市场观点和潜在应用领域 Public views Poll: How disruptive will blockchain technology be? one of the most disruptive innovations since the advent of the Internet -- McKinsey, Beyond the Hype: Blockchains in Capital Markets a truly new way to organize financial transactions and information... -- Oliver Wyman, Distributed Ledgers in Capital Markets industry hype has been unprecedented, but also generally uncoordinated up to this point -- DTCC, Embracing Disruption many challenges need to be overcome. This will take not only years but hundreds of millions if not billions of investment dollars -- Tabb Group, Blockchain Clearing and Settlement: Crossing the Chasm Too Far Away to Care about I Don t Understand Blockchain A Fad Source: Autonomous December 2015 survey Meaningfully disruptive Important, but Modest Change Potential applications E-commerce & Manufacturing Trading Platforms App Development Authentication & Authorization Healthcare A Smart Contract IT portal executing order fulfillments Digital security trading for ownership and transfer Proof of ownership of modules in app development Provides digital identity that protect consumer privacy Decentralized patient records management Source: GrowthPraxis 19
Potential Blockchain applications within J.P. Morgan 摩根大通内部区块链技术潜在应用领域 In-flight efforts Internal Network Payments (In-house) Interbank network payments Single-Name CDS Settlement (POC completed Q1 w/ Axoni) Equity Derivative Swap Settlement (Axoni) Securities Settlement / Custody and Servicing (Digital Asset) Analysis (in no particular order) Trade Finance Repo Interbank Clearing Commodities Corporate bonds Collateral Management Syndicated Loans (Digital Asset) 20
Use Case J.P. Morgan Network Payments 使用案例 摩根大通支付网络 Overview Benefits A new 1 service offering enabling any J.P. Morgan account holding client to remit funds to any other J.P. Morgan account holding client: In real-time J.P. Morgan s overall network position International representation in 32 countries Account services in multiple currencies Providing FX in 120+ currencies TORONTO LONDON FRANKFURT For any supported currency At any time 365 days a year From any J.P. Morgan location to any J.P. Morgan location Current settlement process Settled within prescribed cut-off times Subject to third party bank deductions or charges No confirmation of settlement to creditor Settlement delay Limited reference data NEW YORK SYDNEY 19 18 17 21 20 16 15 22 23 14 13 24 12 1 2 3 11 10 9 4 8 5 6 7 TOKYO BEIJING J.P. Morgan Network Payments Opportunity Real-time payments within J.P. Morgan Network across 32 branches Internal Settlement across distributed ledger network No Clearing/Correspondent timing restriction Client benefits Near real-time settlement across entire J.P. Morgan Network 24 / 7 / 365 processing window End-to-end track and trace transparency JOHANNESBURG Any J.P. Morgan supported currency Elimination of third party bank charges or deductions Reduced transaction fees Settlement assurance 1 2017+ new build 21
Use Case Interbank network payments 使用案例 银行间支付网络 L O N D O N The Current Landscape T O R O N T O F R A N K F U R T Multiple participants for each transaction Reliance on Correspondent Network Clearing time restrictions Lack of transparency Distributed Ledger Network Payments Real-time transfers within a Distributed Ledger Network N E W Y O R K 23 22 21 20 19 18 17 16 15 14 13 24 1 2 3 10 12 11 4 5 6 7 8 9 B E I J I N G Multi-bank participation Reduced intermediaries No requirement for trusted third party S Y D N E Y T O K Y O Correspondent Distributed Ledger Network Clearing 22 Correspondent
Distributed Ledger - beyond network payments 分布式总账技术 - 除支付网络外 Our vision for the payment ecosystem We anticipate continued applications beyond Network Payments The technology may affect entire payments financial architecture in the future to provide additional benefit for clients Implementation will requires industry cooperation, regulatory acceptance and additional testing Banks, central banks, payment regulatory bodies and infrastructure providers performing R&D to understand implications Use Case Project Ubin (Singapore) Build a domestic payments prototype for inter-bank obligations (for domestic and international banks operating in Singapore) using the Singaporean Dollar ($S) and DLT and backed by central bank deposits Singapore will be the first financial market in Asia to achieve this and the Singaporean dollar will be the first Asian currency to be put on a distributed ledger Build a DLT platform and internal capability for MAS and market participants in Singapore as a precursor to tackling two key business challenges crossborder payments and cross-border securities in a later phase of work Test whether DLT can improve on the properties of the MEPS+ system in terms of: Efficiency Can operational efficiencies be driven in the Singaporean domestic payments systems Resilience Can the resilience of the overall systems be increase to reduce the risk of overloading due to high volume, misrouting or prevent security breaches Explore impact of immediate, deferred and deferred net settlement and settlement certainty on operational and counterparty risk 23
Roadmap 发展蓝图 2018-2020 DTCC Conference Participant Poll Industry scale production-ready pilot of a major process 60+% 2021 Autonomous Research $16 billion cost savings and $6 billion of capital release at Investment Banks 2020-2025 DTCC Conference Participant Poll Major impact on securities settlement 2025 Morgan Stanley assets to proliferate onto Blockchain Blockchain industry-wide impact timeline 2020 Morgan Stanley shared infrastructure will emerge beyond initial PoC groups 2022 Santander / Oliver Wyman infrastructure costs in x-border payments, securities trading & reg compliance to fall by $15-20B 2026+ Oliver Wyman 10+ years before mass adoption Citi 10+ years before majority of processes move to Blockchain J.P. Morgan view Technology Development: Resolution of critical technological challenges (e.g., scalability, privacy, latency) in 2-3 years Ecosystem Development At least 5 years before DLT solutions dominate operating model/ market structure (i.e., >30%) in a major asset class, due to competing models & nascent standardization >7 years before regulatory & legal frameworks sufficiently address blockchain / DLT to enable mass adoption Internal Solutions: Likely to start emerging in 2-3 years 24
Q&A 问答 25
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