Current State of Blockchain - CeFPro · Current State of Blockchain Roberto Mancone ... Q3 2016 Con sortium focu ed on creati on f an SME trade finance solution we.trade Q1 2017 Solutions

December 2017 0

Deutsche Bank

Current State of Blockchain

Roberto Mancone

Global Head of Disruptive Technologies and Solutions

Deutsche Bank Private and Commercial Ban

Payments Forum, London

27th – 28th February 2018

December 2017 1Deutsche Bank

Agenda

B Selection of most relevant initiatives for DB

Impact of Blockchain on banking & Deutsche Bank initiativesA

B1 we.trade (Digital Trade Chain)

B2 Distributed Ledger Group (DLG / R3)

B3 Utility Settlement Coin consortium (USC)

C Collaboration between DB and H-Farm



Anticipated long-term benefits make Blockchain a highly relevant investment opportunity for banks

… are confirmed by industry expertsReasons for a bank to invest in Blockchain …

Lower frictional and administrative costs

Lean process creation

High security standards

Faster transactions

Transparent real-time data would create major operational benefits for users. (…) More efficient settlement of transactions and processing would occur as everyone sees the same data.

The long-term opportunity for banks is to repoint key operational, risk and finance systems to blockchain based, shared data platforms.

Big banks can leverage Blockchain to streamline operations and costs, while improving services and products for clients.

https://thenounproject.com/term/mobile-transaction/763928

https://thenounproject.com/term/mobile-transaction/763928

https://thenounproject.com/term/process/355072

https://thenounproject.com/term/process/355072

https://thenounproject.com/term/shield-lock/524011

https://thenounproject.com/term/shield-lock/524011


To achieve this role, Deutsche Bank is pursuing Blockchain research and development around six pillars

Market

Engagement

Internal

Innovation

Private

Partnerships

Market

Infrastructure

Consortium

Independent

Market Influence

Market Structure

Standard

1 3 4 5 62

PoV

Commercial loan

Utilize for internal efficiency

Develop in house business model knowledge

Collaborations with market counterpart/client to develop deeper business model understanding

Informed investments

Assess & undertake selective investments in traditional market infrastructure

Consortia focused on core products

Active engage-ment with marketleading companies in order to secure involvement in key projects

Active engage-ment in standard setting (incl. interoperability)

Proactive stance on streamlining divergent forums

Proactively positioning DB globally and regionally as thought leader

Show case DB projects to evidence progress

we.trade (Digital

Trade Chain)

PoV

Corporate bondsR3

Utility Settlement

Coin

Digital Trade Chain

press coverage

PCB@

Maersk/IBM

Blockchain Ac-

celerator (H-Farm)


Deutsche Bank has started numerous Blockchain initiatives in the past years…

Smart Contracts for a

corporate bond

2H 2015

Proof of Value

Initial focus on Bitcoin

exploring its potential

implications for cash

products

2H 2014

Focus on the protocol

behind Bitcoin i.e.

Blockchain. Discovery of

greater opportunity to

transform the investor and

issuer space

1H 2015

Smart Contracts for a

commercial loan

Proof of Value

Q2 2016

Consortium focused on

creation of a clearing and

settlement coin

Utility Settlement Coin

Q3 2016

Consortium focused on

creation of an SME trade

finance solution

we.trade

Q1 2017

Solutions combining

Internet of Things with

blockchain technology

Blockchain & IoT

Q4 2016 Q3 2017

Cooperation with The

Loan Exchange (TLE)

Blockchain factory

Incubator & TLE

Q4 2017

Industrial blockchain

applications in

cooperation with large

industry partners

Blockchain Accelerator

Initial Focus

Discovery

Initiative by Global Transaction Banking Initiative by Private & Commercial Bank

http://www.r3cev.com/



Hence, we are actively engaging in external collaborations to push Blockchain initiatives

Further details in section B

Distributed Ledger Group

(DLG / R3)

• Consortium of 100+ members

• Deutsche Bank driving membersince 09/2015

• “R3” focuses on developing and executing Corda, a distributed ledger platform specifically for financial services

• Corda v1 released in Oct 2017

• The Loan Exchange cooperation stablished in Q4/2017

Utility Settlement Coin

consortium (USC)

• Consortium of 4 banks, NEX Group

plc, and the start-up Clearmatics

• Focus on an asset-backed digital

cash instrument implemented on

DLT for use within global,

institutional financial markets

• Deutsche Bank actively engaged

to assess potential market

structure changes (policies,

economics)

we.trade (Digital Trade Chain)

• Consortium of 8 European banks

• Focus on the development of a

Blockchain solution to digitize

and improve cross-border trade

• Solution aimed at European SMEs

to increase/enhance their trade

transactions




Agenda








DB is exploring Blockchain and IoT solution to solve some of the most relevant challenges in trade finance

IoT and blockchain supported value chain in trade finance

Real-time capturing of

trade data

Real-time

monitoring

Shipping

arranged

Letter

of credit

Real-time verification and

digital submission

Smart contract

auto filled

One online platform

IoT componentDocumentation component Documentation component

• Current main challenges in trade finance revolve around document handling

• These challenges arise from the high number of participants, no standardization & legal requirements

• The cases where IoT monitoring could add significant value are:

- Low cost monitoring (RFID) of high volume freight

- High tech monitoring of expensive and sensitive freight (e.g. medicine)

• The cases where blockchain could add significant value are:

- Smart contracts for automated settlement

- All other documentation aspects

Can be supported by

Blockchain solutions

Can be supported by

Blockchain solutions

December 2017 9

Deutsche Bank joined a consortium of nine European banks to provide a Digital Trade Chain solution: we.trade

• we.trade (Digital Trade Chain) is a Blockchain based digital platform for managing and tracking domestic and cross-border Open Account trade transactions

• Scope: Initiate transactions on paperless and secure basis, track transaction at each stage of the transaction lifecycle, through to point of settlement/payment

• Go-to-market in Belgium, France, Germany, Italy, the Netherlands, the Nordics, Spain and the UK is planned for Q1/2018

• Expansion to other countries, banks and additional service providers planned for the future – platform will generate revenues through fees from newly onboarded banks

Partnership to provide Blockchain solution for European companies in cross-border trade

December 2017 10

With our vision of the global platform for trade finance we already created significant awareness in the market

Global platform for trade and finance…

…aims at corporates of different sizes, with diverse

product offerings, and across multiple industries

…enables European companies to increase/

enhance trade transactions

Source: Forbes, coindesk, finextra, IT Finanzmagazin, Global Trade Review, Banking Technology

…acts as standalone product that needs no

integration into legacy systems

…enables automated settlement via smart

contracts using blockchain technology

2017: The Vision – Digital Trade ChainMarketplace where companies can trade with more trust

December 2017 12

• 150 people involved

• 580 conference calls

• 120 meetings & workshop in 7 countries

• Agile methodology with 12 sprints and 1100 story points

already developed

1

• Legal entity setup ready

• Project governance completed

• Shareholder structure agreed

• Corporate governance defined

Building the platform

• Solution development

• Implementation management

• Platform licensing

• Market launch

3 Joint Venture Company

• Brand launched

• Management established

• Go to market strategy agreed

• Projects defined

• Clients identified

2 Governance

4 Market

AAAccomplishments

12


After the Go-Live in early 2018, we plan to expand the bank and client network – likely beyond Europe

Constant onboarding of client banks which generates additional fees for platform

December 2017 14

● One single platform: enables transparency and constant follow-up at each stage of the lifecycle

● Verified customers: buyer and seller have been verified by their respective bank

● Access to financial services: unique customer experience and more possibilities for trade

● Legal framework: increased security

we.trade

Transparency Follow-up

Access to FinanceTrust

1 Login via Bank access

2 Draw-up contract

3Receive contract,

check and confirm

4 Request Bank Service

(Optional)

4 Request Bank Service

(Optional)

5 Track & Trace Payment

Seller

Belgian Beer

Brewer

John

Buyer

French drink

distributor

Boisson

5 Track & Trace Shipping

Seller‘s Bank Buyer‘s Bank

1 Login via Bank access

Payments will be executed by the banks upon smart contract

instructions negotiated amongst the clients,

therefore no payment executed through the platform

Clients register on platform and are validated and approved

by their respective bank –

only clients who are already bank clients and went

through KYC process can participate

Payment

Services for Companies

14

December 2017 15

Controls - Increased controls around the

process so that if the fulfilment is met, the

payment will not be blocked by a third party.

Automation - Increasing speed and

reliability in the workflows across both banks

users and SME customers.

Reduced Intermediaries - Use of

blockchain cuts out the middleman so the

process requires less trust and fewer steps.

Innovation – how it works Customer Benefits

Smart Contracts: Automated Settlements

The key innovation in the we.trade platform

is its use of Smart Contracts.

Smart contracts may be defined as:

“the use of code to articulate,

verify, and enforce an agreement between parties.

A smart legal contract1”

Automated settlement means that the smart

contract determines that conditions of the

trade have been met and will then send the

payment instruction to Buyer’s Bank for

execution.

The Buyer’s Bank will make the payment

through its existing systems.

Payment conditions:

During the registration of a trade transaction,

Buyer and Seller agree that payment will be

initiated after reaching the agreed conditions

– Buyer and Seller can select a or b or c

with d or e optional:

d) Against confirmation of delivery of

goods by transporter.

e) Against confirmation of delivery of

goods by buyer or seller (cfr incoterm)

a) Trade Agreed by Buyer and Seller

(prepayment)

b) Invoice data uploaded by seller

c) Acceptance of invoice by buyer

1. https://www.coindesk.com/making-sense-smart-contracts/ 15

And invoice will be paid in full

….. days after settlement conditions

met/ after invoice date or else on a

fixed date.

https://www.coindesk.com/making-sense-smart-contracts/


Agenda








The Distributed Ledger Group aims to execute use cases based on distributed ledger technology – platform “Corda” launched

What it is

• The FinTech R3 coordinates the Distributed

Ledger Group

• R3 has built an open and modular shared

ledger platform to allow financial services firms

to access these efficiencies in a flexible and

low cost manner (“Corda”)

• “Corda” is designed to record, manage and

automate legal agreements

Distributed Ledger Group – Mission

• Defining and executing use cases suggested

by the consortium members

• Realizing the benefits of distributed ledger

technology in financial markets

& Over 100+ consortium members from the financial industry



December 2017 18

Deutsche Bank is currently exploring the concept of a smart loan exchange with a partner company and R3

Partnership to validate set-up of a smart loan exchange

• The Proof of Concept (PoC) will explore the feasibility of setting up a platform for originators and investors to exchange smart loans

• The platform will be developed based on Corda technology

• Intention: Allow loan originators to transform loans into smart loans that can be exchanged in a virtual exchange. Providing investors with the opportunity for a more efficient exchange of loans.


Agenda








USC is a digital cash equivalent for eliminating the need to manage financial transactions through central banks

USC as leg for international transactions…

• Utility Settlement Coin is an asset-backed digital cash

instrument based on distributed ledger technology

and traded via special payment system developed by

USC consortium

• USC is free of credit and counterparty risk, available

for all major currencies, and convertible at parity

with a bank deposit

• Equipped with properties of Central Bank money, USC

is intended to pioneer the Central Bank Digital

Currencies (CBDC) field

…will benefit participants in financial markets

• Reduced systemic risk with higher resiliency and

efficiency in the market

• Payment paths point to point without

intermediaries (e.g. Central Banks) and step-by-step

transactions

• Better interoperability, also with third-party service

providers

• Lower capital and transaction charges

USC Consortium


Agenda






C Collaboration between Db and H-Farm

December 2017 22

Program offer

• Five start-ups selected through extensive screening

process and competitive selection day

• 4 month acceleration & growth process

• Advisory sessions, lectures & resources around start-up

development and blockchain

• Mentoring by Deutsche Bank and industry partners

• Start-ups stay on H-Farm campus: accommodation,

working space, mentoring, etc.

Conditions

• Seed Investment €20K (+ €80k Services)

• H-FARM option to convert the Program Value into 3-6%

equity based within a timeframe of 3 years – possibility

to pass on 50% to DB

Timeline

SELECTED

START-UPS

Co-operating with H-Farm, we support five promising start-ups in our recently launched blockchain business solutions accelerator

DEC JAN FEB MAR APR

4-months period

2018

Deutsche BankDeutsche Bank

Private & Commercial Bank

Thank You!Do you have questions?

Payments Forum, London

27th – 28th February 2018

Roberto Mancone, Managing Director Deutsche Bank

Global Head of Disruptive Technologies and Solutions

Documents

Current State of Blockchain - CeFPro · Current State of Blockchain Roberto Mancone ... Q3 2016 Con sortium focu ed on creati on f an SME trade finance solution we.trade Q1 2017 Solutions