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Deloitte EFMA
Blockchain Survey
Grid.Blockchain Lab
- EMEA -
2
THE BLOCKCHAIN
3
4
WHAT IS BLOCKCHAIN?
A highly secure, tamper proof, SHARED ONLINE LEDGER
Enabling the organisation and exchange of value with NO THIRD
PARTY INVOLVEMENT
LIVING ON THE INTERNET, accessible to anyone
Allowing people (and things) to INTERACT AND TRANSACT with
each other
With the ability to store ASSETS, IDENTITIES, CONTRACTS AND
MORE
DATA
STORAGE
SMART
CONTRACTS
VALUE
TRANSFER
$
Blockchain is the technology protocol that sits beneath Bitcoin
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What do the big names have to say about blockchain?
WHAT IS ALL THE FUSS ABOUT?
"If distributed ledger technology could provide a more efficient way for private
sector firms to deliver payments and settle securities, why not apply it to the core of
the payments system itself?"
“blockchain technology continues to redefine not only how the exchange sector
operates, but the global financial economy as a whole, Nasdaq aims to be
at the center of this watershed development.”
""Is the blockchain technology going to be fundamental? I think the answer is overwhelmingly likely to be yes.
“The Blockchain is a technology, which
we’ve been studying and yes it’s real. It could probably reduce the cost of real
application in certain things”
“DLT has great potential to drive simplicity and efficiency through the
establishment of new financial services infrastructure and processes”
Mark CarneyGovernor, BoE
Bob GriefieldCEO, Nasdaq
Larry SummersFormer US Treasury Secretary
Jamie DimonCEO, JPM
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Source: Deloitte / Goldman Sachs / Santander InnoVentures / Oliver Wyman
POTENTIAL IMPACT TO FINANCIAL SERVICESNumerous papers have been written by our clients and our competitors on the areas where blockchain will have the biggest impact and also the potential associated cost savings
$11 – $12bn
$2 – $4bn$3 – $5bn
KYC / AMLReal
Estate
Cash
Securities
$15 – $20bn
Annually by 2022
IT
Infrastructure
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BLOCKCHAIN REALITY CHECK
MISCONCEPTIONS CHALLENGES
It’s not a panacea
It’s not Bitcoin, that is just a use
case
Traditional technology is not
redundant or obsolete
You will still need to integrate data
from other systems
It’s not real-time
Standards need to be formalised
Not all regulators are on board
Does it scale?
It is not proven in production
environments
Collaboration is required to make it
a success
What blockchain is not and the challenges associated with the technology
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EFMA SURVEY
© 2016 Deloitte9
The EMEA blockchain survey is closed! Here is an overview of the results
THE EFMA DELOITTE JOINT EMEA BLOCKCHAIN SURVEY
Respondents breakdown
80% Banking
14% Insurance
6% Others
3.000 C-Level Contacts across EMEA
11th March Survey published
20th April End of survey
Survey highlights
© 2016 Deloitte10
64%
Permissioned
blockchains are the
key for large-scale
adoption
Majority of respondents think that the financial services industry will be disrupted by blockchain in the next five years, but they are intrigued by permissioned solutions: are they focusing on the right use cases?
THE EFMA DELOITTE JOINT EMEA BLOCKCHAIN SURVEY
92%FSI will be disrupted
by blockchain
Blockchain main characteristics
allow to create new business opportunities…
… but currently FSI players seems to be
focused on use cases that can be
developed leveraging on existing
technologies
based on an immutable ledger
shared among a planetary-scale network
without a central authority
© 2016 Deloitte11
Among permissioned blockchains the preference is to achieve scale and trust in a consortium led manner, but even the most important consortia are currently not working on groundbreaking solutions
THE EFMA DELOITTE JOINT EMEA BLOCKCHAIN SURVEY
Consortium is
the preferred
solution by
Financial
Institutions
53%
Blockchain can be leveraged for
transactions of value in absence of trust
Consortium need to balance stakeholders
interests makes things to move slower
“We are not building a blockchain. Unlike otherdesigns in this space, our starting point isindividual agreements between firms…We reject the notion that all data should becopied to all participants, even if it isencrypted”
Richard G BrownChief Technology Officer, R3 CEV
© 2016 Deloitte12
The companies who have embarked on a blockchain journey are waiting for the regulator to set a framework for cryptocurrencies and blockchain technology
THE EFMA DELOITTE JOINT EMEA BLOCKCHAIN SURVEY
Regulatory
uncertainty is
the biggest
concern
49%
Over regulation concern could threaten
the technology evolution
Under regulation apprehension and
absence of a regulatory framework
could also slow down the evolution
Regulators have being open-minded in
addressing cryptocurrency topic so far
© 2016 Deloitte13
The majority of the participants are hesitant making their first steps in the blockchain world, some collaborate in consortia but only a few actively participate in the development of a solution
THE EFMA DELOITTE JOINT EMEA BLOCKCHAIN SURVEY
Have not
started started
their blockchain
journey yet
71%
None of our respondents firms have
developed a centre of excellence
Although the majority believe in
consortium owned permissioned
blockchain only 17% are actually
collaborating in such initiatives
11% have invested in start-ups
developing blockchain solutions or are
building POCs
© 2016 Deloitte14
Payments have undoubtedly been an initial focus area for blockchain projects and the participants confirmed that tendency
THE EFMA DELOITTE JOINT EMEA BLOCKCHAIN SURVEY
Would focus an
initial use case
around
International
money transfers
60%
Beyond payments we are seeing a broad
focus of initiatives right across financial
services areas and processes
An increased focus is around the KYC-
AML, clearing and settlement processes
© 2016 Deloitte15
The participants want to improve the way of working by improving busines models and efficiency
THE EFMA DELOITTE JOINT EMEA BLOCKCHAIN SURVEY
Cost efficiency
and new
businesses
opportunities
are driving
57%
Respondents are not afraid of FinTech or
Disruption
Especially experiences firms focus on
opportunities to improve their own value
propositions, investing in new business
models
Developing an understanding of thetechnology and the competitorsposition in the blockchain space aremotivations too
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OPPORTUNITIES
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OPPORTUNITIES - THE MEGA TRENDS
Direct impact on FSI
Dir
ec
t im
pac
t o
n c
lien
ts
High
Low
HighLow
DNA Sequencing
Internet of Things
Predictive Analytics
Crowdsourcing & Funding
Augmented Reality
Nano, Neuro,
& Biotech
Mobile Robots
Sensoring
New Energy
Advanced Materials
Personal Data Analytics
Advanced analytics on
enterprise data
Social Networking
Big data
Social Analytics
Digital Currency
SELECTED TRENDS
Technology Standardization &
ConsolidationMobile
Networks
3D Printing
NFCCloud
Blockchain
RPA
DATA
MOBILE
SOCIAL
CLOUD
NEW CORE
BIOSCIENCE, ENERGY &
MATERIALS
MEGA TREND CATEGORIES
Technological innovation is resulting in an array of new capabilities & possibilities, which in combination create powerful
‘megatrends’. The largest impact on business models will comes from multiple related innovations.
18
BLOCKCHAIN– CAPABILITIESC
OR
E
PL
AT
FO
RM
S
SP
EC
IAL
IST
SC
HA
LL
EN
GE
RS
Bitcoin
- CryptocurrencyEthereum
- Smart Contracts
Ripple
- Payments
Factom
- Proof of Existence
Loyyal
- Loyalty
Stellar
- Payments
Chain
- Consortium
Colu
- Local Currency
Corda
- Consortium
Hyperledger
- Linux
IBM Bluemix MS Azure
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BLOCKCHAIN– WHAT ABOUT MY WORLD?
SETTLEMENTASSET
SERVICING
TREASURY
SERVICESDERIVATIVES
CLIENT
SERVICES
MANAGEMENT &
ADMIN.
CUSTODY
Monthly Reports
Daily Reports
Client Enquiries
3rd Party Reporting
Internal Reporting
Credit
Global Network
Management
Cash Monitoring
SSI Maintenance
Internal Projects
Training
Management
Oversight
MIS
Internal Audit
Interface
Vendor Liaison
Internal Coordination
Risk Management
Claims Processing
Custody Account
Opening
Custody Account
Maintenance
Derivative Client
Services
Derivative Processing
FX
Fixed Income
Corporate Actions
Income Processing
Proxy Voting
Custody Tax Services
Stock Lending
Settlement Instruction
Capture
Settlement Processing
Instruction
Authentication
Client Meetings
TRANSFER
AGENT
Registration
Deal Processing
Manager Book
Processing
Settlement & Cash
Management
Distributions
Fees and commission
Shareholder services
Shareholder reporting
Client Service
Delivery
Investment Tax
TA
= Low
= Medium
= High
= N/A
POTENTIAL EFFECT
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BLOCKCHAIN– KYC UTILITY
• Leveraging Blockchain for storage, verification and workflow within a utility and enabling the customer to
manage their identity.
1
2
3
4
COLLECT &
VALIDATE
ENDORSE
TRANSACTION
RULES & LOGIC
Develop an app with industry players
for digital document capture “My ID
Wallet”
Seek endorsement for the authenticity
of your key documentation e.g. Driving
Licence from DVLA
Initiated from financial institution
requesting information or specific
customer records or transaction
details
Leverage capability to run rules
against bank requirement for correct
validation for KYC or AML checks
Client ID Wallet
Central Utility
Blockchain Enabled
Bank 1
Insurer 1
Insurer 2
Investment Manager
Asset Manager
Bank 2
“Even before the network is born, within one bank there is inter-product
KYC checks; inter-divisional, inter-location, inter-subsidiary. Those KYC
checks are not shared. KYC costs are very high.” - Gene Vayngrib,
Tradle Founder
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BLOCKCHAIN– SETTLEMENT
• Typical T+3 scenario
Exchange
Clearing Participant
(Brokers)
Settlement
Participant
(Custodian)
Clearing Participant
(Brokers)
Settlement
Participant
(Custodian)
Registry Central Bank
Clearing Service
Clearing House- novates and CCP
Settlement
House- settles and nets
Notified Trade
Net batch instructions
Batch instructions
Confirm DvP Transfer (T+3)
Notified Trade
Net batch instructions
Batch instructions
Confirm DvP Transfer (T+3)
Instruction transfer of funds (T+3)End of Day Reporting (T+3)
Trade Report
Estimated annual
cost for managing
post trade clearing
and settlement
$65 - $85
billion
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BLOCKCHAIN– SETTLEMENT
• What happens if we leverage smart contracts and the blockchain?
Radical Results!Match Buyer with Seller
Exchange
Contract receives asset
Contract distributes asset
Seller- Releases asset
- Receives remuneration
Buyer- Releases
remuneration- Receives asset
Digital Asset
Digital Currency
Distributed
Digital
RegistryClearing &
settlement
automated
Ownership
undisputed
• Launched the first ever cryptobond - Overstock
TIGRcub bond
• What is a cryptobond? The same as a regular bond
that a company would use to raise capital, but instead
of buying and selling it on, e.g. the NASDAQ, a person
would buy and sell this bond on the blockchain.
Clearing and settlement reduced to 10
minutes(time it takes for a single confirmation on the bitcoin
blockchain)
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SUCCESS RELIES ON A CULTURAL SHIFT
INNOVATION OFFICER
IN AN INNOVATION
ENVIRONMENT
FIXED BUDGET
FOR
FIXED TERM
CUSTOMER FOCUSED
TO DELIVER VALUE
WITH CLEAR ROI
ECOSYSTEM
CREDIBILITY AND
CONNECTIVITY
PARITY
OF ESTEEM
Innovate outside the
existing business i.e. a
fresh setting
Empower people to
commit to change and
facilitate failure
Give the customer
today what they think
they will need
tomorrow
You can’t change the
world from an ivory
tower
Treat the partner as an
equal. You might need
them more than they
need you!
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PROGRESSING
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THE GRID BLOCKCHAIN LAB
Leveraging our strong EMEA Blockchain SME network we develop strategic blockchain use cases and concepts to
support financial services clients to capitalise on the opportunities and test the capabilities that blockchain
technology can bring.
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A team of 50 blockchain practitioners will be built within 18 months by collective efforts and have the following capabilities
GRID BLOCKCHAIN LAB CAPABILITIES
Research and eminence
Use case identification,
analysis & PoC design
Learning and development
Be at the heart of the blockchain ecosystem
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