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15th September 2016
Link'n Learn Session
Opportunities and Threats of Digital for the Investment Management Industry
2
THE WORLD IS
CHANGING
Presentation title[To edit, click View > Slide Master > Slide Master]
3© 2016 Deloitte. All rights reserved
Presentation title[To edit, click View > Slide Master > Slide Master]
4© 2016 Deloitte. All rights reserved
To create new norms, behaviours and engagement approaches…
££
£
Mobile first every day interaction Redefining the everyday banking customer journey around mobile
Digitalising our walletsDigital wallets [cloud / NFC], mobile device merchant terminals and perhaps NFC at some stage
Real insight that helpsReal-time personal finance management to help purchasing / budgeting decisions
The tablet conundrumFinding the opportunity between smartphones and online
Integrated channels Omni-channel interactions built to solve user needs within a customer journey
mCommerceGoogle, Facebook, Amazon, Square and PayPal amongst many more fighting for a slice of the banking eco-system
Gamifying financial tasksUsing game mechanics to motivate behaviour to engage customers in new ways; frequency, affinity and loyalty
Social InfluenceSocial payments are quickly becoming a standard feature in banking apps
A perfect storm relished, embraced and adopted by newly empowered and value driven consumer….
New Empowered Consumer
Access to information
Greater choice than ever before
Leveraging social media
and price comparison
Sharing views post purchase
Seeking personalisation
and to co-create
7
INNOVATION
8
Customers Frustrated
Limited Flexibility
Legacy Systems
Process Inefficiency
Services Not Optimal
One Size Fits All
…on Mt. Legacy
9
THE TRADITIONAL
ROUTE
10
Ideas
11
…lead to pitches
12
…which go to steering committees
13
…who discuss feasibility
14
…and write a report on it
15
THE RESULT
16
At best we see incremental changes
17
…at worst complete failure
18
… AND ON
AVERAGE WE GET
19
Paper weight
20
Money burned
21
Frustration
22
WE CALL THIS…
23
The hamster wheel
24
THE HAMSTER
WHEEL IS KILLING
BUSINESS
25
IT RESULTS IN INSIGNIFICANT RETURNS…
26
AND WON’T SURVIVE IN A WORLD OF EXPONENTIAL CHANGE
27
HOWEVER,
EXPONENTIAL TRENDS
ARE EMERGING
28
EMERGING EXPONENTIAL TRENDS…
Products Platforms
SilosEcosystem
Segment
LedCustomer
Led
29
POWERED BY…
Standards
Sharing and Cooperation in an ecosystem
30
NOW WE WANT
31
Experiences
32
Lifestyle
33
Social
34
Personalised
35
CONNECTIVITY IS
THE KEY
36
Blockchain
Internet of Things
Robotics
AdvancedAnalytics
Payments
RegTech
P2P
OUR FOCUS NEEDS TO BE RAPIDLY CONNECTING TOSTART-UPS AND SCALE-UPS ALIGNED TO DISRUPTIVE TECHNOLOGIES
37
WHAT IS BLOCKCHAIN?
38
WHAT IS BLOCKCHAIN?
Blockchain is the technology protocol that sits beneath Bitcoin
Satoshi Nakomoto publishes a white paper in 2008 to support
peer to peer electronic payments system
Created to transfer payments amongst peers in a secure
manner so that sanctions and banks could be bypassed
Bitcoin is developed as an open source protocol with first
block mined in 2009
Bitcoin has evolved into the most developed and famous use
case of blockchain technology
Bitcoin has yet to be hacked……
Brief History of Bitcoin
#
15.7 million bitcoins
in circulation
€
$678 per bitcoin(as at 17:41 19.06.2016)
5k transactions
per hr
39
WHAT IS BLOCKCHAIN?
Blockchain is the technology protocol that sits beneath Bitcoin
Innovative characteristics
A distributed ledger for each participant
Highly secure because of the level encryption applied to the data in the ledgers and in the
transactions
Single version of truth because of the consensus algorithms applied giving mathematical proof
No third party required because the consensus algorithms are automated
Concepts of blocks used to reduce the volume of data to be replicated
Public and private keys to determine what data can be seen by whom
Each ledger has a complete history of all transactions that is cannot be changed - immutable
“THE TRUST MACHINE”
40
WHAT IS ALL THE FUSS ABOUT?
What the most conservative and risk averse say
What is the impact of blockchain?
"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.”
“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”
""Is the blockchain technology going to be fundamental? I think the answer is overwhelmingly likely to be yes.
Larry SummersFormer US Treasury Secretary
Mark CarneyGovernor, BoE
Bob GriefieldCEO, Nasdaq
Jamie DimonCEO, JPM
41
WHAT IS ALL THE FUSS ABOUT?
A simple example….
Cross border payments example
Seller
Sending Bank
LocalClearing
SWIFT
Seller
Receiving Bank
LocalClearing
SenderReceiver
Typically 3-5 days
Multiple points of reconciliation
and failure
Third parties fees (5% to10%)
Country A Country B
Today……
Seller Seller
SenderReceiver
Country A Country B
With blockchain……
BlockchainSending
BankReceiving
Bank
Near real time
Minimal reconciliation
Resilient payments infrastructure
Third parties fees (<3%)
42
WHERE WILL IT IMPACT?
The most important development since the internet
$11bn –
$12bn
$2bn –
$4bn
$3bn -
$5bn
KYC / AMLReal Estate Cash Securities
$15bn – $20bn
Annually by 2022
IT Infrastructure
$1bn –
$3bn
Trade finance
POTENTIAL IMPACT ON FINANCIAL SERVICES
Source: Deloitte / Goldman Sachs / Santander InnoVentures / Oliver Wyman
43
WHO ARE THE MAIN PLAYERS?
Blockchain platforms in the marketplace
Co
re P
latf
orm
sS
pecia
lists
Ch
allen
gers
Bitcoin
-Cryptocurrency
Ethereum
- Smart Contracts
Ripple
- Payments
Factom
- Proof of Existence
Loyyal
- Loyalty
Stellar
- Payments
Chain
- Consortium
Corda
- Consortium
Hyperledger
- LinuxIBM Bluemix MS Azure
44
WHERE IS THE MARKET TODAY?
Blockchain is still an immature technology
FORMATION
EXPERIMENTATI
ON
LARGE SCALE
ADOPTION
EARLY
ADOPTION
2008 - 2013 2014 - 2017 2017 - 2019 2019 +
45
WHAT YOU’RE NOT TOLD?
Blockchain is still an immature technology
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
MISCONCEPTIONS CHALLENGES
46USE CASE REVIEW
Enduring & Unique
47
GRID BLOCKCHAIN LAB USE CASE IDENTIFICATION
The Grid Blockchain Lab will select strategic use cases that will have thebiggest impact across EMEA. The focus will be to design, develop and testthese strategic use cases
48
GRID BLOCKCHAIN LAB USE CASE IDENTIFICATION
Let’s focus on the banking use cases
49
ASSET/INVESTMENT MANAGEMENT USE CASES
KYC Utility Loyalty Programme
Asset Tracking Risk Reporting
2
Escrow & CustodyDerivatives Trading
Corporate Actions Shadow NAV Private Equity/ Real Estate
Smart Securities
50
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.
51
GRID BLOCKCHAIN LAB CAPABILITIES
A team of 50 blockchain practitioners will be built within 18 months by collective efforts and have the following capabilities
Research and eminence
Use case identification,
analysis & PoC design
Learning and development
Be at the heart of the blockchain ecosystem
52
OUR CORE COMPETENCIES
Prototyping
Blockchain
Global Clients
• We bring a proven process and capability for solid experiment definition and rapid, iterative prototyping with demos at the close of each sprint
• Our cross functional agile teams develop proof of concepts and mature them into fully developed solutions by leveraging our portfolio of prebuilt assets and development kits to accelerate time to market and decrease development costs
• We have industry experience with blockchain technologies including Bitcoin, Ethereum and experimental experience with Hyperledger
• We will select and use the most appropriate platform to help bring your vision from paper to end product
• We have extensive experience working with smart contracts, and our optional smart identity platform enables greater control and automation of user specific conditions within distributed workflow
• As a global firm we have worked extensively with the words largest firms• Our industry specialists have deep process and regulatory insight across both local and international operational
domains • Dedicated technology practice with core expertise in the integration of production systems and exponential
technologies
53
GRID BLOCKCHAIN LAB RAPID PROTOTYPING
The Grid Blockchain Lab offers a 10 week rapid prototyping process using an experiment-driven agile methodology
Discovery
Build
Review
AC
TIV
ITIES
OU
TP
UTS
Milestones
DiscoverUnderstand the problem, define the use case and objectives
DesignDefine, agree and document the technical design specification of the PoC experiments
Week 1
Design
Week 2 Week 3 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10
Design SpecificationFunctional and technical design documentation for each experiment
Phases
Hypothesis and ExperimentsA set of hypothesis with experiments used to test the validity of the claims. For each hypothesis, criteria are defined to measure business success
Experiment 1Build and measure a blockchain-based proof-of-concept
Summary and findingsReview and documented the summary of final outputs and findings
Week 4
Review outcome (Persevere/Pivot)A review of the first experiment output which upon assessment will lead to either preserving with the solution or pivoting to another experiment whereby a short design phase is undertaken
Experiment 2Re-design, build and measure a Blockchain-based proof-of-concept dependent on the outcome of the experiment 1 review
VisionA vision setting the overall agenda, objective and definition for success for the PoC
54
COLLBORATION – LEARN, SHARE, CREATECollaborating to create new ideas, share insights and propel growth
Europe’s Largest Blockchain Hackathon
In November 2015 we sponsored Europe’s largest blockchain hackathon in DCU where 150 tech enthusiasts including our own specialists came together to design and build innovative blockchain products.
Asia’s Largest BlockchainHackathon
In January, we supported our Chinesecolleagues in running the largestblockchain hackathon in Asia.• 23 teams and 90+ competitors
entered, competing for $100,000in prizes
• The winning team presented ameans for putting Bills of Ladingonto a blockchain in order to cutdown on paperwork whenimporting goods
Eminence
Blockchain – Enigma, Paradox, Opportunity
Blockchain – Out of the blocks: From hype to
prototype 2016
Blockchain – Disrupting the Financial Services
Industry?
GLOBAL ALLIANCES
55