Deloitte EFMA

Blockchain Survey

Grid.Blockchain Lab

- EMEA -

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THE BLOCKCHAIN

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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.

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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.

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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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