Blockchain - a platform for Digital Transformation in Finance
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The document discusses the transformative potential of blockchain technology in the financial services sector, highlighting its role in digital transformation and the growing institutional interest in its applications. By 2019, a significant majority of executives planned to invest in blockchain, anticipating a $20 billion annual expenditure by 2024. Key use cases include cross-border payments, asset management, and KYC processes, with a structured methodology proposed for corporations to implement blockchain effectively.
Blockchain - a platform for Digital Transformation in Finance
- 1. Blockchain Worx Harnessing the potential of Blockchain technology for Digital Transformation in Financial Services Next-gen products and services Digital-first for a post Covid-19 world Smart decentralized financial networks
- 2. www.BlockchainWorx.com 2 From digital identity and asset tokenization to using smart contracts to automate business processes, Blockchain technology is swiftly establishing itself as a key enabler of the emerging digital enterprise environment By 2018, about 90% of U.S. and European banks and financial institutions had begun exploring the adoption of Blockchain technology. 95% of execs surveyed by Deloitte had stated their company plans to invest in Blockchain technology in 2019 By the end of 2024, it’s expected that corporations will spend $20 billion per year for Blockchain technical services. Blockchain is listed as the number one ‘hard skill’ for 2020 according to a new report compiled by jobs site LinkedIn. Source: Gartner, Deloitte, LinkedIn, BlockTelegraph, Reuters, Grand View Research Propelled by new business models and opportunities to upgrade the existing legacy infrastructure, institutional interest in Blockchain technology continues to rapidly grow
- 3. www.BlockchainWorx.com 3 Blockchain is a native digital technology that is setting up the financial services industry for significant disruption — or crucial transformation, depending which side of the table you look at it from How a blockchain works ImmutableCryptographically Secure Blockchain Consensus driven Open source value transfer protocol Distributed P2P network Secure math-based system Decentralized The first electronic value transfer protocol A wants to send money to B The transaction is represented online as a `block’ The block is broadcast to every party in the network Those in the network approve the transaction is valid The block that can be added to the chain, which provides an indelible and transparent record of transactions The money moves from A to B 1 2 3 4 5 6 Key features of Blockchain technology Blockchain technology, by its very nature, lends itself to the digital transformation journey of a Financial institution The Blockchain, a cryptographic ledger comprising a digital log of transactions shared across a public or private network, can address key pitfalls of digital transformation programs – id, security and trust
- 4. www.BlockchainWorx.com 4 Blockchain can be a powerful tool anywhere trading occurs, trust is at a premium and people need protection from identity theft Source: Image adapted from Citi research, Strategy+Business, Blockchain offers a robust distributed transaction infrastructure, well suited for collaboration within and across institutional boundaries and are especially effective in establishing trust in a trust-less environment Distributed ledgers have potential to radically change the future of transaction and records based industries Financial intermediaries (Today) • Requires trusted, centralised intermediaries • Batch clearing and settlement • Higher fees and costly infrastructure Clearing house (centralised ledger) Financial network (distributed ledger) Blockchain protocol (Emerging) • No intermediaries required • Faster processing and management • Lower fees and reduced infrastructure cost
- 5. www.BlockchainWorx.com 5 Financial institutions are experimenting and investors have poured millions of dollars into Blockchain related firms Source: CNN Money, Coindesk, Citi Research Large financial institutions experimenting Blockchain Ventures Accelerator USD millions invested in Blockchain start-ups Use Case / Application Record BLOCKCHAINPlatform CROSS-BORDERPAYMENTS ESCROW&CUSTODY SERVICES SUPPLYCHAIN&TRADE FINANCE CUSTOMERACQUISITION& LOYALTY CURRENCY FINANCIALSECURITIES& TRADING LOGISTICS&ASSETTRACKING INTELLECTUALPROPERTY RIGHTS ASSETS REALESTATE&PROPERTY SUPPLYCHAINMANAGEMENT DIGITALRIGHTS MANAGEMENT INSURANCE LEGAL CONTRACTS IDENTITYMANAGEMENT FILESTORAGE&SHARING ELECTRONICMEDICAL RECORDS AUDITINGANDCOMPLIANCE DATA INTENETOFTHINGS VOTINGANDGOVERNANCE SYSTEMS COLLABORATIVEECONOMY OTHERSTOBEDETERMINED P2P
- 6. www.BlockchainWorx.com 6 From KYC and Cross-Border Payments to Asset Management and Inter-bank Settlement, key use cases are starting to take shape and receive exec sponsorship Blockchain, the revolutionary shared ledger technology, has swiftly acquired a new identity in the financial world – becoming a key platform for Digital Transformation Interbank Infra KYC and DD Asset Management Payments From remittances to cross-border wiring services, Blockchains offer a faster, effective and much lower-cost alternative The emergence of consortia will also quicken adoption intra-bank, inter-bank and beyond Banks spend on average $60 million on KYC and customer due diligence Once verified, a client's data can be put on a Blockchain so that it can be securely accessed by the various divisions of the bank Facilitate the creation, distribution and trading of assets in digital format on the Blockchain The distributed ledger enables instant, secure and efficient settlement and eliminates the need for any reconciliation Along with open banking, a distributed ledger system could efficiently facilitate inter-bank settlements It can provide the backbone infrastructure for more interoperable, open mobile money and other related services
- 7. www.BlockchainWorx.com 7 A 5-Step Methodology to harness the potential of Blockchain technology within and beyond the enterprise A structured approach will help organizations to explore possibilities, experiment with the technology, and develop innovative Blockchain-based solutions in a cost effective way 1 2 3 4 5 Select guiding principles: Perform a comprehensive assessment of opportunities from a business, technology, and the legal standpoint of using blockchain technology Set up a lab. Start small. Begin with select processes that could be showcased to a wider audience to highlight benefits and prime adoption. Evaluate. Invest in technology and expertise related to blockchain. Secure alignment. Press for industry-wide change. Collaborate and work together to design solutions for specific use cases and processes. Form consortia and work with regulators early in the process. • Understand application of Blockchain tech. for specific use cases • Secure exec sponsorship. • Setup a working group • Explore and validate hypothesis • Design PoC engagement • Select and on- board PoC participants • Kick-off project • Develop prototype application • Test use cases. • Review PoC • Evaluate options • Move to mainstream deployment (in a phased approach)
- 8. www.BlockchainWorx.com 8 4-Considerations to help move blockchain experiments from the lab and towards mainstream deployment Blockchain technology needs to fit into the enterprise IT fabric and be integrated with core systems and processes Need of the hour Current State Part of the overall business strategy and Digital Transformation Isolated, independent experiments Integrated with and leverage the extended enterprise IT landscape Disconnected. Detached from core systems Inter-departmental, Inter-agency, as part of an enterprise consortium / network Standalone or one-off transactions between two department / enterprises Ecosystem collaboration platform with synchronous real- time processing for global value chains Independent, single- industry network blockchains Participation in industry consortia and engaging with regulators early in the process to collaboratively design solutions for specific use cases (especially inter-institutional ones) will help bring the solution swiftly and more effectively to deployment
- 9. www.BlockchainWorx.com 9 Take The First Step: Identify the right pilot use cases to highlight the potential of the technology to all stakeholders Blockchains are best suited for situations where there is a distinct need for a select set of values A distributed transaction infrastructure, for collaboration within and across institutional boundaries Intra-institution Inter-institutionCollaborationSecurity Trust Transparency Disinter- mediation
- 10. www.BlockchainWorx.com 10 Learn how you can harness the potential of Blockchain technology for Digital Transformation within and among financial institutions Drop us a line or reach us via any of the channels below: Get in touch +65 96536243 +91 9320930671 @blockchainworx info@blockchainworx.com www.blockchainworx.com