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Blockchain Trends and Applications

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Just how closely should financial executives be paying attention? Is the disruption of blockchain technology a distant rumble or an imminent strike? Fintech is shaking the foundation of the traditional financial services industry and blockchain alone could be a game-changer, transforming transactions, custody, accounting, currency exchange, and more.

Navigating the associated business implications and expected timeline is no easy task for financial professionals. This webinar can help firms sift through the noise and will identify the most significant blockchain trends and tangible applications.

Sponsored by ALFI

Published in: Economy & Finance
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Blockchain Trends and Applications

  1. 1. Blockchain Trends and Applications March 8, 2017 SPONSORED BY:
  2. 2. MODERATOR: PANELISTS: Angus Champion de Crespigny Financial Services Blockchain and Distributed Infrastructure Strategy Leader, Ernst & Young Justin Chapman Senior Vice President, Global Head of Market Advocacy & Innovation Research, Northern Trust Serge Weyland Head of Financial Institutions, Banque Internationale à Luxembourg, Co-Chair of ALFI Fintech/Digital Forum Chuck Gallant Managing Director, BNY Mellon
  3. 3. What is Blockchain? How Will It Impact Financial Services? Angus Champion de Crespigny Financial Services Blockchain and Distributed Infrastructure Strategy Leader, Ernst & Young
  4. 4. Abstract. Blockchain is a decentralized and distributed ledger technology that can enhance data security, transparency, and integrity. Originally used to record historical transactions of Bitcoin, the technology was further developed to relate to existing technologies. A decentralized structure enables blockchain to operate with high efficiency, low cost, and a resistance to outages of a centralized database. Blockchain
  5. 5. Structural Models • Traditional central body controls transactions and records • Other parties maintain their own copies Centralized • All parties can hold the same record of every transaction Distributed Ledger • Intermediaries maintain local records of transactions • Other parties maintain their own copies De-centralized
  6. 6. Blockchain and Asset Management A Disruptive Technology Solving Business Challenges Manages transactions (the “blocks”) Maintains records (the “chain” of computer code) Distributed ledger Record keeping Ownership verification Digital identity Settlement and clearingPotential Process Disintermediation
  7. 7. Proof of Concept: Applicability in Asset Management Serge Weyland Head of Financial Institutions, Banque Internationale à Luxembourg, Co-Chair of ALFI Fintech/Digital Forum
  8. 8. KYC/AML Utilities Industry Use Cases Shareholder Recordkeeping Distribution of Funds
  9. 9. Fundchain 2016 Blockchain Research Initiative for the Fund Industry 10 participants from Fund Industry University of Luxembourg 1 startup 4 Blockchain trainings 7 workshops 1 two-days hackathon 2 1 Blockchain Proof of Concept “SmartTA” running on a 10-node private Ethereum Blockchain 1 White Paper covering business and technical challenges and perspectives 1 regulation study Presentation to the regulator - CSSF
  10. 10. Fundchain 2016 Proof of Concept: SmartTA
  11. 11. Fundchain 2016
  12. 12. The distribution value chain counts many intermediaries between final investors and asset managers that increase the cost of distribution Investor Asset ManagerTransfer AgentDistributor Fund platform Custodians • Perform AML/KYC • Advise investors on products • Sell products • Transmit fund documentation • Advise on fund selection • Order routing, clearing and settlement • Deliver market Intelligence • Compute and collect inducements • Collect cash from investors and make payments • Perform reconciliations with TA orders • Safe-keep fund assets • Perform oversight on fund flows • Perform AML/KYD • Collect orders • Update the register of shareholders • Perform corporate actions The current model will significantly evolve in the next years with the implementation of Mifid II and the need for Asset Managers to reduce operational costs Clearing & Settlement House • Wire cash from investors FundsDLT
  13. 13. MIFID II is disrupting the whole fund distribution business model Distributors • Might close the open architecture model and only offer in-house products to continue perceiving inducements • Create FoFs to replace inducements by management fees • IFAs will charge an upfront fee to end investors Retail investors • Might end up losing their IFAs as they won't be profitable anymore • Become self-directed investor as they do not wish to pay an upfront fee • Otherwise limit its portfolio to one brand/asset manager • Expected to use more D2C platforms Fund managers • Challenging to distribute funds for independent fund houses as distributors are likely to favor in- house products • Start directly targeting end investors • Develop tools to help distributors selling their products MIFID II Distribution platforms • Platforms will lose their principal source of revenue: Inducements • No clear new business case FundsDLT
  14. 14. FundsDLT
  15. 15. FundsDLT
  16. 16. Drivers and Hurdles for Blockchain Implementation Justin Chapman Senior Vice President, Global Head of Market Advocacy & Innovation Research, Northern Trust
  17. 17.  Cost reduction  Value-added capabilities  Risk reduction  New revenue opportunities  Prevention of lost business opportunities to smaller disruptors Drivers MEASURABLE ROI
  18. 18.  Industry standards  Multiple entities and ledger technologies  Regulatory and compliance challenges  Policy and governance  Technology operating at scale  Technical viability to be proven  Implementation  Costs  Integration with existing systems/operations  New vendors Hurdles
  19. 19. What Can My Firm Do to be Prepared for Blockchain?
  20. 20. Questions

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