IBM Blockchain Usecase - Nov 2016

1© 2016 International Business Machines Corporation IBM Blockchain
IBM BLOCKCHAIN
Ramesh Gopinath, Ph.D.
VP, Blockchain Solutions and Research

Blockchain is an emerging platform for transaction services
that will fundamentally change and reimagine the way we do business
Reduces
Time
•  Capital Markets
–  Securities trading /
settlement
–  Syndicated loans,
Commercial paper
•  Commercial Banking
–  Trade Finance
–  Trade Logistics
Party A’s
records
Bank’s
records
Auditor’s
records
Party B’s
records
•  Ineﬃcient
•  Expensive
•  Vulnerable
Digitally signed,
encrypted
transactions and
ledger
All parties have
same replica
of the ledger
Party A
Bank
Auditor
Party B
•  Consensus
•  Immutability
•  Smart Contracts
•  Provenance
•  Finality
T
E
C
H
N
O
L
O
G
Y
I
M
P
L
I
C
A
T
I
O
N
S
•  Retail Banking
–  Payments: Cross border
remittances
–  Lending: Mortgage
contracts
•  Supply Chain
–  Provenance
–  Logistics
Removes
Cost
Reduces
Risk
Enables New
Business
Models

Key Concepts and Benefits of Blockchain for Business
Transaction time
from days to near
instantaneous
Overheads and
cost intermediaries
Tampering, fraud &
cyber crime
Benefits:
Smart
Contracts
Permissions
Shared
Ledger
Consensus
Ensuring appropriate visibility;
transactions are secure,
authenticated & verifiable
Business terms embedded in
transaction database & executed
with transactions
All parties agree to network
verified transaction
Append-only distributed system
of record shared across
business network
Key Concepts:
Reduces
Time
Removes
Cost
Reduces
Risk
Enables New
Business
Models
IoT Integration
into supply chain

IBM’s point-of-view on Blockchain
•  Open source standard to lower adoption risk
•  Encourage Innovation through modular architecture
•  IBM Supports Linux Foundation’s Hyperledger project
•  Privacy, conﬁdentiality, auditability, performance and scalability.
•  Engage with governments and regulators to encourage the broad adoption of
blockchain in industry
IBM BLOCKHAIN is conducting business in 2016 across three areas
1.  Community development of blockchain fabric (Hyperledger project)
2.  Cloud deployment which expands Hyperledger with value added features
3.  Client engagements and transformative solutions
• 
•  Ensure greater trust by provisioning only permissioned members and users
•  Enable more optimized forms of consensus to keep the ledger in sync
BLOCKCHAIN ≠ BITCOIN

BUILT IN
THE
OPEN
PERMISSIONED
ENTERPRISE
READY

CLIENT EXAMPLES
Trade Finance
BAML
HSBC
Identity management
Crédit Mutuel
Arkéa
Food Safety
Low liquidity securities
trading and settlement
Japanese
Stock
Exchange
Settlements through
virtual currency
Mizuho
Financial
Channel Financing
IBM
Global
Financing
Contract Management
BTMU
FX Netting
CLS
Reward points
management/IoT
CUP

IBM Blockchain in Financial Services Sector
PAYMENT NETTING (FX)
LOW-LIQUIDITY SECURITY TRADING
Provide eﬃciency
and resiliency
across global FX
markets in a
standardized
manner
Reduce trade
settlement time by
automating the end-
to-end multi-party
interactions for low
liquidity trading
LOYALTY POINTS
Build a peer-to-peer reward
point trading system
between banks, credit card
users, gift shops, for
seamless exchange of
loyalty reward points
CONTRACT MANAGEMENT
Accelerate the
Design, Management
and Execution of
Contracts among
business partners on
the Blockchain

IBM Blockchain in International Trade and Supply-chain
DOCUMENT WORKFLOWS
Manufacturers
Suppliers
Products
Track Others
Track Back
Faulty
Part
SUPPLY-CHAIN VISIBILITY
Automate current
inefficient, manual
and error-prone
workflows in
documentary trade
finance
Provide single view
for purchase order
life-cycle across the
supply-chain
as the truth
TRADE/SUPPLY-CHAIN FINANCE
Improve the efficiency
of (our) commercial
financing business by
sharing data in a
secure and
transparent manner
SUPPLY-CHAIN PROVENANCE
Provide provenance
across the supply-
chain cutting
through complex
distribution and
processing
ecosystems

IBM Blockchain in Healthcare
HEALTH DATA EXCHANGE
CLINIICAL TRIALS CONSENT MGMT.
Data Exchange
across Health eco-
system based on
patient centric
control and consent
Patient consent
management, data
capture and exchange
based on consent;
enable compliance &
auditability
PHARMA SUPPLY-CHAIN PROVENANCE
Provide a
complete end-
to-end audit trail
in the pharma
supply chain by
serialization
CLAIMS AND FRAUD MANAGEMENT
Full audit trail of
electronic medical
records, pharmacy,
claims data, etc.
facilited by data
exchange (above)

FINANCIAL SERVICES SECTOR

Develop a payment netting service to provide efficiencies and
resilience to the foreign exchange market
Global market limited by:
•  lack of standardized payment netting process for trades not
settled within the current CLS environment
•  institutions intervening manually to complete the process
•  inconsistent netting approaches, resulting in higher costs and
increased intra-day liquidity demands.
CLS Group has partnered with IBM to release a
payment netting service called CLS Netting. This will
•  be used for buy-side and sell-side institutions’ FX trades that are
settled outside the CLS settlement service.
•  have a Hyperledger based platform which delivers a
standardized suite of post-trade and risk mitigation services for
the entire FX market.
“It (CLS Netting) is a
significant step forward in
reducing risk and providing
further efficiencies and
resilience across the
global FX market.”
David Puth
CEO, CLS Group

Securities settlement in low liquidity markets
Today’s process
Settlement Process with Blockchain
Reduce trade settlement time by automating the end-
to-end multi-party interactions from trade execution to
settlement on the blockchain for low liquidity trading
Beneﬁts
1.  Reduced settlement time
2.  Reduced settlement risk
3.  Lower cost transactions

Loyalty points network with China Union Pay
Bank A Bank B
Gift Shop A
Identity
Service
Gift Shop B
•  Banks invest about $4B in
credit card points market in
China
•  Less than 50% points are
redeemed
•  Other rewards worth at $100B
level
“At least Save $15M to build loyalty point exchange
for banks by Blockchain Than Traditional Approach”
Unionpay Blockchain Leader, Mr. Yan.
In the future , it can be for a larger Business
Network: Airline, Super Market, Hotel, Car
Rental, Restaurant, etc

Typical Use Case Loyalty Points Exchange
Bank B 12,000 + Bank C 9,000 =
Bank A 20,000
Channels to exchange points
Cross Bank Exchange
Transfer within Banks
Channels to redeem (online + oﬄine)
online shops

stores

Scan gift and
generate QR Token
Smart POS
Check available
points
Scan QR Token on
phone to request
transaction
Complete

To examine the design,
management and execution
of contracts among
business partners using
Blockchain technologies

INTERNATIONAL
TRADE

Blockchain for Supply Chain Visibility
What?
•  Prove out the ability of Blockchain technology to address key
supply chain visibility pain points
•  Provide a single view and source of the truth regarding the
lifecycle of a Purchase Order
How?
•  Shadow Ledger capturing Buyer, Supplier, and Carrier EDI data
to the Blockchain with a web-based User Interface providing
enhanced visibility
Purchase
order
Carrier
load
tender Tender
response
Advance
Ship Notice Shipment
Status
Blockchain
Visibility Portal
Retail
Trucking CompanyManufacturer
Blockchain

Blockchain Solution for IBM Global Financing (IGF)
What?
Improve the efficiency of our commercial financing business
by sharing data in a secure and transparent manner on
Blockchain
How?
•  Blockchain enables Comprehensive View of key
operational data:
Purchase Order > Transaction Approval > Shipments > Invoices > Remittances
Benefits
•  Fewer disputes & faster settlement
•  Reduction in dispute resolution time: 40+ days to under 10
days
•  Improved capital efficiency; freer flow of capital
orders
Partners
Suppliers
products and services
IGF
IGF world-wide statistics
4000+
Partners and
Suppliers
2.9M
Invoices / year
$44B
Financed / Year
$100M
Capital tied up
any time!
25,000
Disputes /
year
$31K
Avg. disputed
invoice value
44 days
Avg. time to
resolve a dispute
Our Commercial Financing business provides working capital to IT suppliers,
distributors and partners through financing of inventory and accounts receivables

Improved Documentary Trade Finance
Automate current inefficient, manual and error-prone workflows in documentary
trade finance (e.g., letters-of-credit) via smart contracts on the blockchain
Benefits
1.  Faster transactions with less complexity
2.  Improved transparency and visibility => fewer errors
3.  Lower cost of transactions
EXPORTER IMPORTER
Importer BankExporter Bank
Request
L/C
L/C : Letter of Credit
CI : Commercial Invoice
Place Order
L/C
L/C CI
CI
CI
Distributed Shared Ledger
Exporter Bank Importer BankImporterExporter

Traceability/Provenance in Food Supply Chains
Build a transformative end-to-end food traceability system, that cuts
through the complex distribution and processing eco-system, to provide
provenance of food items across the supply-chain (“farm to fork”).
Beneﬁts
1.  Increased trust
2.  Pinpoint source of compromised food, reducing the unnecessarily broad recall
3.  Improved co-ordination in food supply chain
4.  Handle changing regulations easily using smart contracts
Supplier
Distributor
Consumer
Product
QR Code
Product
Information
supply
chain
…
Auditor

IBM Blockchain
IBM
•  Invented the industries first Blockchain for
regulated businesses
•  Created the first decentralized membership
service for permissioned-blockchains, making it
possible to comply to regulations (like the
European Union Data Protection Directive).
•  Pioneered blockchain platform as a service on
Bluemix (one click is all that needed to spark a
blockchain network) and
•  Set the gold standard in security with the
industries first high security network.

BACKUP

REG-TECH

Blockchain-Enabled Know Your Customer
Pain Point Solution Benefit
•  Redundancy: Most large FIs use similar data and processes to
verify the same clients
•  Eliminate redundancy: Documentation needs to be verified
only once before the approval information is shared
•  Inefficiency: Manual and time consuming process to gather and
verify documentary evidence
•  Increase automation: Documents and approvals are
digitized and can be verified without manual intervention
•  Lack of specificity: Requirements for due-diligence are often
fuzzy, creating uncertainty on compliance to avoid legal sanction
•  Standardize process: Standardized, automated KYC
processes sanctioned by regulators
Source: 2016 Know Your Customer (KYC) Independent Survey (Thomson Reuters)
Build a single but cross-business KYC platform
providing employees with a consolidated view of all
documentary evidences collected by any entity of
Credit Mutuel Arkea Group, helping to reduce
unnecessary duplication of information and requests.

IBM Blockchain Usecase - Nov 2016

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