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HfS Webinar Slides: Blockchain in BFS - Client Experience and War Stories

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Watch the webinar replay: https://www.hfsresearch.com/webinars/webinar-blockchain-bfs-use-case
All HfS webinars: https://www.hfsresearch.com/webinars/

The blockchain is starting to change the way we think about business transactions, data storage, and even industry value chains and associated revenue models. Banking & Financial Services (BFS) is leading the charge in enterprise blockchain adoption. Adoption of use cases around payments, trade finance, and wallets are advancing rapidly.

In this 60-minute webinar, we will discuss a successful BFS blockchain use-case to separate the hype from reality and learn how enterprises can leverage Distributed Ledger Technologies (DLT) to drive new levels of value.

We have assembled a global expert panel to share their unvarnished experiences and battle scars in the trials and tribulations of blockchain experimentation:

- Mauro Giorgi, Head of Financial Services, SVP, NTT DATA Italia;
- Silvia Attanasio, Head of Research, ABILAB;
- Nicolò Romani, Head of Innovation, SIA;
- Saurabh Gupta, Chief Strategy Officer, HfS (moderator)

Watch this webinar and learn:

- The promise of blockchain in BFS
- End-to-end journey of a blockchain solution
- Adoption challenges and practical advice on managing them
- Impact and implications for the industry

Publié dans : Business
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HfS Webinar Slides: Blockchain in BFS - Client Experience and War Stories

  1. 1. Proprietary │Page 1© 2018 HfS Research Ltd. Blockchain in Banking & Financial Services | Client Experience and Battle Scars HfS Webinar March 15, 2018
  2. 2. Proprietary │Page 2© 2018 HfS Research Ltd. Today’s panelists Saurabh Gupta Chief Strategy Officer HfS Research Saurabh.gupta@hfsresearch.com @saurabh_hfs Mauro Giorgi SVP, Head of Financial Services NTT DATA Italia mauro.giorgi@nttdata.com @aqualung61 Silvia Attanasio Head of Research ABI Lab s.attanasio@abilab.it @SilviaAtta Nicolò Romani Head of Innovation SIA nicolo.romani@sia.eu Insert headshot Insert headshot
  3. 3. Proprietary │Page 3© 2018 HfS Research Ltd. Agenda • Blockchain adoption trends in Banking & Financial Services (BFS) • The story of ABILAB in partnership with NTT DATA and SIA • Implications and key lessons learnt • Q&A
  4. 4. Proprietary │Page 4© 2018 HfS Research Ltd. The “blockchain six-pack” manifests into a disruptive potential over the long run Distributed shared data over peer-to-peer (P2P) network reduces single points of failure Consensus-driven trust cuts out the middle-man Immutable transactions ensure trust Hashing-based data ensures integrity and security Automated smart contracts promote touchless interactions across process chains Permissioned and permissionless flavors give enterprise users flexibility The Blockchain “Six-Pack”
  5. 5. Proprietary │Page 5© 2018 HfS Research Ltd. Limited activityExplorationPilotsLive in-production Enterprise blockchain adoption heatmap by industry **Professional services industry coverage includes auditing, accounting, legal, real-estate, etc. Banking & Financial Services Insurance Manufacturing / CPG / Retail Professional Services* Public sector Based on assessment of 200+ enterprise blockchain engagements across 20+ solution providers Energy & utilities Healthcare Life Sciences Telecom & Media Travel & hospitality While use-cases across almost all industries are emerging, BFS is the earliest and hottest adopter of blockchain
  6. 6. Proprietary │Page 6© 2018 HfS Research Ltd. Adoption of use cases around payments, trade finance, and wallets are advancing rapidly Heatmap of most promising enterprise blockchain use-cases in BFS Payments / settlements Trade finance Wallets / KYC Trading Asset mgmt. Based on assessment of 200+ enterprise blockchain engagements across 20+ solution providers Compliance Lending Auditing Investing / Transfer pricing Micro-finance Limited activityExplorationPilotsLive in-production
  7. 7. Proprietary │Page 7© 2018 HfS Research Ltd. The market is witnessing an explosion in blockchain PoCs and pilots but in- production solution are few and far between 1. Strategic advisory 2. Prototype development 3. Production build 4. System Integration 5%- 10% 50%- 60% 30%- 40% N = ~200 blockchain engagements across 20 service providers Identifying blockchain-based use cases, creating business cases, or selecting a platform About 35%-40% of engagements are at the PoC stage while 15%-20% of engagements have progressed to pilots Only a handful of successful pilots progress to production. Almost all engagements at this stage are parallel or shadow production environments There are negligible blockchain solutions that have been completely integrated with clients’ existing process and systems landscape No credible evidence
  8. 8. Proprietary │Page 8© 2018 HfS Research Ltd. Enterprise blockchain adoption is going through the “90-9-1” set of challenges • Overall nascency of blockchain solutions • Lack of understanding in distributed ledger technologies and use cases • Lack of maturity of blockchain platforms • Lack of success stories in the market • Internal stakeholder buy-in around business model changes and threat of disruption • Uncertainty and lack of formal regulations • Lack of talent availability • Lack of market standards, inter-operability issues • Integration issues with legacy • Cultural change management (internal and external) • Latency or throughput issues in production • Service support for blockchain largely undefined • Consortia-related challenges (set-up, management, and governance) • Difficulty in quantifying the benefits (ROI) • Lack of clarity on technical architecture • Permissioned versus permissionless decision • Security and privacy concerns
  9. 9. Proprietary │Page 9© 2018 HfS Research Ltd. The story of ABILAB in partnership with NTT DATA and SIA ABI Lab is a Banking Research and Innovation Center founded and promoted by the Italian Banking Association (ABI) with the aim to connect banks with ICT and energy companies. ABI Lab is managed as a Consortium (over 160 banks and 65 information communication technology companies in Italy) and counts several collaborations. Through research, ABI Lab analyses trends and develops innovation in the banking and finance sector sharing best practices on different topics including organization, technology, security, channels and energy management. NTT DATA is one of the ICT Partner of ABI Lab in Italy with a long lasting relationship grown up through an active contribution on many different initiatives, observatories, workshops run by ABI Lab. NTT DATA is a part of NTT Group, one of largest Telecom company and a partner to 88 percent of the Fortune Global 100. NTT DATA has a strong experience in BlockChain/DLT domain. Since 2015 has delivered Use Cases, PoC and solutions to its Finance and non Finance customer. NTT DATA has a global CoE for Blockchain services and our reference platforms are HyperLedger, Corda, Ripple and Ethereum. SIA is an European leader in the design, creation and management of technology infrastructures and services for Financial Institutions, Central Banks, Corporates and the Public Sector, in the areas of payments, cards, network services and capital markets. SIA is providing the infrastructure for the solution designed by NTT DATA, using the platform SIAChain, a secure and protected network, integrated with R3’s Corda platform to enable SIA customers to run CorDapps.
  10. 10. Proprietary │Page 10© 2018 HfS Research Ltd. Interbank reconciliation: the case ABI Lab has launched a program to address simplification and standardization of domestic interbank reconciliation, using a DLT platform. The program has been defined as a journey in three phases: 1. BPR and Solution Design; 2. PoC/Pilot; 3. Production. The success of this program will simplify the resolution of the suspended movements in the correspondent accounts between banks in terms of better efficiency, transparency and speed of this process. In particular, ABI Lab, in cooperation with NTT Data Italia, is exploring the applicability of DLT to issues such as the time taken to identify mismatched transactions between two banks, lack of a standardized process and communication protocol, and limited visibility of transactions between parties. These often result in discrepancies that are costly and complex to resolve. The goal is to leverage DLT to address cumbersome, outdated and time consuming reconciliation practices and the challenges associated with managing bilateral data sources. R3’s Corda has been choosen as DLT platform. SIA has been chosen as the Business Network Operator, providing with its infrastructure SIAChain the base for NTT DATA’s CorDapps.
  11. 11. Proprietary │Page 11© 2018 HfS Research Ltd. Interbank reconciliation: the journey xxx AS IS process analysis 1 2 3 4 5 Definition of the TO BE process and technological scouting ACTION ITEMS TO BE architectural analysis Phase 1 (BPR & Solution Design) A series of one-to-one meetings with the participating banks were planned and executed. Previously, two questionnaires were provided to each bank to be used as guidelines for conducting interviews and to simplify the collection of information. The evidence emerged and the data collected during the interviews were analyzed and systematized to highlight the peculiarities of the AS IS process and the differences between the various banks. The TO BE process has been modeled verifying the fulfillment of the minimum requirements emerged from the analysis of the AS IS process and adapting it to the analyzed technologies considered suitable The main architectural hypotheses of the proposed solution have been defined with the technologies identified. The analysis led to the identification of the main components and activities necessary for the implementation of the solution. The roadmap for the implementation of the identified solution was produced. The roadmap included the high-level analysis of costs, commitment and time required to implement Phase 2 Interviews with banks Phase 2 (PoC) started in December 2017. This phase was required in order to validate the solution with choosen DLT platform. Result of PoC will be the definition of the functional and technical specifications for the development of the SW, the development and deployment of the solution and the supporting documentation for Phase 3 (production release). PHASE 2 – PoC/PILOT PHASE 3 – PRODUCTION Phase 3 (Production) will follow the end of PoC and the evaluation that will be done by banks participating in PoC. Main activities: - Engagement of cluster of banks, (they joined spontaneously, 14); - Engagement of infrastructure partner (SIA); - R3 Corda engagement; - Orchestration of several and different technical landscapes by banks.
  12. 12. Proprietary │Page 12© 2018 HfS Research Ltd. Interbank reconciliation: TO BE process, simplified and reduced Starting from the process of checking the reciprocal accounts in Italy AS IS (not shown here) the operating phases that characterize it have been analyzed and redesigned. The design activity of the TO BE process has brought efficiency improvements such as the removal of the "Inversion owner tick" phase and an innovative management of anomalies / mismatches. BACK OFFICE OPERATIONS ITALIAN INTERBANL RECONCILIATION PROCESS PHASE Resolution of pending investigations Movement upload on DLT/BC Pending investigations identified PRENDING MISMATCHES UNDER INVESTIGATION AUTOMATIC MATCHING Matching automatico flussi /Rilevazione sospesi Sistemazione anomalie Investigation anomalie MISMATCH ANOMALIES INVERSION OWNER SPUNTA Update sistemi Invio piano di raccordo Simplified Process Process expected to be significantly reduced in elapsed time and effort • The TO BE process is “natively” based on the DLT concept of nodes that exchange flows of information (this means that the use of DLT technology does not “force/shake up” the AS IS interaction model between Banks); • Being a back office process, mitigation of risks is in place in some way, with no direct impact on Customers. Thus, technology discontinuity can be better managed. Furthermore, the compliance regulation of the process can be directly managed by ABI, reducing any issue derived from the use of DLT technology.
  13. 13. Proprietary │Page 13© 2018 HfS Research Ltd. Interbank reconciliation: Phase 2, architecture CordApp Front-end Web API Flows Smart Contracts Corda Node HW Machine IT System Conti Correnti Reciproci …. Translator to new standard In scope Out of scope OS + Dependencies (Java, …) Notary Service Movements Query DB The picture shows the target architecture of a node, identifying what will be developed in the POC and what will be developed in a future phase. It is important to underline that in the Phase 2 PoC nodes are not integrated with the legacy bank systems.
  14. 14. Proprietary │Page 14© 2018 HfS Research Ltd. Interbank reconciliation: Phase 2, current activities 1. Bank’s interviews 2. Standardization proposal 3. Functional requirements analysis 4. Corda network design 5. CordApp design 6. UX & UI design 7. CordApp development 8. UI development 9. Deploy 10. Test & Live
  15. 15. Proprietary │Page 15© 2018 HfS Research Ltd. Key success factors, implications and lessons learnt Key success factors for the project 1. Facilitating/supporting a deep/continuous engagement of Banks in the PoC project (also through workshops, meetings at Banks premises, online webinars and calls, etc.). One of the goal of the PoC is the growth of competence/awareness of Banks on BC/DLT technology; 2. Engagement of different roles for each banks: Process specialists, IT SMEs on interbank reconciliation, Innovation/Blockchain specialists. Diversity of skills/approaches bring value to the Project; 3. High commitment from the Top Management of Banks; 4. Performing a detailed BPR and considering the whole set of process variables/KPI (FTE, costs, volume of transactions, skills, etc.) in order to design the best TO BE (the process must lead decisions, not the technology); 5. Assure a shared/”democratic” decisional process within the project (since many Banks are involved); Implications and lessons learnt 1. Identifying a best practice between many experiences is mandatory; 2. Harmonizing previous technical choices by many actors is not easy and is a possible showstopper; 3. Identifying correct roles of actors (BNO, System Integrator, Banks, Association/Regulator) since beginning is key, as well as maintaining a clear direction; 4. Assuming that current technology is completely ready for production use is an error; 5. Ignoring governance issues for a peer-to-peer distributed network is an error; 6. Assuming that interoperability among platforms that are currently evolving is easily addressed; 7. Use case and the right process is key for correct adoption of BC/DLT;
  16. 16. Proprietary │Page 16© 2018 HfS Research Ltd.