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Blockchain beyond FinTech
Mark Buitenhek – Global Head Transaction Services 20th June 2016 | Amsterdam
Vision from the banking industry
Looking back on our journey
so far, most of our efforts
have taught us about WHAT
blockchain actually is
In order to do that we had to start with the technology itself but quickly
bridge between our “techies” and the business
Database to share
Instead of maintaining
What did we learn from that conversation?
What is blockchain technology in essence, why it is different and what we can do with it?
Gives a full system
Full history of data
gives full auditability
Always use the
same protocol to
validate new entries
More than register
register future rights
Manage assets over
Smart enough to
If distributed ledger technology allows us sharing our ledgers, what business
problem do we solve?
What are the SHARED FACTS
of the financial industry?
Financial agreements: from
cash demand deposits to
derivative contracts or
delivery vs. payment
How are they currently being
registered and agreed upon?
Recorded by both parties
In different system
Based on (one-way)
Incurring a lot of costs to fix
And what does a DLT have to
So we rather think of blockchain as a set of technologies & concept that can be applied to a specific case
So what have we done so far? We started, as many others, with experiments
1. Lessons learned
• Different implementations >> different limitations
(due to scalability, confidentiality and privacy)
• More complexity = more potential benefits
• Not bet on one of the existing chains yet
2. Distributed ledger technology needs several more
years to fully develop
3. Many “problems” are not technical
(The industry to agree on models, standards and
4. Despite limitations, the technology can already bring
benefits in controlled situations
5. The end game however is to get industry wide
Technology has huge potential, but is also in its infancy
Our current efforts are more
focused on HOW and
WHERE we will use this
technology to leverage its
Ultimately, like mobile, like the internet, and
like computers before that, Blockchain is not
the thing. It’s the thing that enables the thing.
Digital Strategy & Innovation | Blockchain / Healthcare / Enterprise, Philips Health
Where is the business problem?
Blockchain technology is not a magic problem-solver, nor a one-size fits all solution!
Prioritize Collaborate Fail fast
What did we need and what steps did we take?
1. Find the business problem
What problem does it really solve?
Who do you need to create adoption, standardization and reach?
3. Experiment, fail and try again
What are the most risky hypothesis and how to test them?
4. Understand what is possible and what is not (YET)
Recognize current limitations
5. Define the regulatory space and start conversations early!
Open conversations with piers and regulators
For ING: finding the business problem to solve, or opportunity to seize
Through exploration and experimentation we found several areas of
opportunity from a business & technical perspective
• Not (yet) suitable for high volume, low value processing of payments
• Showing potential for more complex international payment use cases regarding speed, costs
and risk (transparency)
• Fully automated way to issue (digital) assets directly between parties
• Speed up processes, increase transparency & potential to remove third parties
• Reducing the need for paper-processes and automating hand-over moments
• Fully digital assets and transparent information enable secondary markets and new business
• Removing/reducing risk of reconciliation errors as well as the costs to fix them
• Fully transparent ledger and potential for instant clearing and perhaps faster settlement
• Auditability, reporting and guaranteed compliance
• Process of providing evidence
• Can play a role in managing access to identity information
• Providing a way to sign & certify digital identities
What specifically is the role of consortia?
1. Standardization – Avoid fragmentation
2. Permissioned vs. permissionless blockchains
– Fit for purpose in the financial industry
3. Faster building of knowledge
- Two know more than one
4. More and more collaborative initiatives
(Hyperledger, SWIFT, .. etc)
5. In practice - Our experience with R3
Besides recognizing the problems we want to solve, what else do we need
- as a bank – to successfully leverage blockchain technology?
Fit for the financial industry – To permission, or not to permission?
And other considerations
Appling distributed ledgers in a permissioned environment
gives the opportunity to make different choices.
Some choices are essential for financial services;
Confidentiality and establish identity
Modelling specific financial assets
Reference data to use
Performance requirements (scale, speed, volumes)
Due to choices there will be multiple different ledgers and
technologies, so think about;
Standardization of contracts (so we can understand each
Processes for dispute resolution of smart contracts
COLLABORATION across the industry IS ESSENTIAL! Participating in consortia helps addressing these topics.
• Knowledge sharing
• Addressing the “hard problems”
• Long-running in-depth groups leveraging member banks’ & industry experts
A look inside…
How a consortium works. Looking back on the first year of R3 DLG.
• Driven by member banks
• Delivering concrete use cases and working software in a short time
• Can engage external parties
• Open source initiative – involved in the Hyperledger project
• Regulatory outreach – actively engaging with regulators around the world
WHO we are working with?
HOW to make industry-wide
collaboration really work?
1. We strongly believe in its potential
2. First real pilots this year
3. ING focusing on cases to bring customer value
The industry – and ING – is moving from proof of concepts towards pilots
1. Business & IT collaboration essential from start
2. Moving the market by making connections on
senior management level
3. Training talents understanding the potential and
come with a fresh view
4. Developing new skills goes relatively fast but
needs attention too
5. Real expertise (cryptography) is scarce
Moving towards real solutions, realizing the impact of this technology, we need
to start thinking about training more & more people
1. Contribute to developments for the financial industry
But this will take time!
2. Run several pilots before the end of this year.
Without going too fast
3. Start engaging clients in the short term
4. Collaborating- adoption more valuable than speed