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

1. Blockchain Trends and Applications
March 8, 2017
SPONSORED BY:

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. What is Blockchain?
How Will It Impact Financial Services?
Angus Champion de Crespigny
Financial Services Blockchain and Distributed Infrastructure Strategy Leader, Ernst & Young

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. 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. 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. 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. KYC/AML Utilities
Industry Use Cases
Shareholder Recordkeeping
Distribution of Funds

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. Fundchain 2016
Proof of Concept: SmartTA

11. Fundchain 2016

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. 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. FundsDLT

15. FundsDLT

16. Drivers and Hurdles for
Blockchain Implementation
Justin Chapman
Senior Vice President, Global Head of Market Advocacy & Innovation Research, Northern Trust

17.  Cost reduction
 Value-added capabilities
 Risk reduction
 New revenue opportunities
 Prevention of lost business opportunities
to smaller disruptors
Drivers
MEASURABLE ROI

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. What Can My Firm Do
to be Prepared for Blockchain?

20. Questions