FINTECH DISRUPTIONBlockchain Technology

“It's not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change

- Charles Darwin

INDUSTRY CHALLENGE

➤ New Fintech innovations have radically disrupted the way Front-office functions for investment banks

➤ Yet, despite these technology advancements middle and back office largely remains regimented and clunky

➤ Firms are here still grappling with complex and inefficient processes which need urgent simplification and modularization

OPPORTUNITY IN CHANGE

➤ Untangling of this complexity is getting addressed via a two pronged strategy - simplification using Lean and disruption through technology (such as block chain)

➤ Focusing on exploiting the potential of these disruptive technologies Financial Services industry has formed multiple consortiums and partnerships

➤ Consultants and Service providers are gearing up with innovative solutions and where possible is leveraging co-creation as the chosen vehicle

WHAT IS BLOCK CHAIN?

➤ Blockchain is a cloud based database shared by every participant in a given system. The blockchain contains the complete transaction of the crypto currency or other record keeping in other applications. Think of it as a cloud cased peer to peer ledger.

➤ It uses cryptography and a distributed messaging protocol to create a shared ledger between trading counterparties.

➤ This is made possible by simple transfer of assets through smart contracts

➤ Data on the ledger is persistent and transactions cannot be lost or corrupted by participants

➤ Suggested use cases include - KYC, AML, Reg reporting and Clearing and settlements

KEY COMPONENTS OF BLOCKCHAIN

➤ Secure Transaction Ledger Database...shared by all parties

➤ Elimination of Third Party Validation...assets help in Cloud

➤ Automation...includes automatic settlement

➤ Smart Controls...managed by computer protocols

➤ Cost Reduction...by controlling infrastructure and transaction costs

➤ Eliminates Error Handling...and hence better handling of reconciliation

FEW CONSIDERATIONS TO MAKE THIS REAL

➤ Regulatory framework for adequate controls

➤ Should this be open source and how will competitiveness be managed?

➤ Scalability of the infrastructure

➤ How will the legal framework be established?

➤ Integration with reporting and analytics for audit and control

➤ Hype vs. Reality? What's the true potential to reduce the cost of execution?

➤ A marketplace to perform these transactions

Credits - Forrester research and Accenture research