banking innovation summit...

Clive Cooke | R3 | February, 2018

Banking Innovation Summit Croatia

The R3 network is an alliance of the world’s largest banks,

insurers, regulators and exchanges committed to

delivering the next generation of financial infrastructure

based on blockchain

p2.R3 - Private and Confidential

Blockchain is the new operating system for Finance

Action

Perception Perception

Action

Processing Processing

Action

Processing

Perception

Action

Perception

Processing

Internet

Action Action

Shared Communication

Shared Processing Logic

Shared Perception = Truth

Bank A Bank ABank B Bank B

Before the Internet Now After Shared Ledger

CommunicationCommunication

R3 - Private and Confidential p3.

Bank B

The Truth – “I Know That What I See Is What You See”

TODAY

This is what I think

I am owed

This is what I

think I owe

Supplier CustomerTOMORROW

Supplier Customer

We both see the

same thing


▪ Participants in a Blockchain network each:

✓ run software that communicates with their

counterparts and

✓ enables a near-instant update in their systems

without relying on intermediaries,

reconciliation, matching or manual fixes.

Blockchain enables competing firms to collaborate and maintain one secure, shared database


Blockchain has huge potential to change existing business

Regulators

• Cross Border Payments

• Anti-Money

Laundering / Know

Your Client

• Derivatives Clearing

• Repo Clearing

• Trade Reconciliations

• FX Settlement

• Loan Settlement

• Collateral

Management

• Client Onboarding

• Intracompany

Settlement

• Normalize Reference

Data

• Timestamping

• Account Portability

• Broker Fraud

Identification

• Securities Agreements

as Smart Contracts

• Crowdfunding

• Virtual Identity

• Credit Scoring

• Cross Border

Remittance

• Vault/Escrow Services

• Customer Deposit Cost

• Peer-to-Peer Lending

• Anti-Money

Laundering / Know

Your Client

• Compliance Reporting

• Risk Visualization

• Basel III Compliance

• Client Fund

Transparency

• Trade Reporting

Financial Institutions IndividualsOperations

These four use

cases could

alone

generate

$60-80bn in cost

savings1

(1) Source: McKinsey 2016 Findings From Research Into Distributed Ledger Technology


p7.

Regulators: 20+ Regulators

and Central bank

members

including;

• HKMA

• AMF Montreal

• Abu Dhabi

Global Markets

Partners:70+ partners

which includes

system integrators

& advisory,

independent

software vendors,

Infrastructure/

technology

partners and

network service

providers

The R3 Member Network

R3 - Private and Confidential

Network Service Providers

Delivery Partners(Systems Integrators & Advisory)

Infrastructure / Technology Partners

Partner Solutions(Independent Software Vendors)

R3 Partner Network


CordaBlockchain solution for Financial Institutions


Built from the ground-up and designed for financial services by the financial services industry

p10.

The R3 members’ Architecture Working Group,

comprising contributions from 300+ individuals,

realized that existing blockchains were not

appropriate for the world of Finance.

Blockchain-inspired: takes the best

attributes from Bitcoin and

Ethereum, but no cryptocurrency

Enterprise grade: built specifically

for financial markets.

Data privacy: transactions shared

on a need-to-know basis.

Consensus: achieved at individual deal

level, rather than system level. Supports a

variety of consensus mechanisms.

Regulator-focused: design directly enables

regulatory/supervisor observer nodes.

Smart contract: strong link between

legal prose and smart contract code.

Easy integration: reuses existing java developer skills making integration with

bank systems easy and safe.


Interoperable Networks

One Node = Many Apps, Flexible Networks, No Stranded Assets

Business

Networks


From Idea to Application

Project Working Groups


Digital Assets Trade Finance Digital Identity

Digital CashInsurance

GO-LIVEDeployment Considerations

INCUBATORWhere members by region or by product

explore blockchain solutions

The CorDapp path to production

FinTech partner

Joint Venture

Industry RFP

Ownership considerations

Corda Enterprise

Graduate

Evaluate projects and results to graduate

the successful ones to the Accelerator

Co

rDa

pp

s

p15.

Fast track results

Consider Legal/Regs, Data Oracles, Partners,

Production Readiness

Dedicated R3 team lead collaboration

to ratify Business Case

Sprint Project

Bank integrations

Risk Management

Security

Architecture

Integration

Procurement

ACCELERATORWhere experiments come to life*

Quality Assurance


Delivery Partner

p16.

Matching Partners to Opportunities

ISV & Network Partners

Delivery & Infrastructure Partner

Customers |Members | Stakeholders

CorDapps

Regulators |Central Banks | Legal

R3 work with software vendors and partners to build applications (CorDapps) that will sit on top of

the Corda Network


Project Portfolio

Project HQLAX

Accelerator – Digital Assets

Vision

Objectives

Benefits

Tokenisation of baskets of securities to distribute liquidity more efficiently - Pilot

A collateral lending solution for sourcing or providing High Quality Liquid

Assets (HQLA) on R3’s Corda

To build an exchange that improves HQLA upgrade / downgrades by

utilizing distributed ledger technology for the tokenization of baskets of

securities that allows for quick, legal transfer of HQLA and re-

hypothecation

Network of Participants

• Improve collateral fluidity with an operating model that does not

require securities to be moved across CSDs

• Real-time and atomic legal title transfer enabling DvD (Delivery vs.

Delivery) of baskets of securities

• Enhance regulatory transparency of collateral chains via a

standardized and transparent marketplace, with a “Collateral

Tracking” view for regulators

• Mitigate systemic risk by enabling orderly default unwinds


Project LenderComm

Vision

Objectives

Benefits

Automation of lender communications between agent banks and lenders - Pilot

By using Corda, Project LenderComm exposes real-time credit

agreement, accrual balances, position information and detailed

transaction data to lenders, directly from agent bank loan servicing

platforms such as Finastra’s Fusion Banking Loan IQ. Project

LenderComm aims to slash operational cost and slash operational cost

and burden of agent to lender administration and deliver self-service

capabilities to lenders, providing accurate information on demand to

optimize loan portfolios

To build a distributed ledger technology platform for the syndicated

lending community

To drive transparency and efficiency in the syndicated loan market



Accelerator – Digital Assets

p19.

Project Thredbo III

Accelerator Project – Digital Assets

Vision

Objectives

Benefits

FX confirmation matching - Pilot


▪ Full matching workflow and dispute resolution

▪ Synchronization of workflows between parties

▪ Remove data discrepancies & increase STP

▪ Open to non-Calypso and R3 Clients

▪ Flexibility for local or cloud based offering

▪ Develop innovation model suitable to other traded products

▪ Cost savings and operational efficiencies

▪ The delivery of the MVP and opening to the wider market is scheduled early in Q1 2018.

▪ Calypso and R3 are committed to present a strong value

proposition to the market in 2018, which would consist of real-life

transaction processing applied to FX asset class over a selection of

internal and external counterparties.

▪ Project Thredbo III is a project being undertaken in partnership with

Calypso which is designed to extend Phase 1 into a pilot and fully support

Calypso FX Matching Workflow.

▪ Utilization of Corda in tandem with Calypso will dramatically reduce the

cost and complexity of back-office operations, allow for developing smart

contracts and help further automating the whole post trade processing

workflow.


Project Marco Polo

Accelerator – Trade Finance

Vision

Objectives

Benefits

Tracking goods and trade documents - Pilot

• Enable trading parties and their financiers to dramatically cut back-

office costs

• Eliminate operational friction

• Reduce fraud and compliance risk

• Open up new revenue streams

• Enable entirely new ways of managing and financing trade.

To develop an end-to-end open account trade platform. The platform

consists of trade finance solutions, APIs and developer tools on an open

technology infrastructure powered by Corda DLT

To provide an open, shared platform that makes trade safer, simpler,

and more inclusive, connecting the ecosystem of banks, buyers,

suppliers, technology providers, insurers, and others critical to facilitating

global open-account trade flows

Network of Participants(Phase 1)


Technology Provider

Project Ubin

Accelerator – Digital Cash

To put the Singaporean dollar on a distributed ledger for the first time,

building a prototype domestic payments for inter-bank obligations

(backed by central bank deposits), a DLT platform and internal capability

for MAS/market participants in Singapore

Vision

Objectives

Benefits


Digital Singaporean Dollar Prototype for interbank domestic payments - Prototype


The eventual goal is to developing simpler to use and

more efficient alternatives to today’s systems based on

digital central bank issued tokens.

• Improved domestic securities transactions, offering Delivery-

vs-Payment (DvP) settlement in cases where it is not already

available

• Significantly improved cross-border payments (Payment-vs-

Payment) and securities transactions (DvP)

Project VoltronX

Incubator – Trade Finance

Banks, corporates, and trade ecosystem on The Corda network,

interacting in real time, using shared business logic to transform

Documentary Trade (Letters of Credit) business.

Vision

Objectives

Benefits


Trade finance – Documentary Trade - Pilot

• Simplified customer experience

• Greater straight through processing, reduce operational costs

• interoperability across Bolero’s e-Bill-of-Lading Title Registry

• Improved checks to automate manual verification of documents

Support a pilot Letter of Credit transaction, utilising an electronic bill of

lading Title Registry and Legal rulebook, deployed on Corda and the

R3 Network. Scale the network and pilot clients throughout 2018.


Project Leia II

Incubator Project – Digital identity

Vision

Objectives

Benefits

Corporate KYC - Prototype

By partnering Member institutions KYC SME knowledge, R3 Corda design

experience and Synchrony's Development capability, project Leia II can

specify, design and deliver a prototype to demonstrate the KYC on-

boarding process for a corporate client. The high level of SME

engagement will drive good insights into the requirements and build buy-

in amongst the community who will benefit from a production version of

Leia.

Demonstrate the value of Self Sovereign, de-centralised Corporate KYC

on Corda

To demonstrate the benefits of Corporate KYC on Corda and build buy

in for continuing towards an Accelerator phase of the Leia program



Project ECP

Accelerator Project – Debt Issuance

Vision

Objectives

Benefits

Euro Commercial Paper - Pilot

• Cost saving – Creating a new decentralised business models i.e. Issuer

/ dealer / investor platform with potential for IPA / CSD / Custodian

role removal.

• Transparency & Ownership tracking - Single shared consensus view of

the state, value and ownership history (transfers, rights & obligations)

via DLT to guarantee a consistent, accurate, auditable, reportable

record.

• Standardisation & automation - Shared business logic that can be

automatically executed i.e. Standard industry processes for handling

lifecycle events modelled as smart contracts.

• Instant settlement – Achieve atomic DvP - requires both asset

representation & cash on ledger.

A new application & business model for the issuance, dealing &

settlement of Euro Commercial Paper on a Distributed Ledger.

Deliver the full ECP trade lifecycle on a Distributed Ledger into

Production & scale across key jurisdictions.


Clive Cooke [email protected]+44-771-517-2772

mailto:[email protected]

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