financial process transformation opportunities from the ......solve key treasury challenges and...

S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L

Disruptive Technology and Innovation

Financial Process Transformation Opportunities from the Evolving Payment Landscape

November 2019

C O N F I D E N T I A L

Chase, J.P. Morgan, and JPMorgan Chase are marketing names for certain businesses of JPMorgan Chase & Co. and its affiliates and subsidiaries worldwide (collectively, “JPMC”, “We”,

“Our” or “Us”, as the context may require).

We prepared these materials for discussion purposes only and for your sole and exclusive benefit. This information is confidential and proprietary to our firm and may only be used by you

to evaluate the products and services described here. You may not copy, publish, disclose or use this information for any other purpose unless you receive our express authorization.

These materials do not represent an offer or commitment to provide any product or service. In preparing the information, we have relied upon, without independently verifying, the accuracy

and completeness of publicly available information or information that you have provided to us. Our opinions, analyses and estimates included here reflect prevailing conditions and our

views as of this date.

These factors could change, and you should consider this information to be indicative, preliminary and for illustrative purposes only. This Information is provided as general market and/or

economic commentary. It in no way constitutes research and should not be treated as such.

The information is not advice on legal, tax, investment, accounting, regulatory, technology or other matters. You should always consult your own financial, legal, tax, accounting, or similar

advisors before entering into any agreement for our products or services. In no event shall JPMC or any of its directors, officers, employees or agents be liable for any use of, for any

decision made or action taken in reliance upon or for any inaccuracies or errors in, or omissions from, the information in this material.

The information does not include all applicable terms or issues and is not intended as an offer or solicitation for the purchase or sale of any product or service. Our products and services

are subject to applicable laws and regulations, as well as our service terms and policies. Not all products and services are available in all geographic areas or to all customers. In addition,

eligibility for particular products and services is subject to satisfaction of applicable legal, tax, risk, credit and other due diligence, JPMorgan Chase’s “know your customer,” anti-money

laundering, anti-terrorism and other policies and procedures.

Products and services may be provided by Commercial Banking affiliates, securities affiliates or other JPMC affiliates or entities. In particular, securities brokerage services other than

those that can be provided by Commercial Banking affiliates will be provided by appropriate registered broker/dealer affiliates, including J.P. Morgan Securities LLC and J.P. Morgan

Institutional Investments Inc. Any securities provided or otherwise administered by such brokerage services are not deposits or other obligations of, and are not guaranteed by, any

Commercial Banking affiliate and are not insured by the Federal Deposit Insurance Corporation.

JPMorgan Chase Bank, N.A. Member FDIC.

© 2019 JPMorgan Chase & Co. All rights reserved.

Unless otherwise specifically stated, any views or opinions expressed herein are solely those of the presenter, and may differ from the views and opinions expressed by the

Blockchain Center of Excellence (BCOE) or other departments or divisions of JPMorgan Chase & Co. or its subsidiaries and affiliates. This material is not a product of the

BCOE and should not be treated as such.


JoEllyn Perry Powell, MBA, CTP, Executive Director

JoEllyn is an Executive Director in Treasury Management at J.P. Morgan, working with higher

education and nonprofits organizations in the Mid-Atlantic region. As a Treasury Management Officer,

JoEllyn helps her clients manage their cash flow. She has worked in many areas of banking on the

commercial side for most of the major banks in the Philadelphia Market for many years, spending the

majority of her career in both Treasury Management and Commercial Real Estate Lending.

JoEllyn serves on the Board of the Alice Paul Institute, as well as volunteering with their Finance

Committee, and Career Day program.

Technology roadmap for nonprofit organizations

James F. Lock, III, MBA, CTPManaging Director, Industry Executive

James Lock leads the Healthcare, Higher Education, and Not-For-Profit Industry Solutions team as

part of J.P. Morgan’s Commercial Banking business. James and his team work with clients using their

extensive treasury experience, deep industry knowledge, and a strategic consulting methodology to

solve key treasury challenges and incorporate a value-based and technological approach.

Through partnerships with coverage teams across the country, he demonstrates how the firm’s

treasury platform can solve problems, address key efficiency opportunities, incorporate best practices,

and optimize Treasury operations.


Agenda

Page

1 Technology Trends in Nonprofit Organizations 1

2 Artificial Intelligence & Machine Learning 7

3 Blockchain (Distributed Ledger Technology) 9

4 Closing 16


Nonprofit landscape: news & trends

Nonprofit organizations are turning to technology to address complex industry dynamics

1) Marketing Automation/Giving Automation2) Using Technology to Nurture Recurring Giving3) Personalized/Relevant/Contextual Communication4) Continued Disruption of the Nonprofit Sector by

Commercial Players like Facebook5) Moving Away from Overhead to Outcomes will

Allow Investment in Technology

1

Trends from

Nonprofit Roundtable Discussions

◼ Systems Integration & Deployment: The Value of Process

Re-Engineering

◼ Chapter Communication is Bi-Directional: Sharing Information

Effectively Across the Organization

◼ Controls are Crucial: Managing Risks in a Changing Environment

◼ The Power of Acknowledgement: Donor Engagement in the

Digital Age

◼ Centralization is Not One-Size-Fits-All: Structuring to Meet the

Needs of Your Stakeholders


Thriving in a transformative period

Donor

experience &

outcomes

Cost

control &

resource

limitations

New channels

for donor

engagement

Regulatory

requirements

& changes

Driving

dollars to the

mission

Leveraging

technology &

systems

Peer-to-peer

fundraising &

"crowdfunding"

Relationship

between grant

makers &

nonprofits

Are you adopting and

leveraging technology to

the fullest?

Are you as efficient as

you can be?

Will your current processes

prepare you for tomorrow’s

opportunities?

Common opportunities and challenges

2


Assessing strategic treasury priorities and objectives

The treasury eco-system is experiencing significant change driven by emerging technologies, regulatory

developments, and market events, yet the key objectives of a Treasurer remain the same

… and more is expected from

treasurers with limited

resources…

…yet the treasurer’s objectives

remain the same.

The Treasury universe is

constantly changing…

Global trade growth

EM capital flows

FX & interest rate

volatility

Cybersecurity

threats

Blockchain

Analytics

Machine learning

Robotics

Real-time payments

Brexit

U.S. tax reform

Trump

North Korea

SEPA

KYC

BEPS

FX regulations

Basel III

Window guidance

Tre

asu

ry F

un

ction

Time

Increasing

demands on

treasury

Treasury

Resourcing

Optimize

Capital

Mitigate

Risks Sta

ke

ho

lde

r V

alu

e

Operational

Efficiency

3


Planning for the future

Harnessing new technologies will help Treasury achieve operational and strategic objectives and

successfully operate the Treasury department of tomorrow

1 Optimizing Capital 2 Operational Efficiency 3 Mitigating Risk

Multiple bank accounts Multiple stakeholders Visibility to exposures

Forecasting challenges Manual processes Trapped cash

Cash visibility Poor connectivity Cybersecurity

Virtual account management Virtual branch Robotics Just-in-time funding

Machine learning -predictive analytics APIs Cloud Auto FX execution

Cash pooling SWIFTNet BlockchainRobotics – fraud

detection

Ch

alle

ng

es

So

lu

tio

ns

4


The six “D’s” of technology disruption

Understanding the progression of new technologies is critical to planning for their disruption

The Six D’s:

1. Digitized

2. Deceptive

3. Disruptive

4. Demonetized

5. Dematerialized

6. Democratized

Exponential Growth Path of New Technologies

Growth

Deceptive

Disruptive

Blockchain

Cloud

Machine Learning

Robotics

APIs

Exponential growth

Linear

growth

Demonetized

Dematerialized

Democratized

Data

Analytics

Digitized

Time

Source: Singularity University

5


Leveraging technology disruption to achieve your goals

New tools can help optimize processing and drive greater organizational efficiencies

Batch

Processing

Task

DrivenPhysical

Systems

Real-Time

Processing

Intelligence Virtual

ACH

Host-to-Host

Treasury Systems

ERP SystemsSpreadsheets

Specialist Tools Machine LearningBlockchain

CloudAPI Robotics

Technology Tools

v

Past Future

6


Agenda

Page




4 Closing 16


Artificial intelligence & machine learning

What can they do for your organization and your mission?

Advance the Mission

Streamline Operations

Improve Decision Making

Artificial Intelligence

Machine Learning

Deep Learning

𝑓 𝑥

1

2

3

COLLECT THE DATA ● LEARN FROM THE DATA ● ACT ON INSIGHTS

7


Use cases: improving operations across your organization

AI-assisted operations & technology can help maximize limited resources and staff time

Donor

Prioritization

• Automating data collection

• Leveraging data to make

decisions about how to reach

out, next best action, etc.

Donor

Engagement

• Engaging with current and

potential donors proactively,

using information about their

past engagements

AI Assistant

• Free up staff time with an AI-

powered assistant to help with

scheduling meetings,

submitting expenses, and

other administrative tasks

Predictive Analytics

• Make your data work for you

• Enhance budgeting and cash

forecasting with enhanced

technology platform

8


Agenda

Page




4 Closing 16


What is blockchain?

A blockchain is an amalgamation of proven technologies that when combined create a distributed database

and computing platform with many interesting characteristics

A data store holding a log, or ledger, of

transactions (events)

Distributed across a public or private network

Using cryptography and hashing techniques to determine

valid parties and transactions

Such that everyone agrees on the order and

state of the ledger, without having to rely on a trusted

3rd party

With a practically immutable, verifiably true audit trail

1

2

3

5

4

Blockchain characteristics…

◼ A blockchain is a database

◼ Multiple identical copies of the database are held by

participants in the blockchain network

◼ Mathematical algorithms create unique electronic “finger

prints” for network participants and any piece of data

◼ A consistent version of the database is maintained using

predetermined rules associated with verifying the “finger

prints” of those associated with changes to the database

◼ The data is stored in a way that makes it extremely difficult

for any one party to amend unilaterally, thereby providing a

highly reliable audit trail

…in plain English

9


An overview of the blockchain tech stack

From an architecture standpoint, blockchain can be simplified into three layers

Networking

◼ Allows for the propagation of transaction level detail

and other relation information throughout the nodes on

the network

Consensus

◼ Allows nodes to come to agreement on the current

state of the network

◼ Consensus can differ by protocol and

permissioning level

Application

Layer

◼ Updates the state of the blockchain given a set of

transactions (e.g. processing transactions)

◼ Allows for overlays, APIs, and applications to

implement some desired functionality

◼ At a high level, the blockchain tech stack above is consistent across

protocols, but there are key differences, mainly, how consensus is

reached across the network

Key Takeaways

Tech stack explainedApplication

Consensus

Networking

10


Public Permissioned

Examples

Performance ◼ Typically lower transaction speeds ◼ Typically higher transaction speeds

Consensus ◼ Energy-intensive protocols ◼ Simple, efficient protocols

Access ◼ Accessible to all ◼ Access restrictions

Bitcoin Ethereum LitecoinJ.P. Morgan

QuorumR3 Corda

Hyperledger

Fabric

Privacy ◼ Public records, anonymous participants ◼ Private records, known participants

Security ◼ High protocol security; exposed intermediaries ◼ High protocol security; enterprise-grade controls

Currency ◼ Cryptocurrencies incentivize miners ◼ No mining incentives therefore no cryptocurrencies

Blockchain networks can be open to the public or limited to known, approved participants

Permissioned blockchains are currently more appropriate for enterprise use cases

Digital Assets

Holdings

11


Blockchain creates new opportunities, improves efficiency, and reduces risk

Short to medium-term Blockchain benefits

Business Opportunities Operational Efficiencies Risk Reduction

Improved liquidity✓

Open brand new markets✓

Increased automation of

business logic & workflows✓

Reduced need for

reconciliation✓

More transparent systemic

risk, faster risk management✓

Reduced settlement time✓ Lower intermediary costs✓Simpler regulatory reporting

and immutable audit trail✓

Enhanced cybersecurity

and data resilience✓

◼ Blockchain technology is still relatively nascent with very few applications in production (across the industry)

◼ Initially, Blockchain solutions would need to run in parallel to existing systems, which may result in short term cost increases

◼ Creation of new governance and business models will require industry-wide coordination

Implementation considerations

In the long term, blockchain technology may enable a complex transformation of our operating model, driven by:

◼ Displacement / Disintermediation of existing roles and functions, e.g., correspondent banking, custodial services

◼ Changing nature of current product offerings in a blockchain-enabled ecosystem, e.g., underwriting digital assets

◼ Need for entirely new products / services, e.g., multi-Blockchain gateway provider, digital identity management

Long-term implications

12


Blockchain technology is not yet mature, but has several potential applications

Vendors and industry

groups begin experimenting

with technology

Multitude of Blockchain

technology providers in

market (consortia,

proprietary tech, open

source protocols, etc.)

Blockchain solutions

coalesce around few key

providers

Industry-wide familiarity

and confidence in

Blockchain technology

Banks and financial

infrastructure

intermediaries begin

discussing and researching

Blockchain

Banks and infrastructure

intermediaries set up POCs

to test targeted Blockchain

use cases to determine its

value and scalability

Successful POCs and pilots

move to production market

offerings

Blockchain replaces

centrally controlled

infrastructure with fully

decentralized solutions

Tech

no

log

yB

usin

ess

Assess Value

(2015 –

Present)

Prototypes

& Pilots

(2016 – 2020)

Islands of

Adoption

(2018 – beyond)

Fully

Decentralized

(TBD)

13


Key takeaways & summary

Blockchain is an

enabling technology or

tool, not a product or

solution

02Blockchain does not

require a cryptocurrency

element

01

We are in the proof of

concept stage of

blockchain evolution

03Where there is an

intermediary there is a

blockchain opportunity

(particularly Finance &

Treasury)

04

14


Committed to being an industry leader in blockchain technology

◼ A secure, decentralized, permission-based network to

safely exchange information and address the current

and future friction points within the payments chain

◼ Streamlines payment-related compliance inquiries

◼ Enables faster and more comprehensive payment

tracking

◼ Enables a more efficient operating model for

processing swaps via distributed ledger

technology

◼ In November 2017, J.P. Morgan completed

a successful six-month test managed by

Axoni in the equity swaps market to better

track contracts

J.P. Morgan’s initiatives

◼ Quorum is an enterprise grade Blockchain platform

developed by J.P. Morgan (based on Ethereum open

source technology)

◼ Available as open source software for clients looking to

explore and experiment with Blockchain technology

◼ Able to process hundreds of transactions per second

◼ Alliance of Fortune 500 companies, startups,

tech vendors, and non-profits to advance

Ethereum as an enterprise-grade technology

◼ J.P. Morgan was one of 30 founding

members

◼ Building solution to simplify and speed up

the process of selling a loan through

distributed ledger technology

◼ Completed initial prototype on Quorum for

matching trade settlement instructions

External initiatives, partnerships, investments

◼ Leading efforts for applications of distributed ledger

technology within the firm

◼ Exploring blockchain use cases and piloting solutions

across business lines

◼ Developing technology, investing in strategic

partnerships, and participating in industry consortia

Blockchain

Center of

Excellence

Enterprise

Ethereum

Alliance

Axoni

Interbank

Information

Network (IIN)

Quorum

Digital Asset

Holdings

Sources: Bloomberg, J.P. Morgan internal data

More resources with the Blockchain Center of Excellence: https://www.jpmorgan.com/global/blockchain

15

https://www.jpmorgan.com/global/blockchain


Agenda

Page




4 Closing 16


Questions and discussion

16

financial process transformation opportunities from the ......solve key treasury challenges and...

Documents