15th September 2016

Link'n Learn Session

Opportunities and Threats of Digital for the Investment Management Industry

2

THE WORLD IS

CHANGING

Presentation title[To edit, click View > Slide Master > Slide Master]

3© 2016 Deloitte. All rights reserved

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4© 2016 Deloitte. All rights reserved

To create new norms, behaviours and engagement approaches…

££

£

Mobile first every day interaction Redefining the everyday banking customer journey around mobile

Digitalising our walletsDigital wallets [cloud / NFC], mobile device merchant terminals and perhaps NFC at some stage

Real insight that helpsReal-time personal finance management to help purchasing / budgeting decisions

The tablet conundrumFinding the opportunity between smartphones and online

Integrated channels Omni-channel interactions built to solve user needs within a customer journey

mCommerceGoogle, Facebook, Amazon, Square and PayPal amongst many more fighting for a slice of the banking eco-system

Gamifying financial tasksUsing game mechanics to motivate behaviour to engage customers in new ways; frequency, affinity and loyalty

Social InfluenceSocial payments are quickly becoming a standard feature in banking apps

A perfect storm relished, embraced and adopted by newly empowered and value driven consumer….

New Empowered Consumer

Access to information

Greater choice than ever before

Leveraging social media

and price comparison

Sharing views post purchase

Seeking personalisation

and to co-create

7

INNOVATION

8

Customers Frustrated

Limited Flexibility

Legacy Systems

Process Inefficiency

Services Not Optimal

One Size Fits All

…on Mt. Legacy

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THE TRADITIONAL

ROUTE

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Ideas

11

…lead to pitches

12

…which go to steering committees

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…who discuss feasibility

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…and write a report on it

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THE RESULT

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At best we see incremental changes

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…at worst complete failure

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… AND ON

AVERAGE WE GET

19

Paper weight

20

Money burned

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Frustration

22

WE CALL THIS…

23

The hamster wheel

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THE HAMSTER

WHEEL IS KILLING

BUSINESS

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IT RESULTS IN INSIGNIFICANT RETURNS…

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AND WON’T SURVIVE IN A WORLD OF EXPONENTIAL CHANGE

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HOWEVER,

EXPONENTIAL TRENDS

ARE EMERGING

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EMERGING EXPONENTIAL TRENDS…

Products Platforms

SilosEcosystem

Segment

LedCustomer

Led

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POWERED BY…

Standards

Sharing and Cooperation in an ecosystem

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NOW WE WANT

31

Experiences

32

Lifestyle

33

Social

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Personalised

35

CONNECTIVITY IS

THE KEY

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Blockchain

Internet of Things

Robotics

AdvancedAnalytics

Payments

RegTech

P2P

OUR FOCUS NEEDS TO BE RAPIDLY CONNECTING TOSTART-UPS AND SCALE-UPS ALIGNED TO DISRUPTIVE TECHNOLOGIES

37

WHAT IS BLOCKCHAIN?

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WHAT IS BLOCKCHAIN?

Blockchain is the technology protocol that sits beneath Bitcoin

Satoshi Nakomoto publishes a white paper in 2008 to support

peer to peer electronic payments system

Created to transfer payments amongst peers in a secure

manner so that sanctions and banks could be bypassed

Bitcoin is developed as an open source protocol with first

block mined in 2009

Bitcoin has evolved into the most developed and famous use

case of blockchain technology

Bitcoin has yet to be hacked……

Brief History of Bitcoin

#

15.7 million bitcoins

in circulation

€

$678 per bitcoin(as at 17:41 19.06.2016)

5k transactions

per hr

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WHAT IS BLOCKCHAIN?

Blockchain is the technology protocol that sits beneath Bitcoin

Innovative characteristics

A distributed ledger for each participant

Highly secure because of the level encryption applied to the data in the ledgers and in the

transactions

Single version of truth because of the consensus algorithms applied giving mathematical proof

No third party required because the consensus algorithms are automated

Concepts of blocks used to reduce the volume of data to be replicated

Public and private keys to determine what data can be seen by whom

Each ledger has a complete history of all transactions that is cannot be changed - immutable

“THE TRUST MACHINE”

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WHAT IS ALL THE FUSS ABOUT?

What the most conservative and risk averse say

What is the impact of blockchain?

"If distributed ledger technology could provide a more efficient way for private sector firms to deliver payments and settle securities, why not apply it to the core of the payments system itself?"

“blockchain technology continues to redefine not only how the exchange sector operates, but the global financial economy as a whole, Nasdaq aims to be at the center of this watershed development.”

“The Blockchain is a technology, which we’ve been studying and yes it’s real. It could probably reduce the cost of real application in certain things”

“DLT has great potential to drive simplicity and efficiency through the establishment of new financial services infrastructure and processes”

""Is the blockchain technology going to be fundamental? I think the answer is overwhelmingly likely to be yes.

Larry SummersFormer US Treasury Secretary

Mark CarneyGovernor, BoE

Bob GriefieldCEO, Nasdaq

Jamie DimonCEO, JPM

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WHAT IS ALL THE FUSS ABOUT?

A simple example….

Cross border payments example

Seller

Sending Bank

LocalClearing

SWIFT

Seller

Receiving Bank

LocalClearing

SenderReceiver

Typically 3-5 days

Multiple points of reconciliation

and failure

Third parties fees (5% to10%)

Country A Country B

Today……

Seller Seller

SenderReceiver

Country A Country B

With blockchain……

BlockchainSending

BankReceiving

Bank

Near real time

Minimal reconciliation

Resilient payments infrastructure

Third parties fees (<3%)

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WHERE WILL IT IMPACT?

The most important development since the internet

$11bn –

$12bn

$2bn –

$4bn

$3bn -

$5bn

KYC / AMLReal Estate Cash Securities

$15bn – $20bn

Annually by 2022

IT Infrastructure

$1bn –

$3bn

Trade finance

POTENTIAL IMPACT ON FINANCIAL SERVICES

Source: Deloitte / Goldman Sachs / Santander InnoVentures / Oliver Wyman

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WHO ARE THE MAIN PLAYERS?

Blockchain platforms in the marketplace

Co

re P

latf

orm

sS

pecia

lists

Ch

allen

gers

Bitcoin

-Cryptocurrency

Ethereum

- Smart Contracts

Ripple

- Payments

Factom

- Proof of Existence

Loyyal

- Loyalty

Stellar

- Payments

Chain

- Consortium

Corda

- Consortium

Hyperledger

- LinuxIBM Bluemix MS Azure

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WHERE IS THE MARKET TODAY?

Blockchain is still an immature technology

FORMATION

EXPERIMENTATI

ON

LARGE SCALE

ADOPTION

EARLY

ADOPTION

2008 - 2013 2014 - 2017 2017 - 2019 2019 +

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WHAT YOU’RE NOT TOLD?

Blockchain is still an immature technology

It’s not a panacea

It’s not Bitcoin, that is just a use

case

Traditional technology is not

redundant or obsolete

You will still need to integrate

data from other systems

It’s not real-time

Standards need to be

formalised

Not all regulators are on

board

Does it scale?

It is not proven in

production environments

Collaboration is required

to make it a success

MISCONCEPTIONS CHALLENGES

46USE CASE REVIEW

Enduring & Unique

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GRID BLOCKCHAIN LAB USE CASE IDENTIFICATION

The Grid Blockchain Lab will select strategic use cases that will have thebiggest impact across EMEA. The focus will be to design, develop and testthese strategic use cases

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GRID BLOCKCHAIN LAB USE CASE IDENTIFICATION

Let’s focus on the banking use cases

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ASSET/INVESTMENT MANAGEMENT USE CASES

KYC Utility Loyalty Programme

Asset Tracking Risk Reporting

2

Escrow & CustodyDerivatives Trading

Corporate Actions Shadow NAV Private Equity/ Real Estate

Smart Securities

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Leveraging our strong EMEA Blockchain SME network we develop strategic blockchain use cases and concepts to support financial services clients to capitalise on the opportunities and test the capabilities that blockchain technology can bring.

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GRID BLOCKCHAIN LAB CAPABILITIES

A team of 50 blockchain practitioners will be built within 18 months by collective efforts and have the following capabilities

Research and eminence

Use case identification,

analysis & PoC design

Learning and development

Be at the heart of the blockchain ecosystem

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OUR CORE COMPETENCIES

Prototyping

Blockchain

Global Clients

• We bring a proven process and capability for solid experiment definition and rapid, iterative prototyping with demos at the close of each sprint

• Our cross functional agile teams develop proof of concepts and mature them into fully developed solutions by leveraging our portfolio of prebuilt assets and development kits to accelerate time to market and decrease development costs

• We have industry experience with blockchain technologies including Bitcoin, Ethereum and experimental experience with Hyperledger

• We will select and use the most appropriate platform to help bring your vision from paper to end product

• We have extensive experience working with smart contracts, and our optional smart identity platform enables greater control and automation of user specific conditions within distributed workflow

• As a global firm we have worked extensively with the words largest firms• Our industry specialists have deep process and regulatory insight across both local and international operational

domains • Dedicated technology practice with core expertise in the integration of production systems and exponential

technologies

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GRID BLOCKCHAIN LAB RAPID PROTOTYPING

The Grid Blockchain Lab offers a 10 week rapid prototyping process using an experiment-driven agile methodology

Discovery

Build

Review

AC

TIV

ITIES

OU

TP

UTS

Milestones

DiscoverUnderstand the problem, define the use case and objectives

DesignDefine, agree and document the technical design specification of the PoC experiments

Week 1

Design

Week 2 Week 3 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10

Design SpecificationFunctional and technical design documentation for each experiment

Phases

Hypothesis and ExperimentsA set of hypothesis with experiments used to test the validity of the claims. For each hypothesis, criteria are defined to measure business success

Experiment 1Build and measure a blockchain-based proof-of-concept

Summary and findingsReview and documented the summary of final outputs and findings

Week 4

Review outcome (Persevere/Pivot)A review of the first experiment output which upon assessment will lead to either preserving with the solution or pivoting to another experiment whereby a short design phase is undertaken

Experiment 2Re-design, build and measure a Blockchain-based proof-of-concept dependent on the outcome of the experiment 1 review

VisionA vision setting the overall agenda, objective and definition for success for the PoC

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COLLBORATION – LEARN, SHARE, CREATECollaborating to create new ideas, share insights and propel growth

Europe’s Largest Blockchain Hackathon

In November 2015 we sponsored Europe’s largest blockchain hackathon in DCU where 150 tech enthusiasts including our own specialists came together to design and build innovative blockchain products.

Asia’s Largest BlockchainHackathon

In January, we supported our Chinesecolleagues in running the largestblockchain hackathon in Asia.• 23 teams and 90+ competitors

entered, competing for $100,000in prizes

• The winning team presented ameans for putting Bills of Ladingonto a blockchain in order to cutdown on paperwork whenimporting goods

Eminence

Blockchain – Enigma, Paradox, Opportunity

Blockchain – Out of the blocks: From hype to

prototype 2016

Blockchain – Disrupting the Financial Services

Industry?

GLOBAL ALLIANCES

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