financial services 2.0 innovation, disruption, automation and trust

Financial Services 2.0 : Innovation, Disruption, Automation & Trust

2Where character is never in question and excellence is always the answer. TM

Agenda

1. WHAT is Financial Services 2.0 ? andWHY is it happening now ? pg 3, pg 7

2. WHERE are we in the revolution ? pg 93. HOW is “IT” driving change ? pg 144. HOW will business models evolve ? pg 245. HOW will corporations adapt ? pg 316. WHAT are the implications ? pg 407. WHEN will impact reach the tipping point ? pg 57


WHAT is Financial Services 2.0

and

WHY is it Happening Now ? 1


WHAT is Financial Services 2.0 ?The evolving, next generation landscape or set of financial infrastructure,

capabilities, partnerships and consumer expectations, that leverages peer-to-peer

(P2P) and advanced data technologies, to add and exchange value, reduce costs,

latencies and risks and enable new markets, products and services for the 21st

Century global marketplace.

» Replacing the outdated model of vertically integrated product segments, via:

– INNOVATION: Inclusion, Connectivity, Collaboration, Commerce, Smart Data

– DISRUPTION: Eliminating Middlemen & Frictions (Cost & Latency), FinTech investment, impact and Convergence, Industry Redefinition, Destruction of traditional operating models, Restructured Value Chains, Redefinition of Customer with new powers and expectations

– AUTOMATION: Internet of Value, P2P, Blockchain / DLT, Smart Contracts, IoT, Machine to Machine Economy, Artificial Intelligence, Machine Learning, Predictive & Prescriptive Analytics

– TRUST: Rebuilding Trust with Protocols not People or Institutions, Eliminate The Middleman, Full Transparency, Trustless Transactions, Trusted Staff and Partners


“Finance 2.0”• Internet gave us a powerful way to share and

access information.

• Blockchain now gives us a powerful way to share and access value.


OPAQUE TRANSLUCENT TRANSPARENT

TRUST & FRICTION DISRUPTION INNOVATION

From Centralized Trust With Middlemen Controlling Transactions To A Trustless Transaction Economy


WHY is Financial Services 2.0 happening now ?The 5th Wave of Productivity is driven by technology innovations and accelerated by demographics, and the loss of trust in Financial and Governmental institutions after the financial crisis.

» Financial Crisis of Confidence in Financial Institutions (2008)

» Launch of Bitcoin (2009), or Blockchain 1.0 - P2P movement of tokenized value aka Programmable Money

» Over $19 Billion was Invested in FinTech Companies Globally in 2015 !

» Data Explosion due to Social Media, Mobile, GPS, RFID, E-Commerce, anticipating IoT

» Millennials are less loyal to brands, technically savvy and driven by convenience

» Market Explosion due to Opportunities and Needs of 3rd world unbanked

» Maturing of Big Data Analysis and Artificial Intelligence Tools

» Blockchain 2.0 - Smart Contracts aka Programmable B2B Business Processes

» Vision for Blockchain 3.0 - Programmable Corporations (DAO)


WHY is Financial Services 2.0 happening now ?Financial Services Investment in Blockchain & Bitcoin Startups and the Evolution of Social Media


WHERE are we in the Revolution ?2


WHERE are we in the Financial Services 2.0 Revolution ?At early stage of Innovation Pattern, that will lead to wave of creative destruction.

» Blockchain aka Distributed Ledger Technology: equivalent to 1995 Internet

» P2P: disruptive, development paridigm for the future

» Big Data: demands driving use case move from Descriptive to Predictive and Prescriptive Analytics

» AI: moving from research into business strategy and operations

» IoT: Preparing to connect 25+ Billion devices to redefined economy in 5-10 years

» Applications:

– New Advice : ROBO Advisors moving from 1.0 to 2.0, providing multipleasset classes, rebalancing, and tactical asset allocation for short term risk avoidance.

– New Products : Are Cryptocurrencies a new asset class ?

– New Markets: Extending services to the 2.5 Billion Unbanked ?


Analog Innovation Pattern Meets the Digital Network Effect

SCHUMPETER'S

PRODUCTIVITY

WAVES

OF

CREATIVE

DESTRUCTION

MEETS THE

DIGITAL

INFORMATION

TSUNAMI

Analog MachinesElectro-MechanicalMachines

Digital Machines


2010s 2020sBLOCKCHAINCONNECTED WORLD & WEB OF VALUE, DRIVEN BY DIGITAL / CRYPTO CURRENCY TOKENS, DISTRIBUTED APPLICATIONS AND SMART CONTRACTS ...

IoT

REAL TIMEFULLY RESPONSIVEECOSYSTEM of PEOPLE, PROTOCOLS AND MACHINES

Digital Network Effect Will Accelerate Innovation Impact


Managing Hype Along The Way To Adoption and Impact

Gartner 2016 Hype Cycle


HOW is “IT” Driving Change ?3


HOW is “IT” Driving Change ?

IT Will Have Many Innovation Roles :

» Educator of Executive Management, Business Leadership & IT Staff

» Enabler via Innovation Lab Processes, Partnerships and “fail fast” Mindset

» Solution Builder of best practice based solutions

» Business Partner internally and with 3rd parties for ecosystem

» Strategic Planner for phased delivery of next generation capabilities

» Service Provider internally and externally


A New Brave World:Blockchains

vs.Middlemen

IT as Educator

Coming Soon !

17Where character is never in question and excellence is always the answer. TMIT as Educator

WHAT Is The Blockchain ?

■ A new form of information technology, a decentralized system of checks and balances, an infrastructure, an organizing system that is universal and planetary-scale


Blockchain Explained

What it enables What it is

Its impact


HOW a Blockchain Works

Transaction creation

Transaction verification

Block Creation

Block Validation

Block Added To Chain


1. DISCOVERKnowledge, Ideas & Best Practices

2. INCUBATEPartners, Systems & Needs

3. ACCELERATECapabilities & Impact

Survey

▪ SURVEY Industry Landscape, SMEs, Interested Parties, Points of Pain, Possible Partners & Opportunities (ITERATES)

Educate

▪ EDUCATE IT / Business by Collecting / Augmenting and Publishing External / Internal Information Sources for Follow Up Use.

Manage

▪ MANAGE the processes, Data Flows, Linkages and Status Reporting Requirements

Solidify

▪ SOLIDIFY Clients, Vendors, Proof Of Concept Candidates and Options For Testbed Ecosystem

Identify

▪ IDENTIFY Specific Proof Of Concept and Associated Use Cases

Establish

▪ Research, Document, Train and DELIVER Ecosystem TO ALLOW IMPLEMENTATION AND TESTING of Proof Of Concept Use Cases

Extend OR

▪ Define, Plan, Resource and DELIVER EXTENDED Proof Of Concept Capabilities

Aggregate OR

▪ Define, Plan, Resource and DELIVER AGGREGATE Solution to Previously Identified Points Of Pain

Initiate

▪ Define, Plan, Resource and DELIVER NEW Corporate INITIATIVE

A

B

C

E

G

H

I

Innovation Team Operating Model: Fail Fast

Knowledge Repository & Roadmap Ecosystem for POCs Major Initiative

D

F

IT-Enabler, Business Partner & Service Provider


Digital Identity Is Critical For Next Generation Solutions

IT as Solution Builder

2005 2020

22Where character is never in question and excellence is always the answer. TMIT as Strategic Planner

HOW Will Blockchain Be Used In The Future ?

23Where character is never in question and excellence is always the answer. TMIT as Strategic Planner

Planning For The Next Phase Of Blockchain


HOW will Business Models Evolve ?4


HOW will Business Models Evolve?

The evolution of Business Models will be accelerated by the elimination of cost and latency frictions, producing disruptions, new markets, products and services.

These new business models will :

» Adopt Digital Identity for People, Organizations, Devices and Ideas

» Require Distributed Ledger Interoperability for Payments, Consortia driven solutions to common industry problems, Global Supply Chains and lastly, perhaps, for internal corporate business processes and data flows.

» Consolidate Reputation Models to utilize Blockchain Technology & Identities

» Adopt Smart Contracts to automate business processes

» Derive Business Value and Competitive Advantage from Big Data & AI

» Deliver efficient, transparent, client centered, regulator certified goods & services


By Connecting People** (Digital Identity) ...

** Paridigm Shift: Transition from Username / Password to Digital Identity and connecting 21st Century Identities: People, Organizations, Devices and Ideas


… and Connecting Processes** (Business Logic)

● Eliminates Friction and Costs

● Increases Productivity

● Creates andDestroys Jobs

**Smart Contracts and Best Practice based Templates to automate the well defined & understood cases, leaving human talent to focus on exceptions and value creation.


By Embracing The Next Generation Business Model:The Internet of Value

- DISRUPTING THE DISRUPTORS- 21ST CENTURY WORK & BUSINESS MODELS- SMART CONTRACTS- DISTRIBUTED AUTOMATED ORGANIZATIONS

Closed and Centralized Networks Open Networks andCentralized Cloud

Open Networks andDistributed Cloud


Example: Car Leasing Business TODAYExample: Car Leasing Business: TODAY


Example: Car Leasing Business with BLOCKCHAIN


HOW will Corporations Adapt ?5


HOW will Corporations Adapt ?Corporations must meet the challenges of accelerating business competition and revenue pressures, by smartly identifying, building and integrating next generation capabilities, emphasising ease of use and reliability with enhanced client security and privacy.

Expected Corporate Adaptations:

» Blockchain 3.0: Long Term Vision for Automated Corporations, Will DAOs be King ?

» More Software (Smart Contracts), less (but more impactful) People

» More Skilled, Information Savvy Staff, less “Paper Shufflers”

» More Nimble, Loosely Coupled Departments, Just In Time Roles and Budgets

» Must provide Work-LIfe-Balance to get and keep Top Talent

» By Disrupting the Disruptors !

» Build a culture of Consistent Excellence during Constant Change, based on client needs and innovation … not on risk aversion


Corporations Evolve Toward Blockchain Based Organizations

All internal and external relationships are managed via blockchain based smart contracts


Corporations Evolve TowardAnti-Fragile, Self Improving Organizations

Handling Stresses

Fragile: BreaksRobust: ResistsAntifragile: Improves

Antifragile systems increase in capability, resilience, or robustness as a result of stressors, shocks, volatility, noise, mistakes, faults, attacks, or failures.


Future of Finance

Automation at the Center

Humans at the Center

Humans at the EdgesAutomation at the Edges

Financial Services Evolves Toward Artificial Intelligence Solutions


Example: Disrupting Services - Uber vs Blockchain

LaZooz.net


Example: Correspondent Bank Disintermediation


Example: Unbundling of a U.S. Bank

Mortgages Merchant Services

Financing and Credit

Payments Payroll

Wealth Management

Insurance

Investing and Retirement Planning


TRUST

INTEGRITY MATTERS BECAUSE REPUTATIONS TAKE YEARS TO BUILD BUT CAN BE DESTROYED IN MINUTES ...

CULTURE Matters, Even with Trustless Transactions :The 5Ps - Managing Excellence During Constant Change


WHAT are the Implications ?6


WHAT are the Implications ? ECONOMY

Move To A Trustless Transaction Economy & Society i.e. Mobile, Frictionless Products and Services

Merging of Tech and Financial Services Companies: Ultimately Banks become “service nodes on the network”, Markets and Business Models disrupted and redefined e.g. Funding, Lending …

Human Capital Still Key. Wave of Creative Destruction, Education / Demographics will drive Talent Acquisition / Retention e.g. Work/Life Balance, JIT work force, Corporate Structure Evolution - DAOs ?

TECHNOLOGYThe Internet Of Value: Blockchain, Mobile, Big Data, IoT and AI:

● Transition from Username/Password (“Shared Secret”) Security Model, to new unified, digital and device identity model

● Cryptocurrencies and Fiat currencies converge to fully enable P2P economy

● Programmable Assets, Trust, Ownership, Money, Identity, Contracts

● Smart Contracts & Applications utilize Blockchain, Big Data, AI etc. to remove latencies, include billions of IoT devices, automate business processes and move up the Intelligence curve.→ Shorter Settlement Cycles, → New Products and Services → The Rise of Robo Advice !


Implication: FinTech Growth Endangers Bank / Customer Relationship … Here come the GAFAs.

FINTECH

Payments

Raising Funds

Digital Currencies

Advice


Banks are frightened by GAFAs financial power and brand image

Implication: New FinTech Banks Driven By Financial Power and Brand Image ? (Google, Apple, Facebook, Amazon)


Implication: GAFAs Will NOT Become Banks … But Banks May Become Slaves of GAFAs ?

• Not profitable enough (negative impact on market cap)• Too regulated• “Slow” growth

What banks fear most are GAFAs owning the customer relationship and them becoming the mere white labels at the back end of the process


Implication: Blockchain Backbone For Financial Services

Distributed Ledger Solutions will replace Centralized SystemsDistributed Ledger Based Services will replace Centralized, Legacy Systems


Implication: Blockchain Impact in Post Trade Processing

Streamlined Securities Settlement

Reducing Latency and Risk

Removal of $20 Billionin Post Trade Processing

Costs by 2022


Implication: Blockchain Impact Across Entire Trade Cycle


Implication: Rise of Robo Advice in Wealth Management


Implication: Robo Advice Moving From Awareness to Adoption


Implication: Robo Advice Managing $2 Trillion by 2020

68 %


Implication: Blockchain Will Help Integrate The IoT


Implication: IoT in Financial Services

1. Monitoring & data transmission

2. Data collection and management

3. Strategicanalytics

4. ValueCreation

DATA

MANAGEMENT

PLATFORM

Financial product development

Risk management & pricing of finance

Identifying additional business needs

Streamlining contractual processes


Implication: IoT / Smart Data In Financial Services

Right time and channel to connect

Fraud and AML

SME Credit

Budgeting

“Right Time” Marketing

Smart Learning and Real Time ServicesUse Transactional, locational, communications and social media for customer engagement

Improve AML and Use Pattern recognition software to catch fraud

Use customer behavior to help SMEs manage cash flow

Combine customer behavior patterns with savings goals for planning


Implication: IoT In Asset Financing


Implication: IoT in Insurance, Customized Products


Implication: IoT Economy


WHEN will we reach tipping point ?7


WHEN will impact reach the tipping point ?The disruption of the financial sector is underway. FinTech / Financial Services Collaboration and Convergence are reshaping the value proposition of existing products and services. Banking and Payments are ripe in the short to mid term, followed by Insurance and Asset Management.

The “Tipping Point” may be driven by some of these facts, surveys, estimates and needs:

» Over 20% of Financial Service business at risk to Fin Techs» Up to 28% of Banking and Payments business at risk by 2020» Up to 22% of Insurance, Asset / Wealth Management business at risk by 2020

» 25% of Financial Services firms do not liaise with FinTech companies at all. They will underestimate the potential benefits and threats of the convergence.

» Mobile only accounts for 16% of Advertisement Revenue Today, within 5 years, expectations are that 60% of clients will be using mobile applications (at least once a month) to access financial services

» Large scale Digital Wallet adoption is critical and requires simplified key management(FYI: Apple Iphone App store now supports 9 cryptocurrencies … )

» Must solve the Millennial Problem


Tipping Point: Solving The “Millennial Problem” ?


Tipping Point: The FinTech Tsunami ?

Fintech could reduce banks revenues and profits by up to 40% and 60% over the next decade

-60% -40%


Tipping Point: Rise of Inorganic Intelligence

Artificial Intelligence

Distributed Computing


Thank You


BOB BONOMO President Bob Bonomo, LLC

CEO Blockchain Innovation Group, LLC

Mr. Bonomo is a Digital Currency Council certified Technology, Process and Business Consultant and former Chief Information

Officer at two major Wall Street firms. He currently chairs the Technology and Product Committee of the Wall Street Blockchain

Alliance.

His areas of expertise are the Asset Management component of the Global Financial Services sector, Blockchain / Distributed

Ledger Technologies & the Bitcoin Cryptocurrency Ecosystem.

Bob believes the productivity and disruptive nature of Blockchain’s Distributed Applications (Dapps) will accelerate the

displacement of many centralized systems and services, initially across Wall Street’s Back Office, via consortia, for Settlement time

and cost reductions, followed by the Buy-Side’s Front Office for Product and Service transparency & compliance differentiation, and

then, more generally, across the global corporate landscape of supply chains of goods and services - creating “a 21st Century

Intellectual Assembly Line of Innovation”.

Recent engagements include Business Development, Tech Strategies, Vendor, Risk, Staffing & Funding Analyses and Program

Management / Delivery at Large Financial Institutions, Cryptocurrency Trading Desks and Blockchain Startup Companies.

Via his Blockchain Innovation Group, Mr. Bonomo helps concept stage startup companies evolve to achieve funding, staffing and

operational excellence. He’s formed PayToSkip.com and GuvChain.org startups as disruptive plays in Advertising and Government.

Previously Mr. Bonomo spent over 25 years on Wall Street designing, delivering and managing innovative global systems, processes

and teams.

From Developer to CIO, he was a key transformation agent at Sanford C. Bernstein / Alliance Bernstein and OppenheimerFunds Inc.

In another lifetime, Bob worked at JP Morgan, Moody’s Investors Service and Digital Equipment Corporation. He received a B.S. in

Computer Science from Columbia University School of Engineering & Applied Science in 1981.

https://www.linkedin.com/in/bobbonomollc

http://www.digitalcurrencycouncil.com/

http://www.wsba.co/

http://www.wsba.co/

http://www.wsba.co/

http://www.blockchaininnovationgroup.com/

http://bitcoinist.net/pay-to-skip-new-model-disrupt-advertising-industry/

http://guvchain.org


CREDITS My LinkedIn Profile - Bob Bonomo

Centralized, Decentralized and Distributed Systems (Paul Baran, 1964)

Joseph Schumpeter (1883–1950) coined the seemingly paradoxical term “creative destruction,”

My not so random walk down Tech Avenue, Wall Street and Blockchain Boulevard

Gartner Hype Curve 2015 http://www.gartner.com/newsroom/id/3114217

https://www.linkedin.com/pulse/blockchain-powering-internet-value-jarle-holm

https://evry.com/globalassets/insight/bank2020/blockchain-powering-the-internet-of-value---labs-whitepaper.pdf

https://www.cbinsights.com/blog/financial-services-bitcoin-investors/

http://firstpartner.net/news/new-market-map-defines-blockchain-ecosystem

https://www.accenture.com/_acnmedia/PDF-2/Accenture-Wealth-Management-Rise-of-Robo-Advice.pdf

http://www.slideshare.net/kantox/the-next-10-years-in-fintech-57726895

https://www.amazon.com/Business-Blockchain-Practice-Application-Technology/dp/1119300312

http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/2016/feb/BlockChain-In-Capital-Markets.pdf

https://www.pwc.at/publikationen/branchen-und-wirtschaftsstudien/fintech-global-report.pdf

http://santanderinnoventures.com/wp-content/uploads/2015/06/The-Fintech-2-0-Paper.pdf

https://www.pwc.com/jg/en/publications/pwc-project-blue-2.0.pdf



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