Finance, Technology and the lessons for business….. 10’s: Digitisation and the future 00’s: The Internet – unprecedented access to data, distribution and communication 90’s: PC’s and the age of the Spreadsheet 2
Who Am I? 20+ Years at Deutsche Bank… Trading Sales & Distribution Product Management 3
News Flash: Technology is disrupting traditional Businesses!! 4
Personal Computers – 1990’s Banking amongst first industry to adopt Computers Very expensive: business case was back-office automation... 5
Personal Computers – 1990’s Spread Sheets allowed the development of the Derivatives... Put Computer Power in the hands of non-technologists… 6
Financial Derivatives Innovation outpaced understanding….. 7
Lessons from the first Era Technology may not be used the way the inventor intended TNT was originally developed for use as a yellow dye 8
Lessons from the first Era Abstract Technological Complexity Away from the User. Make it simple to use! 9
Lessons from the first Era Don’t “improve” your Products beyond what the user needs! Beware unintended consequences! 10
The Internet – 2000’s Ability to automate customer interactions Greater Distribution 11
New Entrants 12
Robot Trading Solving the Business Problems with algorithms….. 13
Data & Analytics 14
Social Networks Coffee houses served the same purpose as Social Networks… 15
Lessons from the second Era Don’t get frustrated when your product doesn’t work, find out why and PIVOT to a new product, market, etc 16
Lessons from the second Era Clay Christensen: “innovate in low end or in a new market” 17
Lessons from the second Era The more data you have, the less intelligent you need to be…. 18
Lessons from the second Era Make sure you keep the user in mind! 19
Digitalisation – 2010’s 20
Digitalisation – 2010’s 21
Disaggregators 22
Break The Business into Components Client Product Component Product Shared Services 23
The Future - Yap Stones!! 24
What is Crypto & Why Should We Care? Bitcoin has reconceptualised one the fundamental banking Product: Trust Can you keep my assets safe? Can you transfer my assets safely to other parties? Can you take delivery of assets on my behalf? 25
Cryptocurrencies – A Beginners Guide 26
Cryptocurrencies – A Beginners Guide 27
Cryptocurrencies – A Beginners Guide 28
Cryptocurrencies – The Blockchain The Blockchain is essentially a Ledger containing a list of all transactions. Its’ key features are that it is Distributed and Transparent . 29
Will Bitcoin become the new currency? Way to transfer ownership of a ”Digital Asset” Eliminates Forgery Eliminates Fraud It’s very quick It’s cheap It’s irrevocable 30
Will Bitcoin become the new currency? Anonymity Fungibility Cost Volatility Deflation 31
Marc Andreesen (Inventor of Nestcape and founder of Andreesen Horowitz) “ A mysterious new technology emerges, seemingly out of nowhere, but actually the result of two decades of intense research and development by nearly anonymous researchers. Political idealists project visions of liberation and revolution onto it; establishment elites heap contempt and scorn on it. On the other hand, technologists – nerds – are transfixed by it. They see within it enormous potential and spend their nights and weekends tinkering with it. Eventually mainstream products, companies and industries emerge to commercialize it; its effects become profound; and later, many people wonder why its powerful promise wasn’t more obvious from the start. What technology am I talking about? Personal computers in 1975, the Internet in 1993, and – I believe – Bitcoin in 2014.” 32
Smart Contracts – Crypto 2.0 Crypto 2.0 allows for Ledger entries to contain or reference business logic –programmable entries that could facilitate, verify, or enforce the negotiation of or the performance of a contract! Transactions Transactions (Sending value (Sending value to the contract) to the contract) Events (Sending Events (Sending information to the information to the contract) contract) 33
Securities Lifecycle... Regulator Issuance Dealing Security Issuer Market (Corporate, etc) Maker/Dealer Investor Executing Broker Executing Broker Investor (Buyer) (Buyer) (Seller) (Seller) Registrar / Transfer Agent Exchange CSD Clearing and Settlement Clearing Broker Clearing Broker (Buyer) (Seller) Global Custodian Global Custodian Clearing House (Buyer) (Seller) Custodian Custodian (Buyer) (Seller) CSD 34
Securities Lifecycle... Regulator Issuance Dealing Security Issuer Market (Corporate, etc) Maker/Dealer Investor Executing Broker Executing Broker Investor (Buyer) (Buyer) (Seller) (Seller) Registrar / Transfer Agent Exchange CSD Clearing and Settlement Clearing Broker Clearing Broker (Buyer) (Seller) Global Custodian Global Custodian Clearing House (Buyer) (Seller) Custodian Custodian (Buyer) (Seller) 1. Greater Transparency 2. Faster Processing A. Decreased RWA (Balance sheet usage) CSD B. Decreased operational Spend (and risk?) 35
Securities Lifecycle... Regulator Issuance Dealing Security Issuer Market (Corporate, etc) Maker/Dealer Investor Executing Broker Executing Broker Investor (Buyer) (Buyer) (Seller) (Seller) Exchange Blockchain Administration Securities Secure Data? Depositary? Services? Lending? 36
Other Use Cases Trade Finance: invoices/documents sent on such a protocol? Could the documents be verified by a digital signature releasing instantaneous payment automatically? Would that eliminate the need for Guarantee’s/Letters of Credit? Financial Derivatives: Could the derivatives contain and modify under certain conditions with no intervention (knock-out options)? Exchanges: Do you still need an exchange to trade on? Could a protocol be adapted to create a decentralised exchange where one could offer to buy or sell any asset at a particular price, and that price would only be matched if another participant was interested 37
Conclusions & Questions Approach everything from the perspective of your customer Pull the value chain apart to find where people are experiencing pain Make sure the interface is usable Don’t bother with improvements that your customers don’t value Find new or low end markets to disrupt in Don’t get hung up on your original idea – PIVOT Shrink the distance between users (consumers) and users (producers) Can you reconceptualize parts of your value chain as an algorithm? 38
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