Blockchain and distributedledger technology in finance

- research based analysisIlkka Lähteenmäki

- 20+ years in banking- Inc. 10+ years of financial research- 2011-2016 in Danske Bank

- Head of business development in PB- Head of strategy planning in FIN

- Partner in two start-ups- Since Oct. 2016 research network of FinTech- Together with the Bank of Finland and

Ministry on Finance a FinTech Institute- Ph.D. about banking development &

partnerships- 7 journal & conference publications

• Independent think tank• Academical foundation• FinTech research and business development hub• Researchers, incumbents, start-ups, regulators• Bank of Finland and Ministry of Finance• Coordination, education, research• Up-to-date Finnish FinTech status• International co-operation

Our research network

FinTechcausationresearch

Aalto Hanken

Lappeenranta Universityof Technology

University of Oulu

Hanken

University of Tampere

University of St.Gallen

FinTech

ManagementMentalModel

Customers,Data,Insurance

Customervaluecreation

FinTech causation research

Financial business:- Business models- Competencies- Competition- Co-operations- Management- Customer experience- Value creation- Partnerships

SummaryCurrent bankingprocesses:- Rife with problems- Regulatory costs- Inefficiency- Digitally wrapped- Centralized- Exclusionary

Blockchain or DLT?- to do more with

less- streamline their

businesses- and reduce risk in

the process

Blockchain- contracting, clearing, settling,

and record-keeping tasks - forge agreements, make

transactions, and build value - to verify their identities,

establish trust, or perform the critical business logic

Industry change- DAOs

DLT- identity and reputation, moving

value (payments and remittances), storing value (savings), lending and borrowing (credit), trading value (marketplaces like stock exchanges), insurance and risk management, and audit and tax functions.

Business model changeand ecosystemimplication

Blockchain in current banking processes

Source: Boston Consulting Group

Blockchain is not hype anymore

Source: IBM Institute 2016

R3CEV

Trade finance

The new platform helps optimise internal processes for banks and reduces the risk of documentary fraud, but the key cost efficiency is in speeding up the time it takes to complete a trade transaction – from as many as 20 days, to just a few hours.

Loading the goods, issuing invoices, dealing with home bank, getting recommendations checked, sending the paperwork and getting it endorsed by the importing bank. In the worst case scenario, it can take 20 days. Since all this is physical, it’s really difficult to accelerate that process.

Significant part of the change is made by start-up firms

Status right nowsolutions for authentication, blockchain-as-a-service, open-source blockchain, application development, mobile wallets, compliance, trading and investment

FinTech synergy

API andopen banking

3rd partyapplications

FinTech

Banking-as-a-service

Platformeconomy

Genericplatforms

IoT

Banking-in-a-service

DAOs

ReplacedBankingServices

Value delivery level

Blockchain and DLT as an architecture

Managers’ mental model is the mostcritical obstacle

DOT-model(Holmlund-Strandvik-Lähteenmäki, 2015, 2016, 2017)

Do not neglect Bitcoin

Banking is only contextual

https://smartlog.kinno.fi/

Customer value creation

Value creation spheres

False True

Value:- Value-in-production- Value-in-use- Co-creation- Service dominant logic- Customer dominant logic

History view

Salaries online

ATMs

Tele-banking

PC-banks

Internet banking

Mobile

60´s

70´s

80´s

90’s

2000’s

2010’s

Apps

50´s

FinTech

Screenscraping

Thanks!