MGX FY17Financial Services

Karen Cone

General Manager, WW Financial Services

Digital Transformation with

Productivity & Collaboration

Preparing the Financial Services Market for the Adoption of Blockchain

Connie Leung

Senior Financial Services Industry Director

Worldwide Financial Services

2

Driving Digital Transformation in Financial Services

Threats perceived by financial institutions

TECH

COMPANIES

STARTUPS

TELCOS

RETAILERS

BANKINGLOANS & CREDIT

INSURANCE

INVESTING AND

RETIREMENT

WEALTH

MANAGEMENT

Source: EFMA-Infosys Feb 2015 Digital Banking Report

BLOCKCHAIN

“There are hundreds of

startups with lots of brains

and money working on

various alternatives to

traditional banking.“Jaime Dimon, CEO, JP Morgan Chase

Digital is driving massive demand for transformation in financial services

3

MANAGING THE REALITIES OF RISK,

REGULATION, LEGACY SYSTEMS, AND

COST PRESSURES

DELIVERING INNOVATIVE CUSTOMER

AND EMPLOYEE EXPERIENCES WITH

SPEED AND AGILITYIT budgetsare currently required to keep the

lights on (Source: Celent)

(Source: Capgemini)

50%of Gen Y

>15%customers

>

(Source: The New Yorker,

May 16, 2016)

FINANCIAL

COMPANIES

ACCOUNTING FOR

US CORPORATE PROFITS

LIKELY TO LEAVE THEIR

BANK IN THE NEXT

SIX MONTHS

Top reasons:

Ease of use and service

Paid in bank fines since 2009

(Source: Morgan Stanley)

$280B

~70% of

17%30%

Before

2009 By 2015

80% of bank customers prioritize online

and mobile functionality

(Source: Wall Street Journal

June 3, 2016)

80% of customers would

switch to a insurer that provided

personalized service

(Source: Accenture)

4

5

Digital transformation is essential to sustaining a competitive advantage

5

ENGAGE YOUR

CUSTOMERS

with compelling

experiences across

all channels

EMPOWER YOUR

EMPLOYEES

to drive customer

intimacy and be

digitally astute

OPTIMIZE YOUR

OPERATIONS

for efficiency,

compliance and

risk management

TRANSFORM

YOUR PRODUCTS

to unlock new

revenue opportunities

and achieve growth

DIGITAL TRANSFORMATION

Leading edge regulatory compliance capabilities empowering financial services

“The cloud is

inevitable…

But right now the

timing isn’t right.”

Two years ago…

“Tell me how to get

there in a safe

compliant way…”

Today…

Over 45 Financial Services Regulators Engaged

in Last 12 Months

Customers are Moving!

75% of the "Too Big to Fail” Financial Institutions

Are Now Committed to Microsoft Cloud…

Online Services (All Customers)

Financial Services Amendment

(FS Only)

Financial Services Compliance

Program (FS Only)

Regulator Right

to Examine

Institution is accountable

& in control

7

7

TRANSFORM

YOUR BUSINESS

WITH

BLOCKCHAIN

9

Secure

Shared

Distributed

Ledger

Blockchain is a secure, shared, distributed ledger

10

Smart Contracts are unable to access external data or events based on time or market conditions. Calling code or

data outside of a Smart Contract or blockchain breaks the general trust barrier and authenticity of transactions.

Cryptlets will allow the blockchain to access external data securely, while maintaining the integrity of the blockchain.

Evolution of Blockchain

12

Blockchain Benefits – Financial Services

Operational

Simplification

DLT

Reduces/Eliminate

s manual efforts

required to

perform

reconciliation and

resolve disputes

Regulatory

efficiency

improvement

DLT enables real-

time monitoring of

financial activity

between

regulators and

regulated entities

Counterparty

Risk

Reduction

DLT challenges the

need to trust

counterparties to

fulfill obligations

as agreements are

codified and

executed in a

shared immutable

network

Clearing and

Settlement

Time

Reduction

DLT

disintermediates

third parties that

support

transaction/verifica

tion/validation and

accelerates

settlement

Liquidity and

Capital

Improvement

DLT reduces

locked-in

capital and

provides

transparency

into sourcing

liquidity of

assets

Fraud

minimization

DLT enables

asset

provenance

and full

transaction

history with a

single source

of the truth

Source – World Economic Forum – The future of financial infrastructure – August 2016

13

And it will disrupt multiple industries

Retail & Manufacturing

Financial Healthcare Government

15

THE FIRST BLOCKCHAIN APPLICATION IN TRADE FINANCEIn December 2015 Standard Chartered and DBS announced that they have successfully completed the Proof of Concept (PoC) of a new distributed ledger based solution in Trade Finance

Blockchain in Asia

17

To create many new solutions to difficult business problemsAsset Titles

Diamonds

Designer brands

Car leasing & sales

Home Mortgages & payments

Land title ownership

Digital asset records

Government

Voting

Vehicle registration

WIC, Vet, SS, benefits, distribution

Licensing & identification

Copyrights

Identity

Personal

Objects

Families of objects

Digital assets

Multifactor Auth

Refugee tracking

Education & badging

Purchase & review tracking

Employer & Employee reviews

Media

Digital rights mgmt

Game monetization

Art authentication

Purchase & usage monitoring

Ticket purchases

Fan tracking

Ad click fraud reduction

Resell of authentic assets

Real time auction & ad placements

Computer Science

Micronization of work (pay for

algorithms, tweets, ad clicks, etc.)

Expanse of marketplace

Disbursement of work

Direct to developer payments

API platform plays

Notarization & certification

P2P storage & compute sharing

DNS

Medical

Records sharing

Prescription sharing

Compliance

Personalized medicine

DNA sequencing

IoT

Device to Device payments

Device directories

Operations (e.g. water flow)

Grid monitoring

Smart home & office management

Cross-company maintenance markets

Payments

Micropayments (apps, 402)

B2B international remittance

Tax filing & collection

Rethinking wallets & banks

Consumer

Digital rewards

Uber, AirBNB, Apple Pay

P2P selling, craigslist

Cross company, brand, loyalty tracking

Supply Chain

Dynamic ag commodities pricing

Real time auction for supply delivery

Pharmaceutical tracking & purity

Agricultural food authentication

Shipping & logistics management

Financial

Trading

Deal origination

POs for new securities

Equities

Fixed income

Derivatives trading

Total Return Swaps (TRS)

2nd generation derivatives

The race to a zero middle office

Collateral managementSettlements

Payments

Transferring of value

Know your client (KYC)

Anti money laundering

Client and product reference data.

Crowd Funding

Peer-to-peer lending

Compliance reporting

Trade reporting & risk visualizations

Betting & prediction markets

Insurance

Claim filings

MBS/Property payments

Claims processing & admin

Fraud prediction

Telematics & ratings

18

Microsoft Blockchain as a Service – embracing all key partnersBlockchain-as-a-Service (BaaS) has attracted 34 partners - the largest Blockchain ecosystem in the FS industry.

Azure BaaS | Select Tech Partners

19

Microsoft Blockchain as a Service – Bletchley 1.0

Blockchain Middleware will provide core services,

which will help users create and build on top of

blockchains within Azure

The core services can be broken down into the

following:

₋ Identity and Key Management Services –

Helps with authentication, authorization,

access, and lifecycle management.

₋ Privacy & Encryption Services – Provides

encryption for blockchain transactions and

fields

₋ Cryptlet Services – Provides runtime for

cryptlets and communication between

blockchain and cryptlet trusted host

₋ Blockchain Gateway Services – Provides

communication between multiple blockchains

₋ BlockchainData Services – Rich data services,

such as analytics, auditing, and machine

learning

₋ Management and Operations – Tools for

deployment and management

HealthcareRetail &

CPGPublic

Sector

ManufacturingFinancial

ServicesMedia

Distributed Ledger Stacks

Azure

SaaS Solutions

3rd

Party

3rd

Party

3rd

Party

3rd

Party

3rd Party DL stack

Consensus, networking & database

1st Party3rd

Party

Virtual Machine Adapters

Smart Contract-based UTXO-based or other

Mid

dle

ware

Tie

rB

ase

Pla

tfo

rm T

ier

3rd Party DL stack

3rd Party DL stack

…..

Ind

ust

ry S

olu

tio

ns

Blockchain Resource Provider

CryptoDelegate and Cryptlet architecture (secure containers, attestation, etc.)

SmartContract Marketplace

Crypto-Services

ML & BIServices

Blockchain Gateway Services

Identity & Key Services

20

Recent Announcement

Blockchain Proof of Value in Trade FinancePresenters: Jayna Bundy, Microsoft

Chris Bozek, Bank of America Merrill Lynch

Bank of America Merrill Lynch and Microsoft Treasury announced a collaboration using blockchain technology that aims to transform Trade Finance business processes.

21

Amis - Taiwan Blockchain consortium using BaaS

Microsoft

Confidential |21

“AMIS帳聯網公司的聯盟區塊鏈架構如果運用在移動支付與其他金融科技創新的應用場景，主要是作為現有金融基礎建設的補充與延伸…”, Alex Liu,

CEO Amis,

22

CollaborationRegulation

Talent

Legal framework

Integration Start-ups

23

FAIL FAST & CHEAP

MIX & MATCH

CREATE & INNOVATE

SHARE SOLUTIONS

PROVISION

Blockchain-

as-a-Service

Strategy

24