Distributed Ledgers in the Financial System
Distributed Ledger Technologyin the Financial SystemEmre
Tekisalp, Columbia Business School Investment Thesis, April
2016@etekis | [email protected]
Financial transactions are settled with the help of
intermediariesP2P Wire Transfers: Banks, Central Banks, Clearing
HousesInternational Payments: Correspondent BanksSecurities: DTCC
(USA)Contracts: Notaries
Source: Ripple
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Financial Institutions are hoping that distributed ledgers will
solve a multitude of problems regarding settlementFinancial
Institutions are facing:Increased regulatory costsCompetition from
fintech startupsAntiquated systems with high maintenance costsLack
of financial inclusionCompetition from alternative financial
channels
Measured as a percentage of revenues, financial services firms
spend more on IT than any other industry. Banks IT costs equal 7.3%
of their revenues, compared to an average of 3.7% across all other
industries surveyed Source: Deutsche Bank, 2012Distributed ledger
technology could reduce banks infrastructure costs attributable to
cross-border payments, securities trading and regulatory compliance
by between $15-20 billion per annum by 2022Source:Santander,
2015
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Source: CBInsights
Many potential use cases.Payments and Capital Markets have seen
most tractionSyndicated loans Trade finance Supply chain
provenanceUS Treasury repo Clearing / settling OTC derivatives and
FXCross-border paymentsIdentity / data authenticationPrivate stock
/ equity issuance2 Capital Markets & Securities1 Cross-border
Payments
Its clear that problems exist with both use cases, but not clear
if blockchain is the technology banks needCROSS-BORDER
PAYMENTSCAPITAL MARKETS & SECURITIESProblems Blockchain can
solve2-4 days to settle transactionsAntiquated messaging (SWIFT)
causes problemsEstimated costs of $1.6 trillionIncreasing burden of
post-settlement back office work1-3 days to settle securities
transactionsCase against Blockchain30 clients, many of the leading
players in the fieldHolistic one-stop SaaS service for all
Bitcoin/Blockchain enabled applicationsBetterment for the rest of
the worldHuge untapped market of retail investors in emerging
markets Bitcoin is less volatile than >50% of currenciesVetted
by leading banks as leading cross-border solutionLeading regulatory
strategyAlready in use by cross-border financial
institutions$3.5MSeed raised to datePre-seedRaising ~$1M
$38.6MSeries A raised to dateRedwood City, CANew YorkSan
Francisco
PlatformConsumerBanking
Questions, thoughts?Emre Tekisalp@etekis |
[email protected]
