Reimagining Financial Services with Blockchain

Organizations can unlock substantial economic value using blockchain technology.

Shanker Ramamurthy | IBM

Across every industry today, organizations are looking to streamline and automate processes to reduce costs, gain efficiencies, radically improve speed to market and achieve better business outcomes.

The financial services industry in many ways is at the forefront of such initiatives – with particular focus on today’s disjointed and redundant processing and reconciliation challenges – which if resolved, would drastically reduce cost and improve quality across the entire ecosystem.

A good example of innovative leadership in this area is DTCC. DTCC, together with its member banks, is reimagining credit derivatives processing using blockchain in a path-breaking project.

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Organizations can unlock substantial economic value using blockchain technology.

Blockchain technology provides a permanent record of transactions, which are then grouped in blocks that cannot be altered, bringing strengthened trust and transparency and a new nexus for value exchange.

DTCC intends to replace its existing Trade Information Warehouse with a new solution based on Distributed Ledger Technology and blockchain to reduce costs and pave the way for driving further efficiencies for member banks.

This has the potential to further streamline and automate the derivatives process across the industry by eliminating the need for disjointed and redundant processing and reconciliation – all of which would drastically reduce cost across the entire ecosystem.

How will it work?

The existing Trade Information Warehouse now houses the golden copy for all credit derivatives transactions and is responsible for critical post-trade functions, including payment calculations and credit event processing.

By replacing the decade-old Trade Information Warehouse platform with new Distributed Ledger Technology, DTCC will create a robust, resilient solution that guarantees identical copies of data across multiple nodes with inherent disaster recovery and continuous availability.

All industry participants will have access to data on the distributed ledger, eliminating the need for reconciliation and potentially helping to simplify regulatory reporting in the future.

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New technologies have additional security measures through advanced cryptography.

It will also provide a simple solution for both business users and supporting technology teams, with minimal impact to external industry participants – reducing infrastructure cost, enhancing operational controls and paving the way for adding more asset classes and functions. This creates enhanced value for member banks and potentially enables direct participation by regulators in future.

Plus, in addition to the standard corporate security provisions, new Distributed Ledger Technologies have additional security measures through advanced cryptography – a hallmark of blockchain solutions.

The combined expertise of IBM and our partners enables us to provide DTCC with this resilient, open and innovative new technology platform to support this transformative initiative.

Organizations collaborating across multiple silos – and wherever there are documents or transactions that need to be confirmed, settled, exchanged, signed or validated – can unlock substantial economic value using blockchain technology. goldbrown2

This article first appeared on IBM’s THINK Blog and was published with permission. 

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Shanker Ramamurthy is General Manager of Strategy & Market Development at IBM.

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