Blockchain, virtual accounts and digital security

Blockchain, virtual accounts and digital security
Using technology to improve the customer experience
The cost of cash and increased digitisation mean there are opportunities to offer a streamlined service. However,
is there a risk that companies will jump on the ‘blockchain bandwagon’ simply to seem relevant in today’s market?
This sentiment, along with a desire to see streamlined and integrated services allowing for the efficient use of cash,
continues to be a prominent theme for clients.
Blockchain for beginners
Blockchain inspires controversy over its potential role
in financial services, but can the technology address
problems of legacy Information Technology and
disparate systems? And, importantly, is the media
portrayal an accurate reflection of what the technology
can actually do?
A recent poll of clients put their level of
understanding of blockchain at one out
of five, although they also acknowledged
that it could have a significant impact on
their business.
A blockchain is a secure shared database that can be
viewed by disparate people to give a shared truth. Its use
can be transferred to any sphere in the economy operating
with large data that needs to be visible to several parties.
However, the business case for blockchain is often weak,
resembling a crude attempt to bulldoze in a technology
when a tried and tested technology would most likely be
more appropriate. The technology has existed for a while;
the challenge is now harnessing its most useful form.
Blockchain’s biggest use-case is where a question of
digital ownership arises. It operates on mutual agreement
when there is a need for a unique, immutable version of
the truth that can be seen by all. The word ‘crypto’
frequently makes people feel uneasy, but it simply implies
something is secure; when talking about cryptocurrency
and bitcoin, it’s often forgotten that crypto secures the
transactions and could act as an enduring mark of ownership
in a liquid market.
Overcoming the barriers
There are, however, significant barriers associated with the
technology; privacy is a big obstacle. In the same way that
financial crime can be tracked, so can individuals and their
actions. The lack of client base on blockchain – and
therefore the visibility of their actions – compounds this
issue. A private blockchain with a private client base,
although a remedy to privacy concerns, doesn’t offer
any more benefit than the SWIFT network. It also requires
large data and energy resources, which can prevent it from
being real-time.
So what is blockchain? George Osborne, Director of
Innovation for FIG at Barclays, describes it as nothing more
than “a shared spreadsheet in the cloud” – rejecting the
hype around this mysterious technology.
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Nonetheless, there are use-cases that are worth exploring,
namely to automate trade finance. A Bill of Lading
requires a paper-based signature and, by replicating
this through blockchain, you could achieve the same
indisputable ownership while automating a paper-heavy
industry. A second compelling use-case is for identity
records; the data can be pushed to clients, therefore
removing the often laborious KYC operational process.
Blockchain is often discussed as being a complicated
technology, and while it’s true to say that it isn’t a
panacea for every challenge facing the financial sector,
it shouldn’t be discounted as a solution to certain
problems.
Cybercrime – the Achilles heel for corporates
Three years ago, cybersecurity wouldn’t necessarily have
been considered a hot topic for corporate treasurers;
cybercrime originally started as attacks on retail consumers.
However, recent years have seen an exponential growth in
fraud attacks within the corporate space. As fraudsters
become ever more informed and sophisticated, the priority
for banks and clients needs to be protecting their businesses.
Recent years have seen an exponential
growth in fraud attacks within the
corporate space.
Blockchain: the facts
Hackers target front-end bank systems by infecting client
PCs with malware. This allows them to layer screens over
the actual interface and take control of the user’s PC while
the user remains ignorant to the fraudulent actions. One
area that has typically been exploited is pre-authorised
beneficiaries. Bank screening won’t pick this up because
the payment isn’t classed as unusual; the hacker calls the
beneficiary asking them to refund the transaction as it was
made in error, but to an alternative, fraudulent, account.
Layered screens are a common form of attack; however,
the industry is innovating to take security to the next level,
for example, with biometric technology. At Barclays, we
have worked with Hitachi to develop a finger vein reader
which scans the user’s vein pattern to log in and approve
payments, mitigating the risk of PIN capture.
As fraudsters become ever more
informed and sophisticated, the priority
for banks and clients needs to be
protecting their businesses.
• The data is immutable
• The system is resilient and secure
• The system is transparent
Although there is a clear threat from sophisticated
attackers, this does not mean that clients do not need to
be alert to more amateur attempts, for example, requests
for urgent payments or unprofessionally worded supplier
invoices or instructions sent to staff not in a payment role.
There are a number of controls companies can put in place
to protect their business from attacks, but it’s commonly
accepted that one of the best methods of defence is to
educate staff within your organisations about the dangers
and trending attack vectors, instilling a fraud-aware culture.
• There is opportunity to automate business logic.
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Moving forward with virtual accounts
Another topic which is high on many clients’ agendas as they
look for streamlined and efficient treasury systems is virtual
accounts. Clients looking for streamlined and simple liquidity
solutions can use accounts to support an in-house bank
structure and automate accounts payables and receivables,
reducing admin and providing a simplified alternative to
pooling. The solution also offers a cost-effective way to hold
multiple accounts with one bank and is proving popular where
clients are moving toward automation and streamlined
treasury management processes.
Virtual accounts are an exciting prospect for clients wanting an
in-house bank structure. A virtual account is applied under the
master account held with the bank; balances and client money
can be driven by something no more complicated than a
payment reference. The client can then manage the structure
as their own accounting system. Whereas a client typically has
to speak to their bank to make any changes to their liquidity
structure, with virtual accounts, they are able to manage their
liquidity themselves, for example, by charging notional interest
on an account, thus empowering them to manage the bank
relationship themselves.
Virtual accounts function almost like an ewallet, where a
master account is held with the bank and different accounts
are set up, enabling individual balances to be driven and
managed by the company. One example of how virtual
accounts could be used is to manage gaming wallets in
casinos, which would be particularly beneficial in managing
the transfer of winnings.
With virtual accounts clients are able
to manage their liquidity themselves.
Virtual accounts demonstrate not only product evolution
but also how moving away from a product’s traditional role
can allow businesses to transact and manage their treasury
as required.
Summary
The need to harness the benefit of rapid technological
developments is clear and the scope of advancements
presents huge opportunities for corporates. The full effect
of blockchain on financial services remains to be seen,
as it is often over-complicated and over-hyped by the
media; however, there is a consensus in the industry that
blockchain could lead to new levels of transparency and
trust, with openness and stability forming the underlying
principles of the technology.
Unfortunately, there is a darker side to the digital age.
Cybercriminals are getting more sophisticated and
business-like which makes it harder to avoid vulnerabilities.
It is therefore a question of offsetting the risk and usability
of online services, a balance which has led to the
development of state-of-the-art security technology
and a requirement for education around online safety.
barclays.com/corporatebanking
Sources: Distributed ledger technology: beyond block chain, https://www.gov.uk/government/news/distributed-ledger-technology-beyond-block-chain, published 19 January 2016.
Barclays Malware Educational Video. Barclays Invoice Fraud Educational Video.
Every attempt has been made to ensure that the information provided is accurate. However, neither Barclays Bank PLC (“Barclays”) nor any of its employees makes any representation or warranty (express or implied) in relation to
the accuracy, reliability or completeness of any information or assumptions on which this document may be based and cannot be held responsible for any errors. No liability is accepted by Barclays (or any of its affiliates) for any loss
(whether direct or indirect) arising from the use of the information provided.
Barclays is a trading name of Barclays Bank PLC and its subsidiaries. Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority
(Financial Services Register No. 122702). Registered in England. Registered number is 1026167 with registered office at 1 Churchill Place, London E14 5HP.
February 2016. BD01923.
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Blockchain: understanding the potential
Blockchain: understanding the potential
Bitcoin, heralded by many as the single biggest breakthrough since the arrival of the internet, has proved to be
something of a moving target since its launch in 2009. However, it continues to be the focus of significant
investment and innovation with the industry predicting that more than $1 billion in venture capital funding will
have been invested in bitcoin and its future by the end of 2015*
Recent developments include BitPesa, a Nairobi-
clichés and misconceptions have grown up around
This may prove to be the case – but rather than
based start-up focusing on bitcoin remittances,
the digital currency and its underlying technology.
simply leaving it there, banks and companies could
which raised over $1 million earlier this year and
These misconceptions can hinder discussions about
be delving into this topic to understand what makes
Earthport which agreed a partnership with Ripple
the future direction of development and the way in
this technology so attractive and what types of
Labs allowing real-time cross-border bank payments
which initiatives are presented in the media.
application could be created. It is only when the
But, it is becoming increasingly clear that bitcoin is
For one thing, its associations with Silk Road, the
part of an even bigger story: financial institutions,
digital black market, have left some people with
including Barclays, are now considering how
the assumption that bitcoin is linked to money
the technology underpinning digital currency –
laundering and terrorists. Education is improving on
commonly called ‘the blockchain’ or ‘blockchain’
this point, but misconceptions continue to affect the
– could in itself revolutionise finance. While many of
way that many people think about bitcoin.
these potential applications are medium term the
development cycles in the industry mean that now
is the time for companies to begin asking how this
technology could benefit them.
Challenging the misconceptions
Bitcoin may have attracted significant attention
around the world – but alongside all the hype, many
*
Blockchain technology is likewise subject to certain
clichés. In the first instance, attention focused
closely on bitcoin itself and how the digital currency
was going to change the world. In the last couple
of years, this focus has shifted and many people
are now repeating the assertion that blockchain
technologies are more interesting than Bitcoin the currency.
www.insidebitcoins.com/news/bitcoin-venture-capital-funding-pace-1-billion-2015/30665
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possibilities are explored in more detail that the true
scale of possible change can be appreciated.
Understanding blockchain
In recent years, there have been many different
processes which are genuinely different, because of
initiatives intended to remove paper from the
the way many of these technologies work. The trick
The first port of call should be to gain an
economy. However, in many cases the new
is in something called “consensus”. Like consensus
understanding what makes this technology so special.
technology has simply recreated old processes in
in a room full of people, computers use algorithms to
Blockchain technology, which underpins bitcoin, has a
a new way, or has led to solutions which continue to
reach consensus about the truth. This contrasts with
number of interesting attributes. There are two main
rely on paper. For example, the process of signing a
today, where every bank, government department
types of Blockchain Technology
cheque was digitised by creating a cheque guarantee
and law firm has their own paper copy of the truth. If
card, followed by a PIN card – but the new model
we could rely on maths to “sync” the truth between
continues to work on the same hub and spokes
us all, we coud cut out a lot of wasted back and forth
model that the previous cheque system had used.
paper from the likes of:
1. Unpermissioned
2. Permissioned (sometimes ‘distributed ledgers’ or ‘replicated shared ledger’)
An Unpermissioned blockchain is an open,
decentralised ledger which records the transfer of
value. Every transaction is cryptographically chained
to the previous transaction. The result is
In other cases, such as tenancy agreements, there
is a continuing need for a piece of paper that will
• Trade Finance
hold up in court.
• Land Registry
A Permissioned blockchain technology could, in
• Social Welfare
contrast, replace certain paper-based processes with
a permanent, immutable and verifiable record of
• Insurance
• KYC and AML
truth that everyone can see. This is useful when
no central entity is available to verify a transaction.
To name just a few.
Unpermissioned Blockchains are “censorship
resistant”. Nobody can edit them, meaning if you
Blockchain and distributed ledgers business
want to record a statement of fact with your name
on it (for example; “Alice would like to pay Bob £1” or
“This is my last will and testament”), Unpermisioned
As outlined above, whilst Bitcoin had a number
blockchains are a great place to do this
of breakthroughs such as the creation of a widely
available and very difficult to attack permanent
A Permissioned blockchain technology is often far
and censorship resistant database. Some of these
more appealing to enterprise and financial services.
characteristics could also make this technology
To understand this we need to explore one of the
particularly relevant to a number of biggest problems with financial services and industry;
financial processes.
the cost of paper.
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From regulatory reporting to derivatives settlement,
the various blockchain technologies could be used
to transform the many key services industry sectors,
reducing cost, increasing the speed and transparency
for data and reducing reliance on paper.
Putting it all together
One interesting development is Everledger,
a permanent ledger for the certification and
transaction history of diamonds. In the past, different
stages of a diamond’s value chain have tended to
SMART CONTRACTS “When paper knows
what you told it to do”
be disparate and paper-based: the producer of the
Imagine a contract that you sign, where all of the
which can be lost or forged at any point.
key clauses could automatically execute. This is
the promise of a “Smart Contract”. If we assume
the blockchain technology of choice is helping keep
records in sync between multiple parties (e.g. which
shipping container is which television in), then Smart
Contracts are the logic layer on top that allow for “if
this, then do that” conditions to be actioned directly
diamond, the shipping and the insurance would all
have been recorded using pieces of paper – all of
Today, these different strands can be brought
together. Drawing upon blockchain technology,
Everledger provides an immutable record of the
ownership of diamonds which allows individual
jewels to be identified and tracked using a common
database. The diamond’s serial number is registered
from the agreement.
against the database (or ‘blockchain’) and users
Taking our television example further. What if the
agencies can access the entire history of a specific
current buyer had agreed they would buy 100x
diamond, including details such as changes of
televisions from the seller so long as the market price
ownership and insurance details. If a diamond is
for televisions stayed above £1? A smart contract
stolen and recovered on the other side of the world,
would record this “clause” in the same way a paper
this database can allow the police to determine
contract would. The difference however is if the
quickly the history of the item and its
price of a television fell below £1, the smart contract
insurance details. Everledger is live today with
could change the owner of the television back to over 800,000 diamonds being tracked on their the seller.
blockchain technology.
such as insurance companies or law enforcement
Other items may also benefit from this type of audit
trail. With greater attention paid to the origins of
items such as organic and fair trade produce, a
blockchain could certify the history of specific items,
including the origins of the food, whether the farm
was certified (e.g. by the Soil Association) and the
amount paid to the farmer.
Corporates may wish to consider how Smart
Contracts may change their business.
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Overcoming the obstacles
The key gap is education, we often conflate “The
Blockchain” and “A Blockchain”. This terminology is
especially tricky because the technology is so new,
come into being. It’s also clear that the security and
In conclusion, Bitcoin was a significant breakthrough
controls associated with blockchain technology will
– but it’s not the whole story. The technologies
need development before many of these applications
around bitcoin have the potential to transform
can become mainstream
many different processes and companies should be
terms are emerging daily to try and understand and
That said, the opportunities are so significant that
make sense of it.
it’s a question of when, not if, these applications
This is a nascent technology and while the
opportunities are exciting, certain obstacles will need
to be overcome before some of these use cases can
will emerge. In order to smooth the way for
discussing these developments at the board level
and asking how this technology could help them and
whether they should be investing in it.
greater development and adoption, financial
service providers and start-ups will need to
collaborate closely.
About the author
Simon Taylor
Blockchain and Distributed Ledger Subject Matter Expert
Named by City AM as one of the Top 10 most influential people in Fintech, Simon’s work
at Barclays focuses on understanding the impact of this new technology on Barclays
businesses and clients
barclays.com/corporatebanking
Barclays is a trading name of Barclays Bank PLC and its subsidiaries. Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority
and the Prudential Regulation Authority (Financial Services Register No. 122702). Registered in England. Registered number is 1026167 with registered office at 1 Churchill Place, London E14 5HP.
Item Ref: BM408383. July 2015.
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“Como los bancos pueden innovar y comercializar la innovación en la
banca digital reduciendo los costos marginales en la entrega de los
servicios y la experiencia del usuario como clave fundamental de
conquistar nuevos clientes."
Juan Carlos Terán-Vela
CEO
icono de la innovación del siglo
XXI: la foto de los asistentes a la
proclamación del Papa
Benedicto XVI en 2005 frente a
la misma imagen en 2013 de
proclamación del Papa
Francisco
Los retos que afronta la banca en América Latina se resumen en 7 puntos
fundamentales:
• desarrollo tecnológico,
• Innovación / disrupción,
• cambios en las tendencias del consumidor,
• entorno macroeconómico,
• reforma regulatoria,
• gestión de riesgos,
• cambio demográfico.
BANCO DIGITAL
Según un informe elaborado por IESE
y Synpulse Management Consulting, el
65% de la banca ya se encuentra
inmersa en un proceso de digitalización
y el resto de entidades está planeando
cómo llevarlo a cabo.
“Los clientes hoy en día van por delante de los
bancos". "Están recibiendo una serie de
servicios instantáneos a través de las
empresas digitales que también van a
demandar a sus proveedores bancarios"
"La transformación digital es una oportunidad para cambiar la experiencia de cliente. Lo importante es
proporcionar una experiencia única a cada usuario, que será al final el que decida cómo quiere ser
servido y por qué canal. El cliente elegirá, pero no puede haber diferencias en el trato"
Capital One www.capitalone.com/
Schwab www.schwab.com
SelfBank www.selfbank.com
Banco Original www.original.com.br
Bankaool www.bankaool.com/web/
MBank www.mbank.pl/en/
ATOM www.atombank.co.uk/
Zen Banx www.zenbanx.com/about/
Moven Bank www.moven.com/
Fidor Bank www.fidor.de www.fidorbank.uk
GoBank www.gobank.com
Ally www.ally.com
USAA www.usaa.com
Aa
Aa
P2P
Direct
Banking
Aa
Next
Generation
ATM
Aa
P2P Lending
Aa
Aa
Money
Market
Fund
Crowdsourcing
Aa
LocationBased
Social
Aa
P2P FX
Marketplace
Aa
Aa
Aa
Account
Aggregation
Aa
Community
Branch
Virtual
Currency
Aa
Social
Customer
Service
Customer
Voice From
Social
Aa
Mobile
Deposit
• Servicios financieros
• Data Mining
• Canales Digitales
• User Experience / Usabilidad
• Encriptación de información / seguridad
• Predictiva y Disruptiva
Diseño de novedosas soluciones
que mejoran la experiencia de
servicio de los clientes…
Aplicación de
herramientas para
la reducción de
costos.
Clientes
Ingresos
Costos
Uso de reglas de negocio en la extracción de datos para la generación
de exitosas campañas de mercadeo cruzado y banca predictiva…
Servicios Hiperconectados
Plataforma de Crowdfunding
Confidential
15
Organización Exponencial
El cerebro tiene una capacidad de memoria de 500 petabytes y de
procesamiento de 1 exaflops
• EXPONENTIAL ORGANIZATIONS
http://singularityu.org/
El plan de negocios
Además de su flexibilidad, otra de las
cualidades que ofrece una ventaja
competitiva a las 'fintech' respecto a las
entidades tradicionales es la falta de un
marco legal que regule su actividad.
"Vivimos un tsunami regulatorio desde 2012
que a la banca le ha perjudicado y que ha
supuesto un incremento de costes. Estos
nuevos actores deben jugar con las mismas
reglas de juego con la que lo hacemos
todos. En la banca tenemos conocimiento
de cliente, experiencia de cliente,
capacidad de financiación y podemos
competir con ellos. No nos debe asustar
meternos en un terreno en el que también
la banca puede competir"
Estos nuevos jugadores, conocidos como
compañías 'fintech', se sitúan en la
periferia de los sistemas bancarios y se
especializan en los distintos componentes
que conforman la cadena de valor de los
bancos. Un ejemplo son las grandes
compañías tecnológicas, como Apple,
Google o Amazon, que ofrecen servicios
relacionados con los pagos y el credito.
Esta firmas se caracterizan por ser 100%
digitales y disponer de una enorme
flexibilidad para incorporar cambios,
gracias a su reducida estructura de
costes.
En los últimos años, los sectores bancarios de numerosos países de ALC han experimentado una rápida transformación
estructural. Un factor importante ha sido su deseo de mejorar la eficiencia y capacidad de reacción de sus sistemas
financieros a través de la desregulación, el desarrollo de mercados de capitales locales, la privatización de entidades
financieras de propiedad estatal y el fomento de la participación de la banca extranjera. Otro determinante ha sido el
proceso de consolidación, integración financiera regional e innovación financiera en general que ha estado dirigido por el
mercado. Como resultado de esta evolución, las fuerzas del mercado han pasado a ocupar un lugar más destacado en la
asignación del crédito y la estructura subyacente a los sistemas financieros ha experimentado a menudo una
transformación sustancial. Todos estos cambios han venido acompañados de un resurgir del crecimiento del crédito, en
concreto para consumo y vivienda, a medida que los sectores bancarios han recuperado su fortaleza impulsados por el
vigor de la actividad económica. La tecnología y digitalización ha sido fundamental.
@teca_móvil
[email protected]
www.inteca.biz
21/09/2016
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