INTERNATIONAL KEYNOTE: Future of Global Finance — Convergence of Blockchains and AI

Juergen Rahmel

Chief Digital Officer, HSBC Germany

Future of Financial Services, Melbourne

The Future of Global Finance6. June 2019

Dr. Juergen Rahmel, MBA

Chief Digital Officer

HSBC Deutschland

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Preface 03

Artificial Intelligence 05

Distributed Ledger Technology (DLT) 09

Convergence 15

Agenda

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4

Preface

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– Emerging Digital Markets

The Future of Global Finance

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Preface – How does it all come together?

Fintechs

and Tech

Giants

Crypto

and

Digital

Currency

Internet

of Things,

Smart

Cities

API’s

PSD2

Instant

Payments

and

Mobile

DLT/

Blockchain

Data, AI &

Machine

Learning

6

Artificial Intelligence

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– AI systems are solving problems based on internal knowledge and learned adaptation to new

situations.

– Such systems are perceived as ‚intelligent‘ if they find solutions without explicitly being programmed for the

solution path.

– AI systems are structured:

– AI systems are different: in their representation and use of knowledge (incl. Learning)

Artificial Intelligence

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What is Artificial Intelligence?

Inbound Capability Outbound

Perception

Recognition

Categorization

Remembering, Reflection and Learning

Decision

Making

Planning

Reasoning

Prediction

Execution

Interaction

Communication

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– AI systems and their relative maturity

Att

en

tio

n c

laim

ed

Time

Maturity of

the TechnologyBusiness Value achievedValue contribution identifiedInflated promisesInception

1-2 years1-2 years1-2 years 1-2 years (Typical duration)

Chatbots,

virtual Agents,

NLP

Optical

Character Recognition

Assisted management

of traditional risks

Assisted

management of

on-demand risks

Structural

Document Analysis

Management of wearables

and IoT data

Image / Video Analysis

Robotic Process

Automation

Biometrics

Intelligent

Document Analysis

Robo-Advisors

Artificial Intelligence

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Applied Artificial Intelligence – Capability view

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Controlling

AI

– Controlling AI –

how to tame the beast?

Artificial Intelligence

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Applied Artificial Intelligence – Control Environment

– Development Controls (e.g. Testing)

– Functional assurance

– Data hygiene

– Follow Values, have Purpose

– Avoid Bias and Unfairness

– Maintain Governance and Best

Practices

– Privacy Requirements

– Preserve Algorithmic Transparency

– Maintain Qualifications of Staff

Regulation

Construc-

tive

Controls

Operative

Controls

Ethical

Controls

10

Distributed Ledger Technology (DLT)

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– Permissioned blockchain & crypto-currencies – there is a difference.

blockchain

private & permissioned

ledgers

Shared ledgersDLT

fam

ily

Perm

issio

ned

blo

ckchain

Underlying technology

Bitcoin and other

crypto-currencies

Distributed Ledger Technology (DLT)

Some background

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– A simplified Block Architecture (Trade Finance view)

Distributed Ledger Technology (DLT)

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Setup of Networks and Platforms

Operating system / Blockchain layer − R3 Corda, Hyperledger Fabric, etc

Network operator

− Consortium governance

− Participant onboarding /

app support

− Common rulebook

− Business model

(cooperative, JV, etc)

Trade

FinanceLogistics Insurance Other Apps

API Layer

Trade Specialist Platforms ERP / Back Office Systems Web Portal

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– Powered by R3’s Corda blockchain technology

– Reduces the time from a Letter of Credit (LC)

presentation to acceptance from 5-10 days to ~ 24

hours.

– Integration with leading electronic bill of lading

providers and their network of shipping lines

– Several successful pilots completed:

– Cargill (May 2018), Reliance & Tricon (October 2018), Rio

Tinto & Cargill (November 2018), Fox&Lillie & China SDIC

(May 2019)

– In 2019 the consortium started launching a live solution

provider on JV basis

Distributed Ledger Technology (DLT)

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Voltron – Global Letter of Credit Solution on DLT

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– Streamlining multinational FX Flows:

– Resulting benefits:

– Consolidated view of forward FX cash flows

– Streamlined Operations, i.e. reduced cost and

– Optimised Balance Sheet

Distributed Ledger Technology (DLT)

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FX Everywhere – Post Trade DLT

Private

Ledger

External ledger of net payments

Currency Cash Flows

HSBC Group Border

Different HSBC treasury and risk

management centers and subsidiaries

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– ‘Next Generation’ Asset Classes:

– Lifecycle events and flows to consider:

– Issuance on a DLT

– Pricing, Trade, Payment and Transfer of Ownership

– Asset Servicing

– Customer and regulatory reporting

Distributed Ledger Technology (DLT)

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Tokenized Assets – Ownership and Trade via DLT

(Digital) Assets

CBDC StableCoinsAsset-Backed

TokensUtility Tokens

CryptoCurrencies

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Convergence

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– Cooperation of Methods

The Future of Global Finance

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Convergence – How will DLT and AI influence each other?

Fintechs

and Tech

Giants

Crypto

and

Digital

Currency

Internet

of Things,

Smart

Cities

API’s

PSD2

Instant

Payments

and

Mobile

DLT/

Blockchain

Data, AI &

Machine

Learning

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– Cooperation of Methods

The Future of Global Finance

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Convergence – How will DLT and AI influence each other?

Generate Trusted Data

Act as a golden source

Make ‚hidden‘ flows tangible

Develop new Business Models

Enable Digitization of Inputs

Monitor and Control

DLT/

Blockchain

Data, AI &

Machine

Learning

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Thank You

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