How is UBS using blockchain?
blockchain technology could be the biggest disruption in computing and finance since the internet. As a leading financial organisation, it is our duty to understand the technology and its implications and to share the knowledge and benefits with clients, the financial industry and the wider society.
For this reason, in March 2015, UBS started a pathfinding journey to explore, harness and share the potential of blockchain. Based at the UBS Innovation Lab in London's Level39, the UBS Crypto Pathfinder programme’s eight person core team, comprises technology, business, and finance experts. The team collaborates with UBS colleagues from all the business divisions around the world, with many of the over 200 technology start-ups based at Level 39 as well as outside partners. Open innovation and partnerships are key methodologies in achieving the programme's objectives as we strongly believe that no bank can win this alone. We need to collaborate to gain the benefits of this revolution. We are working with partner banks and industry consortia, financial intermediaries and regulators in order to gain the long-term benefits for our clients and the whole market.
The main goal of the programme is to develop, enable and promote open standards for blockchain technology, and ultimately to shape better financial services. To stay ahead of the curve, our Crypto 2.0 Pathfinder programme is conducting business analysis and experiments to apply the technology to real use cases that span across investment banking, wealth management corporate banking and retail.
Where can blockchain be used to greatest effect?
The research and experiments we have conducted so far allowed us to identify the fundamental enablers of the future blockchain architecture – crypto cash and digital identity – which we are now extensively exploring across our use cases. Crypto cash would determine settlement finality on blockchain as every crypto coin would be backed by real money or securities, while digital identity would allow for blockchain applications compliant to KYC and AML regulations. We are focusing our effort around these pillars as we strongly believe that further developments in this space could represent a turning point in the advancement and adoption of blockchain technology.
How will blockchain change financial services? Will it make many jobs obsolete in the industry? If so, what percentage?
We approach innovation pro-actively. Concretely, this means we are concentrating on enhancing our ‘Client Experience’, ‘Product Excellence’ and Operational Efficiency. The first two elements are focused on generating additional revenue. While the third element is more about cost savings at first glance, it can in turn also benefit our clients through better services at a lower price point.
Can you give me some examples of applications you are currently working on? Either in the field of blockchain or in digitisation or artificial intelligence?
Let me give you two examples on blockchain:
The Innovation Lab team in collaboration with UBS Trade Finance SMEs and IBM initiated Project Batavia, an innovative approach to international trade , utilising blockchain's distributed ledger technology, which could simplify and accelerate the process of trade by holistically combining trade finance and all ancillary services, logistics, inspection, insurance, payments, FX and financing, in one single tool.
Recently we also announced MADRec: This is a RegTech solution, focusing initially on MiFID II data quality, which allows participants to connect to a private Ethereum network to solve the data quality issue on Legal Entity Identifiers. Using distributed ledger enables reference data upload and verification between banks and other financial institutions. If all participants of the project submit their reference data to the blockchain network, the smart contract can effectively compare data from different banks and highlight discrepancies.
Artificial Intelligence will affect the entire value chain of a typical Wealth Manager. From front office activities like customer services and producing investment strategies to middle and back office tasks like identifying fraud and cyber risk, delivering legal and compliance assessments, managing IT infrastructure or employees – everything that is a process can and will be automated.