1) ABI Lab, NTT DATA, and SIA are partnering to develop a blockchain solution for interbank reconciliation in Italy. They have identified this process as an opportunity for simplification and standardization using distributed ledger technology. 2) The project is being conducted in three phases: requirements gathering, a proof-of-concept pilot using R3's Corda platform on SIAChain infrastructure, and planned production implementation. The goal is to make reconciliation faster, more transparent, and efficient. 3) Lessons from the pilot include the importance of bank engagement, change management, governance planning, and understanding that the technology is still maturing for production use. The right use case and business process re-engineering

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Blockchain in Banking & Financial Services |
Client Experience and Battle Scars
HfS Webinar
March 15, 2018

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Today’s panelists
Saurabh Gupta
Chief Strategy Officer
HfS Research
Saurabh.gupta@hfsresearch.com
@saurabh_hfs
Mauro Giorgi
SVP, Head of Financial Services
NTT DATA Italia
mauro.giorgi@nttdata.com
@aqualung61
Silvia Attanasio
Head of Research
ABI Lab
s.attanasio@abilab.it
@SilviaAtta
Nicolò Romani
Head of Innovation
SIA
nicolo.romani@sia.eu
Insert headshot Insert headshot

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Agenda
• Blockchain adoption trends in Banking & Financial Services (BFS)
• The story of ABILAB in partnership with NTT DATA and SIA
• Implications and key lessons learnt
• Q&A

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The “blockchain six-pack” manifests into a disruptive potential over the long
run
Distributed shared
data over peer-to-peer
(P2P) network reduces
single points of failure
Consensus-driven
trust cuts out the
middle-man
Immutable
transactions ensure
trust
Hashing-based data
ensures integrity and
security
Automated smart
contracts promote
touchless interactions
across process chains
Permissioned and
permissionless
flavors give enterprise
users flexibility
The Blockchain “Six-Pack”

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Limited activityExplorationPilotsLive in-production
Enterprise blockchain adoption heatmap by industry
**Professional services industry coverage includes auditing, accounting, legal, real-estate, etc.
Banking &
Financial Services
Insurance
Manufacturing /
CPG / Retail
Professional
Services*
Public sector
Based on assessment of 200+ enterprise blockchain engagements across 20+ solution providers
Energy & utilities Healthcare Life Sciences Telecom & Media
Travel &
hospitality
While use-cases across almost all industries are emerging, BFS is the earliest and
hottest adopter of blockchain

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Adoption of use cases around payments, trade finance, and wallets are advancing
rapidly
Heatmap of most promising enterprise blockchain use-cases in BFS
Payments / settlements Trade finance Wallets / KYC Trading Asset mgmt.
Based on assessment of 200+ enterprise blockchain engagements across 20+ solution providers
Compliance Lending Auditing Investing / Transfer pricing Micro-finance
Limited activityExplorationPilotsLive in-production

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The market is witnessing an explosion in blockchain PoCs and pilots but in-
production solution are few and far between
1. Strategic
advisory
2. Prototype
development
3. Production build
4. System
Integration
5%-
10%
50%-
60%
30%-
40%
N = ~200 blockchain engagements across 20 service providers
Identifying blockchain-based use cases, creating
business cases, or selecting a platform
About 35%-40% of engagements are at the PoC
stage while 15%-20% of engagements have
progressed to pilots
Only a handful of successful pilots progress to
production. Almost all engagements at this
stage are parallel or shadow production
environments
There are negligible blockchain solutions that
have been completely integrated with clients’
existing process and systems landscape
No credible
evidence

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Enterprise blockchain adoption is going through the “90-9-1” set of challenges
• Overall nascency of blockchain solutions
• Lack of understanding in distributed ledger
technologies and use cases
• Lack of maturity of blockchain platforms
• Lack of success stories in the market
• Internal stakeholder buy-in around business model
changes and threat of disruption
• Uncertainty and lack of formal regulations
• Lack of talent availability
• Lack of market standards, inter-operability issues
• Integration issues with legacy
• Cultural change management (internal and external)
• Latency or throughput issues in production
• Service support for blockchain largely undefined
• Consortia-related challenges (set-up, management,
and governance)
• Difficulty in quantifying the benefits (ROI)
• Lack of clarity on technical architecture
• Permissioned versus permissionless decision
• Security and privacy concerns

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The story of ABILAB in partnership with NTT DATA and SIA
ABI Lab is a Banking Research and
Innovation Center founded and promoted
by the Italian Banking Association (ABI)
with the aim to connect banks with ICT
and energy companies.
ABI Lab is managed as a Consortium (over
160 banks and 65 information
communication technology companies in
Italy) and counts several collaborations.
Through research, ABI Lab analyses trends
and develops innovation in the banking
and finance sector sharing best practices
on different topics including organization,
technology, security, channels and energy
management.
NTT DATA is one of the ICT Partner of ABI
Lab in Italy with a long lasting relationship
grown up through an active contribution
on many different initiatives,
observatories, workshops run by ABI Lab.
NTT DATA is a part of NTT Group, one of
largest Telecom company and a partner to
88 percent of the Fortune Global 100.
NTT DATA has a strong experience in
BlockChain/DLT domain. Since 2015 has
delivered Use Cases, PoC and solutions to
its Finance and non Finance customer. NTT
DATA has a global CoE for Blockchain
services and our reference platforms are
HyperLedger, Corda, Ripple and Ethereum.
SIA is an European leader in the design,
creation and management of technology
infrastructures and services for Financial
Institutions, Central Banks, Corporates and
the Public Sector, in the areas of
payments, cards, network services and
capital markets.
SIA is providing the infrastructure for the
solution designed by NTT DATA, using the
platform SIAChain, a secure and protected
network, integrated with R3’s Corda
platform to enable SIA customers to run
CorDapps.

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Interbank reconciliation: the case
ABI Lab has launched a program to address simplification and standardization of domestic interbank
reconciliation, using a DLT platform. The program has been defined as a journey in three phases:
1. BPR and Solution Design;
2. PoC/Pilot;
3. Production.
The success of this program will simplify the resolution of the suspended movements in the correspondent
accounts between banks in terms of better efficiency, transparency and speed of this process.
In particular, ABI Lab, in cooperation with NTT Data Italia, is exploring the applicability of DLT to issues such as
the time taken to identify mismatched transactions between two banks, lack of a standardized process and
communication protocol, and limited visibility of transactions between parties. These often result in
discrepancies that are costly and complex to resolve. The goal is to leverage DLT to address cumbersome,
outdated and time consuming reconciliation practices and the challenges associated with managing bilateral
data sources.
R3’s Corda has been choosen as DLT platform. SIA has been chosen as the Business Network Operator, providing with its
infrastructure SIAChain the base for NTT DATA’s CorDapps.

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Interbank reconciliation: the journey
xxx
AS IS process analysis
1
2
3
4
5
Definition of the TO BE
process and technological
scouting
ACTION
ITEMS
TO BE architectural analysis
Phase 1 (BPR & Solution
Design)
A series of one-to-one
meetings with the
participating banks were
planned and executed.
Previously, two
questionnaires were
provided to each bank to
be used as guidelines for
conducting interviews
and to simplify the
collection of information.
The evidence emerged
and the data collected
during the interviews
were analyzed and
systematized to
highlight the
peculiarities of the AS IS
process and the
differences between
the various banks.
The TO BE process has
been modeled verifying
the fulfillment of the
minimum requirements
emerged from the
analysis of the AS IS
process and adapting it
to the analyzed
technologies considered
suitable
The main architectural hypotheses of the
proposed solution have been defined with
the technologies identified. The analysis led
to the identification of the main
components and activities necessary for the
implementation of the solution.
The roadmap for the
implementation of the identified
solution was produced. The
roadmap included the high-level
analysis of costs, commitment and
time required to implement Phase
2
Interviews with banks
Phase 2 (PoC) started in December 2017. This phase
was required in order to validate the solution with
choosen DLT platform. Result of PoC will be the
definition of the functional and technical specifications
for the development of the SW, the development and
deployment of the solution and the supporting
documentation for Phase 3 (production release).
PHASE 2 – PoC/PILOT PHASE 3 – PRODUCTION
Phase 3 (Production) will follow
the end of PoC and the
evaluation that will be done by
banks participating in PoC.
Main activities:
- Engagement of cluster of
banks, (they joined
spontaneously, 14);
- Engagement of
infrastructure partner (SIA);
- R3 Corda engagement;
- Orchestration of several and
different technical
landscapes by banks.

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Interbank reconciliation: TO BE process, simplified and reduced
Starting from the process of checking the reciprocal accounts in Italy AS IS (not shown here)
the operating phases that characterize it have been analyzed and redesigned. The design
activity of the TO BE process has brought efficiency improvements such as the removal of
the "Inversion owner tick" phase and an innovative management of anomalies / mismatches.
BACK OFFICE OPERATIONS
ITALIAN INTERBANL
RECONCILIATION
PROCESS PHASE
Resolution of pending
investigations
Movement upload on
DLT/BC
Pending investigations
identified
PRENDING MISMATCHES
UNDER INVESTIGATION
AUTOMATIC MATCHING
Matching automatico flussi
/Rilevazione sospesi
Sistemazione anomalie
Investigation anomalie
MISMATCH ANOMALIES INVERSION OWNER SPUNTA
Update sistemi
Invio piano di raccordo
Simplified Process
Process expected to be significantly reduced in elapsed time and effort
• The TO BE process is
“natively” based on the DLT
concept of nodes that
exchange flows of
information (this means that
the use of DLT technology
does not “force/shake up” the
AS IS interaction model
between Banks);
• Being a back office process,
mitigation of risks is in place
in some way, with no direct
impact on Customers. Thus,
technology discontinuity can
be better managed.
Furthermore, the compliance
regulation of the process can
be directly managed by ABI,
reducing any issue derived
from the use of DLT
technology.

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Interbank reconciliation: Phase 2, architecture
CordApp
Front-end Web
API
Flows
Smart
Contracts
Corda Node
HW Machine
IT System Conti Correnti
Reciproci
….
Translator to
new standard
In scope
Out of scope
OS + Dependencies (Java, …)
Notary Service
Movements
Query
DB
The picture shows the target architecture of a node, identifying what will be developed in the POC and what will be developed in a future
phase. It is important to underline that in the Phase 2 PoC nodes are not integrated with the legacy bank systems.

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Interbank reconciliation: Phase 2, current activities
1. Bank’s interviews
2. Standardization proposal
3. Functional requirements
analysis
4. Corda network design
5. CordApp design
6. UX & UI design
7. CordApp development
8. UI development
9. Deploy
10. Test & Live

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Key success factors, implications and lessons learnt
Key success
factors for the
project
1. Facilitating/supporting a deep/continuous engagement of Banks in the PoC project (also through workshops,
meetings at Banks premises, online webinars and calls, etc.). One of the goal of the PoC is the growth of
competence/awareness of Banks on BC/DLT technology;
2. Engagement of different roles for each banks: Process specialists, IT SMEs on interbank reconciliation,
Innovation/Blockchain specialists. Diversity of skills/approaches bring value to the Project;
3. High commitment from the Top Management of Banks;
4. Performing a detailed BPR and considering the whole set of process variables/KPI (FTE, costs, volume of
transactions, skills, etc.) in order to design the best TO BE (the process must lead decisions, not the technology);
5. Assure a shared/”democratic” decisional process within the project (since many Banks are involved);
Implications
and lessons
learnt
1. Identifying a best practice between many experiences is mandatory;
2. Harmonizing previous technical choices by many actors is not easy and is a possible showstopper;
3. Identifying correct roles of actors (BNO, System Integrator, Banks, Association/Regulator) since beginning is key,
as well as maintaining a clear direction;
4. Assuming that current technology is completely ready for production use is an error;
5. Ignoring governance issues for a peer-to-peer distributed network is an error;
6. Assuming that interoperability among platforms that are currently evolving is easily addressed;
7. Use case and the right process is key for correct adoption of BC/DLT;

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