S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L
Disruptive Technology and Innovation
Financial Process Transformation Opportunities from the Evolving Payment Landscape
November 2019
C O N F I D E N T I A L
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C O N F I D E N T I A L
JoEllyn Perry Powell, MBA, CTP, Executive Director
JoEllyn is an Executive Director in Treasury Management at J.P. Morgan, working with higher
education and nonprofits organizations in the Mid-Atlantic region. As a Treasury Management Officer,
JoEllyn helps her clients manage their cash flow. She has worked in many areas of banking on the
commercial side for most of the major banks in the Philadelphia Market for many years, spending the
majority of her career in both Treasury Management and Commercial Real Estate Lending.
JoEllyn serves on the Board of the Alice Paul Institute, as well as volunteering with their Finance
Committee, and Career Day program.
Technology roadmap for nonprofit organizations
James F. Lock, III, MBA, CTPManaging Director, Industry Executive
James Lock leads the Healthcare, Higher Education, and Not-For-Profit Industry Solutions team as
part of J.P. Morgan’s Commercial Banking business. James and his team work with clients using their
extensive treasury experience, deep industry knowledge, and a strategic consulting methodology to
solve key treasury challenges and incorporate a value-based and technological approach.
Through partnerships with coverage teams across the country, he demonstrates how the firm’s
treasury platform can solve problems, address key efficiency opportunities, incorporate best practices,
and optimize Treasury operations.
C O N F I D E N T I A L
Agenda
Page
1 Technology Trends in Nonprofit Organizations 1
2 Artificial Intelligence & Machine Learning 7
3 Blockchain (Distributed Ledger Technology) 9
4 Closing 16
C O N F I D E N T I A L
Nonprofit landscape: news & trends
Nonprofit organizations are turning to technology to address complex industry dynamics
1) Marketing Automation/Giving Automation2) Using Technology to Nurture Recurring Giving3) Personalized/Relevant/Contextual Communication4) Continued Disruption of the Nonprofit Sector by
Commercial Players like Facebook5) Moving Away from Overhead to Outcomes will
Allow Investment in Technology
1
Trends from
Nonprofit Roundtable Discussions
◼ Systems Integration & Deployment: The Value of Process
Re-Engineering
◼ Chapter Communication is Bi-Directional: Sharing Information
Effectively Across the Organization
◼ Controls are Crucial: Managing Risks in a Changing Environment
◼ The Power of Acknowledgement: Donor Engagement in the
Digital Age
◼ Centralization is Not One-Size-Fits-All: Structuring to Meet the
Needs of Your Stakeholders
C O N F I D E N T I A L
Thriving in a transformative period
Donor
experience &
outcomes
Cost
control &
resource
limitations
New channels
for donor
engagement
Regulatory
requirements
& changes
Driving
dollars to the
mission
Leveraging
technology &
systems
Peer-to-peer
fundraising &
"crowdfunding"
Relationship
between grant
makers &
nonprofits
Are you adopting and
leveraging technology to
the fullest?
Are you as efficient as
you can be?
Will your current processes
prepare you for tomorrow’s
opportunities?
Common opportunities and challenges
2
C O N F I D E N T I A L
Assessing strategic treasury priorities and objectives
The treasury eco-system is experiencing significant change driven by emerging technologies, regulatory
developments, and market events, yet the key objectives of a Treasurer remain the same
… and more is expected from
treasurers with limited
resources…
…yet the treasurer’s objectives
remain the same.
The Treasury universe is
constantly changing…
Global trade growth
EM capital flows
FX & interest rate
volatility
Cybersecurity
threats
Blockchain
Analytics
Machine learning
Robotics
Real-time payments
Brexit
U.S. tax reform
Trump
North Korea
SEPA
KYC
BEPS
FX regulations
Basel III
Window guidance
Tre
asu
ry F
un
ction
Time
Increasing
demands on
treasury
Treasury
Resourcing
Optimize
Capital
Mitigate
Risks Sta
ke
ho
lde
r V
alu
e
Operational
Efficiency
3
C O N F I D E N T I A L
Planning for the future
Harnessing new technologies will help Treasury achieve operational and strategic objectives and
successfully operate the Treasury department of tomorrow
1 Optimizing Capital 2 Operational Efficiency 3 Mitigating Risk
Multiple bank accounts Multiple stakeholders Visibility to exposures
Forecasting challenges Manual processes Trapped cash
Cash visibility Poor connectivity Cybersecurity
Virtual account management Virtual branch Robotics Just-in-time funding
Machine learning -predictive analytics APIs Cloud Auto FX execution
Cash pooling SWIFTNet BlockchainRobotics – fraud
detection
Ch
alle
ng
es
So
lu
tio
ns
4
C O N F I D E N T I A L
The six “D’s” of technology disruption
Understanding the progression of new technologies is critical to planning for their disruption
The Six D’s:
1. Digitized
2. Deceptive
3. Disruptive
4. Demonetized
5. Dematerialized
6. Democratized
Exponential Growth Path of New Technologies
Growth
Deceptive
Disruptive
Blockchain
Cloud
Machine Learning
Robotics
APIs
Exponential growth
Linear
growth
Demonetized
Dematerialized
Democratized
Data
Analytics
Digitized
Time
Source: Singularity University
5
C O N F I D E N T I A L
Leveraging technology disruption to achieve your goals
New tools can help optimize processing and drive greater organizational efficiencies
Batch
Processing
Task
DrivenPhysical
Systems
Real-Time
Processing
Intelligence Virtual
ACH
Host-to-Host
Treasury Systems
ERP SystemsSpreadsheets
Specialist Tools Machine LearningBlockchain
CloudAPI Robotics
Technology Tools
v
Past Future
6
C O N F I D E N T I A L
Agenda
Page
1 Technology Trends in Nonprofit Organizations 1
2 Artificial Intelligence & Machine Learning 7
3 Blockchain (Distributed Ledger Technology) 9
4 Closing 16
C O N F I D E N T I A L
Artificial intelligence & machine learning
What can they do for your organization and your mission?
Advance the Mission
Streamline Operations
Improve Decision Making
Artificial Intelligence
Machine Learning
Deep Learning
𝑓 𝑥
1
2
3
COLLECT THE DATA ● LEARN FROM THE DATA ● ACT ON INSIGHTS
7
C O N F I D E N T I A L
Use cases: improving operations across your organization
AI-assisted operations & technology can help maximize limited resources and staff time
Donor
Prioritization
• Automating data collection
• Leveraging data to make
decisions about how to reach
out, next best action, etc.
Donor
Engagement
• Engaging with current and
potential donors proactively,
using information about their
past engagements
AI Assistant
• Free up staff time with an AI-
powered assistant to help with
scheduling meetings,
submitting expenses, and
other administrative tasks
Predictive Analytics
• Make your data work for you
• Enhance budgeting and cash
forecasting with enhanced
technology platform
8
C O N F I D E N T I A L
Agenda
Page
1 Technology Trends in Nonprofit Organizations 1
2 Artificial Intelligence & Machine Learning 7
3 Blockchain (Distributed Ledger Technology) 9
4 Closing 16
C O N F I D E N T I A L
What is blockchain?
A blockchain is an amalgamation of proven technologies that when combined create a distributed database
and computing platform with many interesting characteristics
A data store holding a log, or ledger, of
transactions (events)
Distributed across a public or private network
Using cryptography and hashing techniques to determine
valid parties and transactions
Such that everyone agrees on the order and
state of the ledger, without having to rely on a trusted
3rd party
With a practically immutable, verifiably true audit trail
1
2
3
5
4
Blockchain characteristics…
◼ A blockchain is a database
◼ Multiple identical copies of the database are held by
participants in the blockchain network
◼ Mathematical algorithms create unique electronic “finger
prints” for network participants and any piece of data
◼ A consistent version of the database is maintained using
predetermined rules associated with verifying the “finger
prints” of those associated with changes to the database
◼ The data is stored in a way that makes it extremely difficult
for any one party to amend unilaterally, thereby providing a
highly reliable audit trail
…in plain English
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C O N F I D E N T I A L
An overview of the blockchain tech stack
From an architecture standpoint, blockchain can be simplified into three layers
Networking
◼ Allows for the propagation of transaction level detail
and other relation information throughout the nodes on
the network
Consensus
◼ Allows nodes to come to agreement on the current
state of the network
◼ Consensus can differ by protocol and
permissioning level
Application
Layer
◼ Updates the state of the blockchain given a set of
transactions (e.g. processing transactions)
◼ Allows for overlays, APIs, and applications to
implement some desired functionality
◼ At a high level, the blockchain tech stack above is consistent across
protocols, but there are key differences, mainly, how consensus is
reached across the network
Key Takeaways
Tech stack explainedApplication
Consensus
Networking
10
C O N F I D E N T I A L
Public Permissioned
Examples
Performance ◼ Typically lower transaction speeds ◼ Typically higher transaction speeds
Consensus ◼ Energy-intensive protocols ◼ Simple, efficient protocols
Access ◼ Accessible to all ◼ Access restrictions
Bitcoin Ethereum LitecoinJ.P. Morgan
QuorumR3 Corda
Hyperledger
Fabric
Privacy ◼ Public records, anonymous participants ◼ Private records, known participants
Security ◼ High protocol security; exposed intermediaries ◼ High protocol security; enterprise-grade controls
Currency ◼ Cryptocurrencies incentivize miners ◼ No mining incentives therefore no cryptocurrencies
Blockchain networks can be open to the public or limited to known, approved participants
Permissioned blockchains are currently more appropriate for enterprise use cases
Digital Assets
Holdings
11
C O N F I D E N T I A L
Blockchain creates new opportunities, improves efficiency, and reduces risk
Short to medium-term Blockchain benefits
Business Opportunities Operational Efficiencies Risk Reduction
Improved liquidity✓
Open brand new markets✓
Increased automation of
business logic & workflows✓
Reduced need for
reconciliation✓
More transparent systemic
risk, faster risk management✓
Reduced settlement time✓ Lower intermediary costs✓Simpler regulatory reporting
and immutable audit trail✓
Enhanced cybersecurity
and data resilience✓
◼ Blockchain technology is still relatively nascent with very few applications in production (across the industry)
◼ Initially, Blockchain solutions would need to run in parallel to existing systems, which may result in short term cost increases
◼ Creation of new governance and business models will require industry-wide coordination
Implementation considerations
In the long term, blockchain technology may enable a complex transformation of our operating model, driven by:
◼ Displacement / Disintermediation of existing roles and functions, e.g., correspondent banking, custodial services
◼ Changing nature of current product offerings in a blockchain-enabled ecosystem, e.g., underwriting digital assets
◼ Need for entirely new products / services, e.g., multi-Blockchain gateway provider, digital identity management
Long-term implications
12
C O N F I D E N T I A L
Blockchain technology is not yet mature, but has several potential applications
Vendors and industry
groups begin experimenting
with technology
Multitude of Blockchain
technology providers in
market (consortia,
proprietary tech, open
source protocols, etc.)
Blockchain solutions
coalesce around few key
providers
Industry-wide familiarity
and confidence in
Blockchain technology
Banks and financial
infrastructure
intermediaries begin
discussing and researching
Blockchain
Banks and infrastructure
intermediaries set up POCs
to test targeted Blockchain
use cases to determine its
value and scalability
Successful POCs and pilots
move to production market
offerings
Blockchain replaces
centrally controlled
infrastructure with fully
decentralized solutions
Tech
no
log
yB
usin
ess
Assess Value
(2015 –
Present)
Prototypes
& Pilots
(2016 – 2020)
Islands of
Adoption
(2018 – beyond)
Fully
Decentralized
(TBD)
13
C O N F I D E N T I A L
Key takeaways & summary
Blockchain is an
enabling technology or
tool, not a product or
solution
02Blockchain does not
require a cryptocurrency
element
01
We are in the proof of
concept stage of
blockchain evolution
03Where there is an
intermediary there is a
blockchain opportunity
(particularly Finance &
Treasury)
04
14
C O N F I D E N T I A L
Committed to being an industry leader in blockchain technology
◼ A secure, decentralized, permission-based network to
safely exchange information and address the current
and future friction points within the payments chain
◼ Streamlines payment-related compliance inquiries
◼ Enables faster and more comprehensive payment
tracking
◼ Enables a more efficient operating model for
processing swaps via distributed ledger
technology
◼ In November 2017, J.P. Morgan completed
a successful six-month test managed by
Axoni in the equity swaps market to better
track contracts
J.P. Morgan’s initiatives
◼ Quorum is an enterprise grade Blockchain platform
developed by J.P. Morgan (based on Ethereum open
source technology)
◼ Available as open source software for clients looking to
explore and experiment with Blockchain technology
◼ Able to process hundreds of transactions per second
◼ Alliance of Fortune 500 companies, startups,
tech vendors, and non-profits to advance
Ethereum as an enterprise-grade technology
◼ J.P. Morgan was one of 30 founding
members
◼ Building solution to simplify and speed up
the process of selling a loan through
distributed ledger technology
◼ Completed initial prototype on Quorum for
matching trade settlement instructions
External initiatives, partnerships, investments
◼ Leading efforts for applications of distributed ledger
technology within the firm
◼ Exploring blockchain use cases and piloting solutions
across business lines
◼ Developing technology, investing in strategic
partnerships, and participating in industry consortia
Blockchain
Center of
Excellence
Enterprise
Ethereum
Alliance
Axoni
Interbank
Information
Network (IIN)
Quorum
Digital Asset
Holdings
Sources: Bloomberg, J.P. Morgan internal data
More resources with the Blockchain Center of Excellence: https://www.jpmorgan.com/global/blockchain
15
C O N F I D E N T I A L
Agenda
Page
1 Technology Trends in Nonprofit Organizations 1
2 Artificial Intelligence & Machine Learning 7
3 Blockchain (Distributed Ledger Technology) 9
4 Closing 16
C O N F I D E N T I A L
Questions and discussion
16
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