It has been two years since the establishment of the R3 consortium, an association of more than 70 financial institutions working to develop blockchain database usage in the financial industry. Since then the popularity of the distributed ledger technologies (DLTs) has increased, turning them into a hot topic in the past few months, according to Sohail Raja (pictured), head of execution platforms at Societe Generale corporate and investment banking (CIB).
The adoption of DLTs is still in its infancy stage with a number of live implementations being planned, says Raja. "The main focus within global markets has been to identify use case potential projects which are centered around processes and cost efficiencies, capital management and improved risk capability," he says. "These are themes that are challenges to all banks but also ensuring we [at Societe Generale] meet our clients' needs."
Within the structured products business, Societe Generale is focusing on post-trade functionalities initially, with an emphasis on event management, standardization of product data and process, according to Raja. "We are focused on the post-trade efficiencies that we might gain that will provide full lifecycle servicing to our clients in addition to the advances that have been made with price discovery, increased payoff structures and on the ability to transact online," he says.
By continually improving its post-trade efficiency, the bank can generate products or product ideas that can be forwarded to its clients in an on-demand basis, says Raja. "We see DL as not necessarily being the only solution for that, Big Data & AI would for example complement this approach," he says. "What we are looking at is improving that service level to the client and what we will do is drive or anticipate what those needs might be from both a service perspective and in terms of the products."
Within the global markets segment, digital transformation is part of the ongoing innovation process that the bank is going through with all of its initiatives, according to Raja. "We are quite well in-tune with the various fintech initiatives and approaches that are being followed," he says. "We have an agile mindset and take inspiration from various organizations."
"For example, for product development within execution platforms we closely follow the Spotify Lean Product Management methodology by using small multi-disciplinary teams to validate ideas and develop Minimum Viable Products (MVPs) with internal & client feedback before launching any products," Raja says. "A key criterion prior to launching products is to ensure the underpinning service is re-usable as an API that can also be re-used internally or directly by clients."
At a higher level, Societe Generale is currently working on areas such as artificial intelligence (AI), machine learning, big data, blockchain/DLT and API connectivity, according to Raja. "Supported by senior management, we set up a dedicated digital transformation team two years ago," says Raja. "We have strong senior management support for fintech and digital transformation initiatives around the bank." The bank has innovation teams that look into specific initiatives around these areas and is involved in things like the Accenture FinTech innovation lab of which it has been a member over the last two or three years.
In terms of its involvement in the area of DLTs, the French bank is one of the founding members of the R3 Consortium which was established in September 2015. "From a client perspective, we are looking at low friction points between the various routes-to-market clients may locate our services and also to ensure a consistent experience whatever the underpinning technology platform might be," Raja says, adding that the collaboration is to ensure that "we understand what the challenges are and how to work together to make the process as seamless as possible for the client".
According to Raja, the bank follows DLTs quite closely. "We have a good view on this space already with some of the projects we have been engaged in," he says. "Overall, we are seeing a lot more involvement not only from banks but also exchanges, central banks and regulators who are looking to understand the capabilities of DLTs and how they might impact the overall set up in both the short and the long term."
Raja believes that DLTs are a long-term initiative and that detailed insight into this segment will be possible when "we actually see distributed ledger solutions in a live context".
"There are a number blockchain initiatives Societe Generale is participating in around trade finance and for SMEs, such as EasyTrading or Liquidshare," says Raja.
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