FINANCE, SECURITIZATION, & SMART CONTRACTS - Business White Paper - MOBI

Page created by Marilyn Mullins
 
CONTINUE READING
FINANCE, SECURITIZATION, & SMART CONTRACTS - Business White Paper - MOBI
Building the
New Economy of Movement

  FINANCE,
  SECURITIZATION, &
  SMART CONTRACTS
  Business White Paper
  June 2021

MOBI FSSC0001/WP/2021
Version 1.0
FINANCE, SECURITIZATION, & SMART CONTRACTS - Business White Paper - MOBI
INTRODUCTION
The Mobility Open Blockchain Initiative is a global, multi-
                                                                Authors
                                                                  Howard Altarescu, Orrick

                                                                  Chris Ballinger, MOBI

                                                                  Joe Bannon, KAR Global

                                                                  Michelle Corson, On the Road Lending

                                                                  David Eddy, D.E. Consulting
                                                                                                            Phil Masi, BMW Bank

                                                                                                            S. Chris Min, Orrick

                                                                                                            Daniela Novaro, Reply

                                                                                                            Eric Pilat, Altaventure

                                                                                                            Andrew Smith, TQ Tezos

stakeholder project working to co-design standards based          Josh Fodale, Ford Credit                  Tram Vo, MOBI

on distributed ledger technology for connected mobility           Griffin Haskins, MOBI                     Marguerite Watanabe, MOBI

                                                                  Tu Le, USAA
ecosystems. The project engages stakeholders across the
transportation value chain, including vehicle
                                                                FSSC Working Group Co-Chairs
manufacturers, technology solution providers,
                                                                  Howard Altarescu, Orrick
governmental, and non-governmental entities. This report          Anthony Salamone, RouteOne

is based on numerous discussions, workshops, and
research. Opinions expressed herein do not necessarily          FSSC Working Group Team Members
reflect the views of individual members or the companies          Toby Box, Quant Network                   S. Chris Min, Orrick

with which they are affiliated.                                   Joe Bannon, KAR Global                    Charlie Moore, Global Debt Registry

                                                                  Anne-Sophie Cartray, ConsenSys            Daniela Novaro, Reply

                                                                  Michelle Corson, On the Road Lending      Eric Pilat, Altaventure

Launched in March 2020, the MOBI Finance, Securitization,         David Eddy, D.E. Consulting               Dan Simerman, IOTA

and Smart Contracts (FSSC) Working Group (WG) strives to          Josh Fodale, Ford Credit                  Andrew Smith, TQ Tezos

                                                                  Don Ho, Quantstamp                        Jamie Solomon, Accenture

improve accuracy and transparency, create operational             Tu Le, USAA                               David Wattebled, Quant Network

efficiencies, minimize fraud risks, and save on costs and         Phil Masi, BMW Bank

time in the execution of financings, including
securitizations, for all entities in the financing lifecycle.   MOBI Team
                                                                  Chris Ballinger, Co-director + Founder    Griffin Haskins, Fellow

                                                                  Tram Vo, Co-director + Founder            Kelly Clark, Communications Manager
Sincere thanks are extended to those who contributed their        Marguerite Watanabe, Working Group Lead   Grace Pulliam, Communications Associate

unique insights to this report.                                   Robin Piling, Technical Lead
FINANCE, SECURITIZATION, & SMART CONTRACTS - Business White Paper - MOBI
01 Executive Summary
03 The FSSC Standard

                                                                TABLE OF
07 FSSC Use Cases
       Know Your Customer (KYC) Requirements

                                                                CONTENTS
       Dealer Floorplan Financing

       Dealer Floorplan Auditing

       A Blockchain Foundation for Securitization

       Verifiable Credentials in the Loan Application Process

       Digitization of Manual Processes with Smart Contracts

       Loan Servicing

       Issuance and Investor Impact Reporting for Green Bonds

       V2X and Securitization

       Non Risk-Based Credit

       Fractional Ownership of Mobility Assets

25 Conclusion
26 Bibliography
FINANCE, SECURITIZATION, & SMART CONTRACTS - Business White Paper - MOBI
The vehicle finance

Executive
                                                                                              Most of these retail and commercial finance contracts are

                                                            ecosystem has many
                                                            components that can be
                                                                                              pooled, packaged into Asset Backed Securities (ABS), and

                                                            characterized as trust            financed by third-party investors in a process called

                                                            services. Blockchain has the      securitization. Blockchain has the potential to reduce risks and

Summary
                                                            potential to radically improve,   costs associated with the financing of vehicle loans, including

                                                            or even fully replace, many of    the securitization process, improve visibility of asset values and

                                                            these trust services.             to replace the trust services currently in place.

                                                                                              Blockchain and related ledger technologies have the potential

                                                                                              to make the trust service function significantly more efficient,

                                                                                              transforming the role of financial intermediaries and delivering

                                                                                              value to downstream businesses and consumers. Many processes

                                                                                              within the vehicle and mobility industry will benefit from the

                                                                                              standardization and digital efficiencies that blockchain enables.

Our financial system - including banking, auditing,         MOBI’s FSSC Working Group         The Mobility Open Blockchain Initiative’s Finance Securitization

                                                            was created to accelerate the
                                                            impact of blockchain and
                                                                                              and Smart Contract Working Group (FSSC) was created to

accounting, and many other components that can be
                                                            related technologies on many      accelerate the adoption and value creation from blockchain

characterized as “trust services” - underlies markets for   areas in the vehicle finance      and related technologies, including smart contracts in the

goods and makes all non-barter trade possible. The          ecosystem. The FSSC               mobility ecosystem as applied to consumer and dealer floorplan

                                                            Working Group considered          lending and financing.

financial system is a network of trust services that        both B2B and B2C use cases
                                                            in its investigation.
together permit markets to function efficiently. These                                        This white paper will overview a variety of use cases that were

                                                                                              considered by the FSSC WG. The Working Group considered
trust services are quite expensive - transaction fees                                         both B2B (business-to-business) and B2C (business-to-

alone are estimated to account for almost 1% of global                                        consumer) use cases, and each section of this paper focuses on
                   1
economic activity.                                                                            B2B and B2C use cases separately.

                                                                                              1.   “The Social and Private Costs of Retail Payment Instruments: A European Perspective”,

In the US, almost 90% of new car purchases and more                                                European Central Bank Ecosystem, September 2012,

                                            2                                                      “https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp137.pdf”

than 50% of used car purchases are financed. Vehicles                                         2.   “Automotive Industry Insights Finance Market Report Q4 2020”, Experian, March 2021,

on dealer lots are likewise financed.                                                              https://www.experian.com/content/dam/marketing/na/automotive/quarterly-

                                                                                                   webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-

                                                                                                   market.pdf

                                                                                                                                     © 2021 MOBI — FSSC Business White Paper 2
FINANCE, SECURITIZATION, & SMART CONTRACTS - Business White Paper - MOBI
THE FSSC STANDARDS
 Modern vehicles and trucks are increasingly connected, intelligent,   interoperability. Truly exciting advances become possible when we
 endowed with large amounts of computing power, and have a wide        are able to seamlessly and easily share data with each other, with
 range of sensors that can capture data about the vehicle and its       the necessary shared functionality assured. These abilities are
 surroundings. Connected vehicles are beginning to dominate global     called data interoperability and functional interoperability; both are
 roadways, and the mobility industry has quickly focused on how        difficult to achieve at scale. Within the vehicle finance ecosystem,
 newly available data from those vehicles can be used to power         there is very little interoperability between the siloed data systems
 exciting new applications. However, there are some major barriers     of the participants. Lenders, rating agencies, servicers, OEMs,
 to fully actualizing the value of these developments. Most notably,   vehicle dealers, and other organizations operate almost entirely with
 the organizations and companies that would utilize vehicle data       a siloed model, and most still rely heavily on trusted third parties to
 operate entirely within data silos, and integrating their closed      mediate and manage multiparty processes.
 systems with external partners or data sources necessitates
 building costly integrations every time. As a result, any             The staying power of trusted third parties is no accident - financings
 coordination or data sharing occurs bilaterally, but such a one-to-   of all kinds are subject to regulation, scrutiny, and potential liability,
 one approach does not lend itself to scalability, transparency,       often necessitating the use of trust services. For example, in vehicle
 openness, or economic efficiency.                                     loan securitizations, a third party is often required to carry out
                                                                       various functions, including servicing and trustee responsibilities
 Executing multi-party applications requires that each party is able   such as receiving funds and distributing payments to various parties
 to communicate and coordinate actions. In other words, multi-party    according to a waterfall structure. Such a third party is providing a
 systems require that each participant’s system have a degree of       trust service.

3 © 2021 MOBI — FSSC Business White Paper                                                                        © 2021 MOBI — FSSC Business White Paper 4
FINANCE, SECURITIZATION, & SMART CONTRACTS - Business White Paper - MOBI
The FSSC Standards
Blockchains provide a trust     Blockchain, ultimately, provides a trust layer, in that it provides a                                   value is tied to the level of adoption and the number of

layer, where the trust arises
from the immutability and
                                secure avenue for stakeholders to authenticate each other’s                                             stakeholders. The diversity of features and range of feasible use

transparency of data on the     identity and to immutably record their secured information and                                          cases of a distributed ledger system are thus married to its

chain, as well as the shared    to securely expose such information to other permissioned                                               network effects. Such network effects grow as adoption grows

governance of distributed       stakeholders. For example, instead of using a costly third party,                                       over time.

ledger systems.
                                                                                                        The core services and logical
                                a smart contract can disburse funds according to a pre-defined
                                                                                                                                        The FSSC Standard’s main components - core services and
                                and agreed upon waterfall structure. All parties can trust in the
                                                                                                        schemas prescribed by the
                                                                                                        FSSC Standard are key for
                                                                                                                                        logical schemas - provide the structures required for creating
                                accuracy of the payments, as everything is transparent on chain.

                                Ultimately, the ability to trust arises from the immutability and
                                                                                                        creating and scaling multi-     and scaling multi-party applications, allowing communication

                                transparency of data on the chain and the shared governance             party applications and          and collaboration between the siloed ecosystems of each

                                                                                                        allowing communication and      vehicle finance stakeholder. Such structures lay the foundation

                                                                                                        collaboration between the
                                of distributed ledger systems. Distributed ledgers, with
                                                                                                                                        for robust, secure data sharing and value transacting at scale.
                                standards enabling necessary data and functional
                                                                                                        siloed ecosystems of each
                                                                                                        vehicle finance stakeholder.
                                                                                                                                        The FSSC Standard carefully and effectively distinguishes
                                interoperability, provide a necessary, foundational layer for
                                                                                                                                        between what sorts of data and functionality must be standard
                                creating multi-party applications on top. However, breaking
                                                                                                                                        across all implementations, versus what considerations are best
                                down these silos requires more than just technology - it requires
                                                                                                                                        left up to the engineers. Standards are much like mobility
                                community buy-in and coordination.
                                                                                                                                        ecosystems and distributed ledgers, in that they all rely on

The FSSC Standard               Interoperability can only be achieved when there are common                                             network effects to provide value. The FSSC Standard enables a

prescribes core services and
logical schemas for data
                                standards for core infrastructure - identity, data, and functions.                                      compelling array of use cases, and those use cases will grow in

sharing between vehicle         The FSSC Standard prescribes core services and logical                                                  number, complexity, and value as adoption grows over time.

finance stakeholders with the   schemas for the sharing of data between vehicle finance
                                                                                                        Distributed ledger technology
goal of achieving functional    stakeholders. In other words, the FSSC Standard is a
                                                                                                        provides technological trust
                                                                                                                                        Given the widespread use of various types of trust structures

and data interoperability.      foundational step towards achieving data interoperability and
                                                                                                        structures that can replace
                                                                                                                                        within vehicle finance and securitizations, distributed ledger

                                functional interoperability for multi-party financial applications
                                                                                                        many third-party                technology has enormous potential to quickly disrupt many

                                in mobility ecosystems. This allows for the proliferation and           intermediaries or processes     traditional processes. Distributed ledger technology provides

                                                                                                        that require onerous manual     technological trust structures that can replace many third-party

                                                                                                        verification. These trust
                                growth of multi-party solutions, enabled by the frictionless flow
                                                                                                                                        intermediaries or processes requiring onerous manual
                                of data between these silos.
                                                                                                        structures enable a diverse
                                                                                                        array of benefits to many
                                                                                                                                        verification. Therefore, the trust layer that is provided by

                                Multi-party applications, as the name implies, involve multiple
                                                                                                        varied use cases, which are     distributed ledger technology can quickly provide value within a

                                parties interacting in a shared system to achieve a mutually
                                                                                                        explored in detail for the      wide range of use cases within vehicle finance and

                                beneficial outcome. Therefore, it necessarily follows that              remainder of this paper.        securitization. The remainder of this document provides an

                                systems supporting multi-party applications require an existing                                         overview of is focused on overviewing these use cases and their

                                set of parties to use those systems. In other words, multi-party                                        benefits.

                                systems rely on network effects to succeed, and indeed, their

5 © 2021 MOBI — FSSC Business White Paper                                                                                                                          © 2021 MOBI — FSSC Business White Paper 6
FINANCE, SECURITIZATION, & SMART CONTRACTS - Business White Paper - MOBI
FSSC
Know-Your-Customer (KYC) Requirements
In both the US and the EU,       In the U.S., the adoption of the Patriot Act made it incumbent

financial institutions must

                                                                                                                              USE CASES
comply with KYC/AML
                                 upon banks and other lenders, including vehicle dealers, to verify

regulations in order to avoid    the identity of borrowers (their customers) to avoid facilitating

facilitating money laundering,   money laundering, terrorism financing, or other criminal activity.

terrorism financing, or other    The KYC requirement applies to all loans, no matter the size.

criminal activity.               Financial institutions must comply with two key components of Title

                                 III of the Patriot Act – the Customer Identification Program (CIP)
                                                                                   3

                                 and Customer Due Diligence (CDD).                     In the European Union, anti-

                                 money laundering requirements are included in the 4th Anti-Money

                                 Laundering Directive (4AMLD), and the specific provisions on

                                 electronic identification and trust services are covered4in

                                 Regulation (EU) No 910/2014 (the "eIDAS Regulation").

Each bank has the discretion     Each bank has the discretion to use whatever process it chooses

to use whatever process it
chooses to verify the identity
                                 to verify the identity of a customer and may require different

of a customer. Financial         information. At a minimum, an individual customer is ordinarily

institutions are required to     asked to provide government-issued identification, such as a

report if they have reason to    passport or driver’s license (or both). If the customer is a business,

suspect criminal activity.       the customer may be asked for filed formation documents and/or

These processes are                                                                                                           Siloed business lines within
expensive for banks and
                                 references. In both cases, financial institutions will often review                                                            Many banks are running on computing systems with inefficient

cause friction with              information from a credit reporting agency. There is no standard,                            and across institutions and
                                                                                                                              jurisdictions lead to redundant
                                                                                                                                                                data capture methods. Siloed business lines within and across

customers.                       uniform approach for establishing a customer’s identity.
                                                                                                                              processes and a poor user         institutions and jurisdictions lead to redundant processes and

                                                                                                                              experience. The inability of      when the customer is required to repeatedly provide the same
                                 Financial institutions are required to report if they have reason to
                                                                                                                              banks to reference a common       information, a poor user experience. The inability of banks to
                                 suspect potential criminal activity, including reporting on activities
                                                                                                                              dataset reduces the               reference a common dataset reduces the efficiency of the
                                 that look high risk, such as frequent wires and international
                                                                                                                              efficiency of the diligence
                                                                                                                              process.
                                                                                                                                                                diligence process, creates ambiguity, and may result in
                                 transactions. The process is expensive for banks and causes
                                                                                                                                                                inaccurate conclusions. Reducing or eliminating manual
                                 friction with customers.
                                                                                                                                                                interpretation allows for an enhanced data-driven decision-

                                 3.   “KYC vs. CIP vs. CDD | Know Your Customer Rules and Guidelines”, AdvisoryHQ, accessed
                                                                                                                                                                making process. The ability to augment a customer profile that

                                      April 2021, https://www.advisoryhq.com/articles/kyc-vs-cip-vs-cdd-know-your-customer-
                                                                                                                                                                is accessible to a broad network of financial institutions will
                                      rules-and-guidelines/.
                                                                                                                                                                reduce risk, can enhance the customer experience, and bring
                                 4.   Charles Krier, Katharina Wagener, “eIDAS and AMLD5: A perfect match?”, PayTechLaw,

                                      September 2020, https://paytechlaw.com/en/eidas-and-amld5-a-perfect-match/.                                               down compliance costs.

7 © 2021 MOBI — FSSC Business White Paper                                                                                                                                                  © 2021 MOBI — FSSC Business White Paper 8
FINANCE, SECURITIZATION, & SMART CONTRACTS - Business White Paper - MOBI
FSSC Use Cases
The objective of this use         Most financial institutions use at least some information from       Lenders often pool loans into    institutions owned and operated by original equipment

case is to reduce costs that                                                                           ABS transactions. A vehicle
financial institutions incur in                                                                        ABS is similar to a mortgage-
                                  third-party service providers, although the data and information                                      manufacturers or “OEMs”), and specialized lenders in the vehicle

complying with KYC                services vary. Enabling systems integration with third-party
                                                                                                       backed security, except that     wholesale industry, including those owned by wholesale auction

regulations by building a         service providers would reduce repetitive information requests
                                                                                                       the underlying assets that       companies that lend money to dealers purchasing vehicles at

standardized approach to a        of the customer and would allow for consistent use of                form the collateral are a pool   such auctions.

global digital customer           independently verified diligence.                                    of loans secured by vehicles
identification system.                                                                                 purchased and owned by car
                                                                                                       dealers.
                                                                                                                                        These lenders often pool these loans into ABS transactions. An

                                  Customers naturally appreciate simple, fast, and seamless                                             ABS is an investment security—a bond or note—which is backed

                                  journeys. As new relationships are increasingly remote,                                               by a pool of loans, in this case floorplan loans secured by new

                                  especially in light of the Covid-19 pandemic, an efficient KYC                                        and used cars. A vehicle ABS is similar to a mortgage-backed

                                  process should contribute to an improved customer experience                                          security, except that the underlying assets that form the

                                  in the customer journey for the purchase of a vehicle.                                                collateral are not residential mortgage loans secured by

                                                                                                                                        residential properties, but rather, in the dealer floorplan

                                  The objective of this use case is to reduce costs that financial                                      securitizations, a pool of loans secured by vehicles purchased

                                  institutions incur in complying with KYC regulations by building a                                    and owned by new and used car dealers.

                                  standardized approach to a global digital customer

                                  identification system. A digital customer ID that is compatible      Blockchains and smart            Blockchain and smart contracts can enable a dealer (a

                                                                                                       contracts can enable a dealer
                                                                                                       to better monitor and manage
                                  with blockchain technology (and, of course, consistent with                                           borrower) to better monitor and manage multiple maturities of

                                  applicable privacy laws and regulations in relevant jurisdictions)
                                                                                                       multiple maturities of the       the loans financing its vehicles. For dealers, a common mistake

                                  can be a catalyst to virtually connect silos of KYC diligence
                                                                                                       loans financing its vehicles.    is a failure to track loan maturities and to realize that many of

                                  systems between institutions across the world.                       Alerting dealers to upcoming     these loans mature at the same time – although each vehicle

                                                                                                       loan maturities allows the       could have a vastly different sales cycle. Smart contracts can be

                                                                                                       dealer to better coordinate a
Dealer Floorplan Financing                                                                             floorplan financing
                                                                                                       management strategy.
                                                                                                                                        created to alert dealers to upcoming loan maturities and to

                                                                                                                                        better enable the dealer to coordinate a floorplan financing

                                                                                                                                        management strategy with its vehicle sales strategy and

Dealer floorplan financing is a   Dealer floorplan financing, among other things, is a form of                                          expectations.

form of inventory financing for
a dealer of vehicles and trucks
                                  inventory financing for a dealer of vehicles and trucks, in which

where each loan is secured by     each loan, or advance against a floorplan credit facility (also

a specific vehicle or truck.      known as an “asset-backed loan”) is secured by a specific piece

                                  of collateral, i.e., a specific vehicle or truck.

                                  Lenders in the dealer floorplan finance space include

                                  commercial banks, captive finance companies (financial

9 © 2021 MOBI — FSSC Business White Paper                                                                                                                         © 2021 MOBI — FSSC Business White Paper 10
FSSC Use Cases
Dealer Floorplan Auditing                                                                                                                process. Using distributed ledger technology to replicate the

                                                                                                                                         audit process, and the ability to reconstruct the source

The primary purpose of a          The primary purpose of a floorplan audit is to reconcile dealer
                                                                                                                                         information for audits on demand should increase confidence in

floorplan audit is to reconcile   inventory used as collateral for the floor plan loan to reduce the
                                                                                                                                         the validity of the audit system.

dealer inventory used as
collateral for the floor plan
                                                                                                       A Blockchain Foundation for Securitization
                                  lender's risk. The main objective is to capture the VIN number

loan to reduce the lender’s       and to confirm the presence of the vehicle at the dealership.

risk. The main objective is to    Gathering this information and accurately reporting it in a

capture the VIN number and        trustworthy fashion represents a significant operating cost.
                                                                                                       Vehicle loan securitizations
to confirm the presence of
                                                                                                                                         Vehicle loan securitizations provide a crucial source of funding
                                  Floorplan audits are intended to identify fraud, intentional or      provide a crucial source of
the vehicle at the dealership.                                                                         funding and liquidity for the
                                                                                                                                         and liquidity to the vehicle industry. Securitization transactions,

Gathering this information                                                                             vehicle industry, but they are
                                  otherwise, by dealers, including double-flooring (when a dealer
                                                                                                                                         however, can be complex and costly, involving many transaction

accurately represents a           takes out a line of credit with two lenders on the same set of
                                                                                                       complex and costly, involving     parties and a vast amount of data that must be obtained,

significant operating cost.       vehicles); and a dealer has sold vehicles out of trust (SOT)
                                                                                                       many transaction parties and      secured, and reviewed multiple times by various intermediaries
                                  (where a dealer fails to repay an inventory advance and sells
                                                                                                       a vast amount of data. The        in each step of the financing process.
                                  the underlying vehicles), among others.                              FSSC WG has identified and
                                                                                                       compiled a list of data
Distributed ledger technology                                                                          elements commonly required        The FSSC WG has identified and compiled a list of data

can be used to eliminate the
                                  Audit solutions can be evaluated on a spectrum that ranges
                                                                                                       in the securitization of loans.   elements commonly required in connection with the origination

cost of a dealer floorplan
                                  from simply taking a dealer at their word all the way to a
                                                                                                       The goal is to improve the        and securitization of loans. The goal is to improve the efficiency

audit by capturing data           perfectly reliable connected car future with autonomous
                                                                                                       efficiency of various multi-      of various multiparty processes involved in securitization by

elements like the VIN, GPS,       vehicles reporting their location and condition in real-time.        party processes involved in
                                                                                                       securitization.
                                                                                                                                         creating a common understanding by lenders (as securitizers),

and time of day. By leveraging    Existing solutions rely heavily on Inventory Control Personnel
                                                                                                                                         the rating agencies, and investors of the data elements required

the availability of verifiable    (ICP). ICPs are either internal employees or those from a third-

data, the onerous manual
                                                                                                                                         for these processes, and the homogenization of information

verification can be avoided
                                  party company contracted by the lender to confirm the relevant
                                                                                                                                         required from such lenders and considered by rating agencies

entirely.                         details of the financed inventory.
                                                                                                                                         and investors. Also, the use of common data elements in loan

                                                                                                                                         originations can further standardize related securitizations,
                                  Distributed ledger technology can be used to eliminate the cost
                                                                                                                                         improving transparency into the underlying loans and liquidity in
                                  of the ICPs with a technical solution that replicates the trust
                                                                                                                                         the markets. Blockchain technology can provide such data in a
                                  level in the existing system while also providing a pathway for
                                                                                                                                         trustworthy, secure and immutable format, that could result in
                                  more efficient collection of data in the future. A high degree of
                                                                                                                                         efficiencies and cost-savings for all parties involved.
                                  trust can be maintained by capturing primary data elements like

                                  VIN, GPS, time of day, etc. In addition, metadata can be used
                                                                                                                                         The creation of a common and trustworthy reference
                                  to capture second order trust indicators like time between
                                                                                                                                         architecture allowing multiple stakeholders to expose their data
                                  captures, physical movement, distance covered, etc. Lenders, as
                                                                                                                                         to shared, multiparty applications, may also provide the
                                  well as securitization investors, must be able to trust the audit
                                                                                                                                         opportunity for smaller lenders to sell loans into warehouse

11 © 2021 MOBI — FSSC Business White Paper                                                                                                                         © 2021 MOBI — FSSC Business White Paper 12
FSSC Use Cases
The creation of a common         facilities. Then, such lenders would be able to utilize              It is essential that the rating    Smart contracts can also be used to efficiently bundle loans

and trustworthy reference                                                                             agencies, investors, and other
architecture allowing multiple                                                                        participants in the
                                 securitizations to finance the loans originated, thus providing                                         with certain characteristics together for securitization purposes.

stakeholders to expose their     the benefits of rated securitization financings to lenders for
                                                                                                      securitization process have        It is essential that the rating agencies, investors, and other

data to shared, multi-party      whom such capital market efficiencies may not be otherwise
                                                                                                      confidence in information          participants in the securitization process have confidence in the

applications, can ultimately     available.                                                           made available by the              information made available by the network. Accordingly, it is

allow for the reduction or                                                                            network. Industry wide             also critical that the data attestations be placed on blockchain

elimination of the need for                                                                           consensus on how these
multiple verifications of data                                                                        processes are to be carried
                                 Elimination or reduction of the need for multiple verifications of                                      by a trusted third party or that the accuracy of the data

or repetitive due diligence by   data by third parties and related due diligence costs may also
                                                                                                      out, and what verification         notarized on blockchain be verified by a trusted third party.

third parties.                   be possible by putting data on a trusted blockchain. Cost
                                                                                                      looks like, are critical for       Alternatively, the process by which the information is verified

                                 savings from a streamlined securitization process through the        trustability.                      and notarized on blockchain can be automated through smart

                                 use of a single trusted blockchain database would lower the                                             contracts. Or, the lenders can require the source of information

                                 cost of entry for many smaller players in the vehicle                                                   to be notarized on blockchain which allows for the digital

                                 securitization industry, giving them access to a valuable funding                                       authentication of the information, which could significantly

                                 source.                                                                                                 reduce the reliance on third-party verification. In any case, it

                                                                                                                                         may prove useful to have industry-wide consensus on one or

A single source of truth can     Reductions in transaction costs mean that it can be cost-                                               more of these processes, including on the parties that would be

help eliminate the need for
paper-intensive processes
                                 effective to enter the securitization market with a smaller deal                                        trusted to verify the accuracy of the information on blockchain

and additional loan-level        size, which can further lower the hurdle for smaller lenders. A                                         derived from the database.

diligence at the time of         single source of trusted data may diminish, if not eliminate, the

securitization, which
diminishes opportunities for
fraud or errors.
                                 need to diligence the accuracy of information mined from loan

                                 applications, loan agreements, related contracts, and other          Verifiable Credentials in the Loan Application Process
                                 documents. For example, tracking the underlying vehicles and

                                 their associated loans and their ownership is often a paper-         A verifiable credential is a set   A verifiable credential is a set of tamper-evident claims and

                                                                                                      of tamper-evident claims and
                                                                                                      metadata that
                                 intensive process, requiring a time-consuming process of                                                metadata that cryptographically prove who issued it. By storing

                                 scanning pages, establishing and securing “authoritative”
                                                                                                      cryptographically prove who        that cryptographic proof on blockchain, it can be easily

                                 copies, and multiple manual verifications and diligence reviews.
                                                                                                      issued it. They are the            accessed for use in various applications and processes.

                                 Such a process, which is typically conducted manually, is also       electronic equivalent of           Verifiable credentials are the electronic equivalent of the

                                 prone to error, and may present opportunities for fraud. Making      physical credentials we use        physical credentials that we all use today, such as plastic cards,

                                                                                                      today, like drivers licenses.
                                                                                                      They can be used in many
                                 relevant data and other information accessible through a single                                         passports, driver’s licenses, paper credentials, and awards,

                                 trusted blockchain could help eliminate the need for additional
                                                                                                      processes within the credit        among others. Verifiable credentials can be utilized in many

                                 loan level diligence at the time of securitization and diminish
                                                                                                      application lifecycle.             components of the vehicle credit application process. Some

                                 opportunities for fraud or errors.                                                                      examples are provided below.

13 © 2021 MOBI — FSSC Business White Paper                                                                                                                         © 2021 MOBI — FSSC Business White Paper 14
FSSC Use Cases
Verifiable credentials can
assist with data authenticity
                                Verifiable credentials can assist with   data authenticity and
                                verifications. A standard vehicle credit application contains
                                                                                                    Digitization of Manual Processes with Smart Contracts
and verifications. A standard                                                                       Smart contracts can be used
vehicle credit application      several data elements provided directly by the customer. Some

                                                                                                    to automatically implement
                                                                                                                                    Smart contracts may be used to automatically implement,

contains many data elements     of these data elements, such as annual income amounts, are

                                                                                                    conventional contractual
                                                                                                                                    without the need for third-party intervention, the conventional

provided directly by the        key pieces of information used in the credit decision process.
                                                                                                    arrangements in a               contractual arrangements in a securitization and the underlying

customer. Verifiable            Today, a variety of often manual processes exist to verify an
                                                                                                    securitization and the
credentials can eliminate the
                                                                                                                                    financing (i.e., the servicer obligations to collect borrower

manual verification
                                applicant’s income. For example, lenders may need to reach out
                                                                                                    underlying financing, as well   payments and remit such payments to a securitization account,

processes that are              and contact the applicant’s employer, in order to confirm their
                                                                                                    as programmatically execute     pursue borrowers to collect delinquent payments or to pursue

traditionally employed for      employment status. Lenders may also require copies of pay           many processes involved
                                                                                                    within the securitization or
                                                                                                                                    recoveries in defaulted loans, and allocate payments to

those data elements.            stubs or previous tax returns. All of these processes are time
                                                                                                    loan.                           investors pursuant to waterfall provisions in the relevant

                                consuming. Verifiable credentials carried by an applicant could                                     agreements.

                                alleviate many of these pain points. For example, a verifiable

                                credential signed by an employer or bank could automatically        One prime example of where      One prime example of an area in which smart contracts can

                                and authoritatively confirm an applicant’s employment status        smart contracts can
                                                                                                    streamline traditional
                                                                                                                                    streamline traditional vehicle finance and securitization is

                                                                                                    processes is executing the
                                and income level. Such a confirmation could be carried out in                                       waterfall distributions and reporting. An immutable and time-

                                mere seconds as the credential is verified against a registry via
                                                                                                    waterfall distributions and     stamped chronology of borrower payments, and a verified smart

                                an Application programming interface (API) call.
                                                                                                    reporting. Smart contracts      contract that provides for the distribution of such payments

Verifiable credentials can                                                                          can execute the distribution    based on the waterfall, could diminish if not eliminate the need

also help protect customer
                                Verifiable credentials can also be leveraged to help protect
                                                                                                    of interest and principal
                                                                                                    payments to the investors
                                                                                                                                    for investors to do monthly payment reconciliations. Smart
                                customer privacy. Lenders often acquire and store copies of
privacy by reducing or                                                                              and charge the fees to          contracts can securely execute the distribution of interest and

eliminating the lender’s need   an applicant’s personal documents, such as driver’s licenses or

                                                                                                    transaction parties pursuant    principal payments to investors and fees to transaction parties

to see and keep copies of       other government IDs. Verifiable credentials can reduce or
                                                                                                    to the waterfall, eliminating
personal documents. This
                                                                                                                                    pursuant to the waterfall, without manual allocations, reporting,

helps reduce oversharing of
                                remove the lender’s need to see and keep such copies, as the
                                                                                                    the need for a third party to   and wire transfers. Blockchain technology allows for seamless,

personally identifiable
                                data is passed digitally and its authenticity can be confirmed by
                                                                                                    provide such a trust service.   trusted, and audited sharing of data among all of the

information during the credit
                                the cryptography. In addition, verifiable credentials can
                                                                                                                                    participants in the transaction while being assured that the

application process.            potentially leverage cryptographic techniques, such as zero-

                                knowledge proofs, to mask the types of information given to a
                                                                                                                                    potential for fraud or errors has been diminished, if not

                                                                                                                                    eliminated.
                                lender. For example, a credential could prove that an applicant

                                makes more than $100,000 per year, without giving away their
                                                                                                                                    A typical vehicle loan ABS transaction produces investor reports
                                exact income or it can prove that such an applicant graduated
                                                                                                                                    on a monthly basis with payment information and loan
                                with a four-year college degree, without specifying the college
                                                                                                                                    performance data from a prior month, resulting in a
                                or major (which would typically be on a diploma). This can help
                                                                                                                                    considerable data lag of up to 30 or more days. Smart contracts
                                reduce oversharing of unnecessary personally identifiable
                                                                                                                                    can track payments, delinquencies, and other performance data
                                information (PII) data in the credit application process.

15 © 2021 MOBI — FSSC Business White Paper                                                                                                                    © 2021 MOBI — FSSC Business White Paper 16
FSSC Use Cases
                                   on blockchain and make such data available on a real-time                                            lower-income consumers, whose bank accounts can be more

                                   basis to all the permissioned actors in a transaction, eliminating                                   volatile, by avoiding the potential for overdraft fees. These

                                   the need to rely on stale data and manual processes, increasing                                      better on-time payment performance metrics can also boost

                                   transparency for the related securitization.                                                         their credit scores.

While the initial use of smart     Smart contracts must, of course, be consistent in all respects        Allowing settlements to be     For cross-border transactions, allowing settlements to be made

contracts is not likely to                                                                               made directly, rather than
replace the transaction                                                                                  through existing protocols,
                                   with the terms of the related documents and the rating                                               directly, rather than via existing protocols like SWIFT, can

parties traditionally used, a      agencies and investors must have confidence that this is the
                                                                                                         can facilitate international   facilitate international lending for consumers in emerging

smart contract that is             case. The initial use of smart contracts in securitizations is not
                                                                                                         lending for consumers in       markets. Rather than using correspondent banking and custodial

publicly available and subject     likely to replace the transaction parties conventionally used, at     emerging markets. This is      service arrangements, transactions can be settled publicly and

to audit by market                 least until the time when rating agencies and investors have full     also made possible by the      transparently.

participants will be able to                                                                             cost reduction associated
carry out tasks currently                                                                                with providing that credit
                                   confidence in such replacements. However, having a smart

performed by such                  contract, publicly available and subject to audit by the market
                                                                                                         through removing               By removing intermediaries and their associated fees, loan

transaction parties, which         participants, could help streamline the diligence process. If the
                                                                                                         intermediaries and their       servicing activities have lower transaction costs. The ability to

could save on diligence            market participants can trust in the integrity of the smart           associated fees.               provide transparent and cryptographically secure payment

costs.                             contract being utilized, and the accuracy with which it can                                          histories can bring down costs by reducing the need for

                                   perform various tasks that are currently performed by third-party                                    redundant services within portfolio transactions for smaller

                                   intermediaries, the diligence that is typically necessary to ensure                                  lenders.

                                   the accuracy of the tasks performed by such intermediaries can

                                                                                                         Issuance and Investor Impact Reporting for Green Bonds
                                   be reduced, and can therefore result in both time and cost

                                   savings.

Loan Servicing                                                                                           Green bonds are bond
                                                                                                         issuances that have an
                                                                                                         environmental purpose and
                                                                                                                                        Green bonds and their variants are bond issuances that have an

                                                                                                                                        environmental purpose and which are structured to appeal to

Most settlements are not                                                                                 are structured to appeal to    Environmental, Social, and Corporate Governance (ESG)

reflected in real time; there is
                                   One of the benefits of distributed ledgers systems is the ability
                                                                                                         ESG investors. Green bond      investors. To avoid instances of “greenwashing” – labeling

a lag between the time of the
                                   to remove both the friction and costs of intermediaries. Most         issuances require both pre-    projects that are potentially harmful to the environment as

payment and when the               settlements are not reflected in real time. When a consumer           and post-issuance evaluation   beneficial -- green bond issuances require both pre- and post-

payment is actually “settled”                                                                            and reporting that ordinary
                                                                                                         bonds do not.
                                   makes a loan payment, there is a lag between the time of                                             issuance evaluation and reporting. For the issuance to be

in the lender’s account.           payment and the time the payment is actually “settled” in the                                        marketable, a Second Party Opinion (SPO) regarding the impact

Blockchain allows                  lender’s account. With blockchain, these settlements can occur                                       and credibility of the proposed framework in relationship to the

settlements to happen in
minutes, rather than days.
                                   in a matter of minutes, rather than days. While this obviously                                       Green Bond Principles accepted in the ESG marketplace is

                                   benefits the lender, it can also benefit the borrower, particularly                                  required. The review includes an evaluation of the intended use

17 © 2021 MOBI — FSSC Business White Paper                                                                                                                        © 2021 MOBI — FSSC Business White Paper 18
FSSC Use Cases
                                of proceeds, the process to evaluate potential projects for          There is a great opportunity     transfer (St. Regis Hotel), few parties have thus far used

                                                                                                     for blockchain applications to                                                               5

                                                                                                     disrupt the real estate
                                eligible sustainability criteria, management of proceeds for                                          blockchain for payments and settlements.                        Because securities

                                compliance with issuer’s Green Bond framework, which outlines

                                their intended green objectives, and reporting on the actual
                                                                                                     transactions space.              issuances require many intermediaries and delayed settlement

                                                                                                                                      times, there is great opportunity for cost reduction, investment

                                allocation of proceeds and relevant impact metrics.                                                   democratization, and the ability of smaller green bond issuers to

                                                                                                                                      enter the marketplace using blockchain.

The evaluation criteria for     Most SPO providers have proprietary systems for capturing and

these offerings is fairly
standardized, so a database
                                disseminating the pre-issuance SPO, but the evaluation criteria                                       As green bond issuances become more prevalent, the ability to

schema development within       is fairly standardized, so a database schema development                                              demonstrate compliance with green bond standards will

blockchain is a viable option   within blockchain is a viable option to bring down transaction                                        become a valuable tool.

to bring down transaction       costs for issuers. For post-issuance reporting, distributed ledger

costs for users.
                                                                                                     V2X and Securitization
                                technology offers an immutable and transparent way to

                                demonstrate impact. Standardization of impact reporting is

                                beginning to occur, including by the Partnership for Carbon

                                Accounting Financials, which adopts uniform approaches by            With hundreds of millions of     More than 650 million vehicles are already connected to OEMs

                                asset class. For passenger vehicles, direct emissions from fuel      connected vehicles on the
                                                                                                     road worldwide, both OEMs
                                                                                                                                      worldwide. This figure will only increase in the coming years with

                                                                                                     and vehicle owners have
                                combustion and indirect emissions from electricity generation                                         cars equipped with 4G SIM cards and soon 5G. Thus, masses

                                for EVs can be captured on blockchain and measured in
                                                                                                     access to massive amounts        amounts of data related to vehicle usage will become a

                                relationship to the targeted reductions stipulated by an issuer in
                                                                                                     of data, which will only         potential new source of revenue for OEMs but also for vehicle

                                its green bond issuance framework. In-vehicle telematics can         continue to grow over time.      owners thanks to the General Data Protection Regulation

                                provide much more accurate information on miles traveled and         This data is valuable and can
                                                                                                     be monetized in various ways.
                                                                                                                                      (GDPR) in the EU, which will give these owners a right of

                                greenhouse gasses emitted (for gasoline-powered vehicles)                                             ownership and access to data. Information on road and mobility

                                directly from the vehicle to the blockchain. Electric vehicles                                        infrastructures, cars and drivers will be available in deferred

                                (EVs) can report on miles traveled and electricity consumed,                                          time and/or in real time due to the advances in connectivity,

                                which can then be correlated with the emissions generated at                                          artificial intelligence, blockchain, and other technologies.

                                the grid level. This kind of real-time impact reporting would

                                enable green bond issuers to efficiently provide a transparent,                                       Several players in the vehicle data marketplace already collect

                                immutable record of compliance with their stated goals, adding                                        the data from certain OEMs and resell it to other OEMs, local

                                efficiencies to the market.                                                                           mobility authorities, mobility operators and others.

                                Some lenders have used blockchain in the structure, registration,

                                sale and distribution of green bonds. While some real estate
                                                                                                                                      5. Robert Hackett, “Ritzy Aspen Hotel Sells Real Estate on Blockchain with Indiegogo’s Help”,

                                transactions have used tokenization to record ownership                                                  Fortune, August 2018, https://fortune.com/2018/08/23/hotel-real-estate-aspen-

                                                                                                                                         blockchain-ethereum-st-regis-indiegogo/

19 © 2021 MOBI — FSSC Business White Paper                                                                                                                                © 2021 MOBI — FSSC Business White Paper 20
FSSC Use Cases
Thanks to advances in              For real-time data, thanks to 5G and the low transfer latency                            The combination of fast            small exception of tolled highways, marginal cost pricing isn’t

connectivity technologies,                                                                                                  vehicle connectivity, easily
vehicles will be able to                                                                                                    communicable geolocation,
                                   that this technology offers, it will be possible to exchange                                                                possible for much of this infrastructure. Hence, much of the

exchange data between              information in V2X (connected vehicle-to-everything
                                                                                                                            and secure identities will allow   world’s transportation infrastructure is provided as a public

themselves and surrounding         communication) and in particular between vehicles to improve
                                                                                                                            for micro-tolling and dynamic      good, leading to chronic infrastructure financing deficits and

infrastructure in real-time.       safety and the driving of semi-autonomous, even autonomous                               pricing. With micro-tolling        inequities in use and payment burdens. The combination of fast

This rapid data exchange and       cars and supplying information to DAS-type equipment, for                                providing predictable cash         vehicle connections, enhanced positioning, and decentralized

overall data availability can be                                                                                            flows, those revenue streams
leveraged within many use                                                                                                   can then be securitized,
                                   example: exchange of information to avoid a collision in the                                                                identities will permit efficient tolling for much of this

cases.                             event of a road accident or a sudden traffic jam, payment for a
                                                                                                                            ushering in a massive new          infrastructure, predictable cash flows and ushering in a massive

                                   new road infrastructure which will be financed on the basis of
                                                                                                                            asset class.                       new asset class available for financing through securitization.

                                   its use per kilometer by motorists, etc.

Vehicle wallets will be critical
to monetizing telematics data
                                   Vehicles equipped with an on-board hard-wallet will be able to
                                                                                                                            Non-Risk-Based Credit
in real-time, as they will be
                                   monetize in real time this information transmitted peer to peer

able to execute payments           thanks to the execution of smart contracts giving payment
                                                                                                                            Blockchains allow for the          The issuance of debt, at its core, is a statement of trust. In the

associated with transacting        orders and making financial settlement. These smart-contracts
                                                                                                                            creation of a digital identity,
that data. Moreover, smart                                                                                                  unlocking the real-time
                                                                                                                                                               past seventy years, since the advent of bank issued credit cards,
                                   will distribute payments between the various stakeholders of the

contracts will enable new road     vehicle and data infrastructure according to the stipulations of                         potential to use other             financial institutions have used credit scoring as a proxy for risk

and infrastructure pricing                                                                                                  indicators to build a              analysis since it allows for instant credit-decisioning.

systems.                                                                                                                    reputational asset profile for
                                   the agreements integrated into the smart-contracts. In this
                                                                                                                                                               Unfortunately, for those who have thin or no credit files, their risk
                                   model, all stakeholders, OEMs, vehicle owners, data
                                                                                                                            otherwise credit-invisible         profile is not easily quantifiable and is, therefore, priced higher
                                   infrastructures, and others are encouraged to cooperate
                                                                                                                            consumers.                         than might otherwise be the case.
                                   according to this model of intelligent “coopetition”. This model

                                   makes it possible to avoid recreating data oligopolies as has
                                                                                                                                                               Credit scores are lagging indicators of risk, using data that may
                                   been done on the Internet with Google, Apple, Facebook, and
                                                                                                                                                               not be current. They are also built on inductive reasoning and
                                   others.
                                                                                                                                                               assuming that the past is a predictor of the future. Blockchain

                                                                                                                                                               provides a way to establish an individual digital identity,
                                   In addition, smart contracts will make it possible to isolate
                                                                                                                                                               unlocking the real time potential to use other indicators (such as
                                   revenues and thus the possibility of financing of new road and
                                                                                                                                                               cell phone payments that could be recorded on chain) to build
                                   mobility infrastructures, including through securitizations.
                                                                                                                                                               a reputational asset profile for otherwise credit-invisible

                                                                                                                                                               consumers. This strategy may be particularly useful in emerging
                                   Global transportation infrastructure is expected to require over
                                                                                                  6
                                                                                                                                                               economies that lack trusted credit scoring models.
                                   $94T in investment between 2016 and 2040.                          With the relatively

                                   6. Oxford Economics, Global Infrastructure Outlook; Infrastructure investment needs 50                                      The ability to track non-traditional sources of credit, such as
                                     countries, 7 sectors to 2040”, https://www.oxfordeconomics.com/recent-
                                                                                                                                                               payments for utilities, phones, or rent, can make credit more
                                     releases/Global-Infrastructure-Outlook.

21 © 2021 MOBI — FSSC Business White Paper                                                                                                                                                © 2021 MOBI — FSSC Business White Paper 22
FSSC Use Cases
For thin-file applicants, this     readily available to these consumers who are not active                A fractional ownership model    transportation models appear on the market, such as car sharing

provides accessible credit in                                                                             may prove to be a cost-
a system otherwise                                                                                        effective and desirable
                                   participants in the conventional financial system. The                                                 and new or used car rental of varying duration. However, we

unavailable to them. This may      microfinance movement facilitated peer-to-peer lending with
                                                                                                          alternative to vehicle          expect that outright ownership may remain a popular

be particularly useful in          funds from developed countries flowing to borrowers in
                                                                                                          ownership for many.             preference. The desire to take your own car for a weekend

emerging economies without         countries with less developed financial markets. Allowing for the      Blockchain technology allows    getaway may remain, for many, the first choice for a long time.

credit scoring infrastructure.     development of an alternative risk assessment process, using           for the immutable recording     The development of a fractional ownership model (ownership of

                                                                                                          and cost accounting between
                                                                                                          parties, and the tamper-proof
                                   data captured on blockchain, could bring together a wide pool                                          an vehicle by multiple individuals, each of whom has specified

                                   of potential lenders and borrowers.
                                                                                                          recording of shared-usage       ownership and usage rights) may respond to the low rate of use

                                                                                                          rights and restrictions.        of vehicles while honoring, to a certain extent, the desire to own

Fractional Ownership of Mobility Assets                                                                                                   a car. Such a model becomes possible with the use of

                                                                                                                                          blockchain technology, including payments directed through

                                                                                                                                          smart contracts. We can also imagine a model of individual or

Today, cars in metropolitan        The vehicle has been a symbol of emancipation and freedom for                                          corporate fractional ownership of autonomous vehicles or robot

areas are used only 5-10% of
the time. The rest of the time,
                                   most of the 20th century. Freedom of movement has become                                               taxis.

the cars sit still in lots or on   available to almost all. The growth in vehicle sales over the past

streets. These vehicles are        20 years, particularly in China where sales of new cars have                                           With the capacity of immutable, and tamper-proof records and

productive capital, but sit        risen from 0.6 to 25.3 million annually, demonstrates the                                              measures, cost accounting between owners is done

unmonetized and unutilized         importance of this freedom of movement.                                                                programmatically. Owners through their fractional ownership

for over 90% of the time.                                                                                                                 right get a shared use right and are liable for their obligations
                                   The vehicle makes it possible to get from point A to point B
                                                                                                                                          based on their share of ownership and the use they make of that
                                   relatively efficiently, to find a job more easily, to go on vacation
                                                                                                                                          vehicle.
                                   or to go out on weekends. The car is a sign of freedom and also

                                   a display of social status for some. But today, cars in
                                                                                                                                          This model is virtuous because the users of the cars are also the
                                   metropolitan areas are only used 5% to 10% of the time. The rest
                                                                                                                                          owners. They are therefore collectively responsible, as opposed
                                   of the time, cars remain immobilized in parking lots or are
                                                                                                                                          to a classic car sharing model provided by a platform operator
                                   parked in the streets. In addition, private car travel is
                                                                                                                                          where nobody is responsible. In addition, in the case of the
                                   increasingly restricted or banned in major cities in order to
                                                                                                                                          sharing models managed by OEMs, the OEMs are obliged to
                                   reduce traffic jams, make way for public transportation or bikes,
                                                                                                                                          provide capital and/or financing to finance the cars, with very
                                   and to cut down on carbon emissions. In this context, we can
                                                                                                                                          poor financial performance so far.
                                   see that the current model is not totally satisfactory for the

                                   owners or for municipalities.
                                                                                                                                          Blockchain technology has the potential to make it possible to

                                                                                                                                          develop fractional ownership on a scale larger than previously
                                   The market is increasingly moving towards transportation models
                                                                                                                                          experienced.
                                   where travel is consumed as a mobility service. Different

23 © 2021 MOBI — FSSC Business White Paper                                                                                                                          © 2021 MOBI — FSSC Business White Paper 24
Conclusion                                                                                 Bibliography
 Blockchain technology is strongly positioned to create widespread shifts within the       AdvisoryHQ. “KYC vs. CIP vs. CDD | Know Your Customer Rules and Guidelines.” Accessed

                                                                                              April 2021. https://www.advisoryhq.com/articles/kyc-vs-cip-vs-cdd-know-your-
 traditional processes of vehicle finance. The widespread presence of trust services
                                                                                              customer-rules-and-guidelines/.
 throughout those processes are precisely where distributed ledger technology

 provides value. The potential for smooth, frictionless operation of multiparty            European Central Bank Ecosystem.“The Social and Private Costs of Retail Payment

                                                                                              Instruments: A European Perspective.” September 2012.
 applications by ensuring the availability of trusted shared data is enormous.
                                                                                              “https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp137.pdf.

                                                                                           Experian. “Automotive Industry Insights Finance Market Report Q4 2020.” March 2021.
 Blockchains provide the fundamental technology, but multi-party applications
                                                                                              https://www.experian.com/content/dam/marketing/na/automotive/quarterly-
 require the presence of multiple parties interacting. Understanding and creating
                                                                                              webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-

 interoperability between those parties is precisely the focus of the MOBI FSSC WG.           market.pdf.

 The FSSC Standard leverages blockchain to provide a trust layer, where all parties
                                                                                           Hackett, Robert. Fortune. “Ritzy Aspen Hotel Sells Real Estate on Blockchain with Indiegogo’s
 are able to validate each other’s identity, leveraging an immutable ledger that              Help." August 2018. https://fortune.com/2018/08/23/hotel-real-estate-aspen-

 allows for the verification of the authenticity of data, resulting in a shared platform      blockchain-ethereum-st-regis-indiegogo/.

 for deploying interoperable applications.
                                                                                           Krier, Charles, and Wagener, Katharina. PayTechLaw. “eIDAS and AMLD5: A perfect match?”

                                                                                              September 2020. https://paytechlaw.com/en/eidas-and-amld5-a-perfect-match/.

 The applications and use cases enabled by such a platform are precisely the focus
                                                                                           Oxford Economics. “Infrastructure investment needs 50 countries, 7 sectors to 2040.” July
 of this paper. Today, each of the use cases discussed in this paper are impeded by
                                                                                              2017. https://www.oxfordeconomics.com/recent-releases/Global-Infrastructure-
 operational inefficiencies, which are all caused by the need for trust services.             Outlook.

 Blockchains and standards created by consortia like MOBI result in a neutral

 environment where all the stakeholders can engage with one another on equal

 footing. For vehicle finance, the implications in terms of new services and

 operational efficiencies are manifold.

25 © 2021 MOBI — FSSC Business White Paper                                                                                                      © 2021 MOBI — FSSC Business White Paper 26
MOBI is a nonprofit industry consortium of many of the world’s largest vehicle manufacturers,
along with many startups, NGOs, transit agencies, insurers, toll road providers, smart city
leaders, and technology companies working to accelerate adoption and promote standards in
blockchain, distributed ledgers, and related technologies.
MOBI is creating simple blockchain-based standards to identify vehicles, people, and
businesses in order to securely exchange and monetize data, and pay for mobility services,
with the goal of making transportation more efficient, affordable, greener, safer, and less
congested. MOBI itself is technology and ledger agnostic. For additional information about or
joining MOBI, please visit our website.

    dlt.MOBI            @dltMOBI             MOBI            @dltMOBI             fssc@dlt.MOBI
You can also read