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Interview with Thomas Laffree, innovation director, PGGM
PGGM and APG recently completed the first phase of a collaborative experiment that used blockchain technology to administer pensions. Based on the prototype they co-created, both pension fund service providers have extended their research.
According to Thomas Laffree, innovation director at PGGM and one of the project leaders, the potential impact of blockchain technology on the pension domain is massive. “By working together to develop proof of concepts and getting our heads around this exciting new technology, we’re investigating the true potential of blockchain”.
How does PGGM organize around innovation? What strategy do you follow?
We follow an innovation strategy that we call the “3x3 model.”
This approach is centered on the three C’s: connection, culture, and customer.
We connect colleagues from different departments and business lines within our organization, and including affiliated employers and employees, and stimulate a culture that nurtures innovation to develop new services for our customers.
Next, we divide our innovation efforts in three directions: lab experiments, research projects, and activities that actively engage with ecosystems of innovation. These include organizations like Startupbootcamp and Techruption.
Finally, we focus our innovation initiatives on three domains: blockchain, artificial intelligence (AI) and (big) data platforms.
Why experiment with blockchain?
It is our assumption that blockchain technology has the ability to improve the service of a pension fund to its participants by making personal information of participants more accessible in a more cost efficient way.
First, we identified interesting opportunities to actively experiment with blockchain technology and build up our skill set. Since blockchain is all about decentralizing a network, we opted to collaborate with multiple parties and stakeholders within the pension domain.
What was the concept and objective of PGGM & APG’s blockchain experiment?
Our current pension infrastructure requires duplicating a lot of data for new participants. These new data entries also require many validations and checks. Provisioning the data is critical. Many parties need access to all or parts of a pension administration: an employer that wants to change something, a participant or employee that wants to look something up, governmental agencies that need access to information, etc.
If all the relevant parties with the correct permissions could access the data, then it might not be necessary to validate and copy it anymore. Eventually, it could be possible to create a more flexible, cost-efficient and transparent pension administration.
So, we thought, let’s do an experiment with our own business. We decided to build a small pension administration in a blockchain. First, we defined some conditions for our experiment, like scalability and availability. For example, the administration should contain a minimum of several thousand clients without crashing. Since the experiment was about proving the concept, our product was a simple, basic administration, without too much complexity.
What were the results and learning outcomes of the experiment’s first phase?
We began this experiment to see if building a basic pension administration based on blockchain technology was possible. We discovered the answer was yes, it is possible. In the first phase, we developed the blockchain administration within three months and executed some additional experiments.
It wasn’t all open-and-shut. In earlier experiments, the blockchain crashed with only six participants. After making some technical decisions, we were able to scale up our administration to over ten thousand participants, which was so exciting and promising we decided to continue the experiment.
The first experiments are promising, but there is still a lot to explore.
We’re now entering the next phase and expect our efforts to remain experimental for the foreseeable future. We need a better, more enhanced picture of the potential impact of blockchain for a pension administration if we want to administer a pension fund on it. We need to think of the processes or components we can build on it. Also, we need to imagine the architecture of the pension administration of the future. We're likely to run into issues and dead-ends, as we’re venturing into unexplored territories.
How was the partnership with APG initiated and set-up?
Since all players in the field face the same challenges, our collaboration was a strategic decision made some time ago, before we even began experimenting with blockchain. For us, it made sense to work with the other large pension service provider.
From day one, I had felt a personal click with my counterpart on the APG side, Joep Beukers. We provided each other with insights into our portfolios. APG had already started with some blockchain initiatives, but they wanted to drive their efforts further by collaborating with us. We executed this blockchain experiment in full collaboration, creating a beneficial knowledge transfer between our organizations, while at the same time-sharing costs.
The project teams shared responsibility, fifty-fifty. Initially, team members spent a few days a week on the project, scaling up as the project advanced. Both partners invested equally in people and assets, and our teams spent the same amount of time working on the project in each location. Because it was a genuine joint effort, we created real team spirit.
What advice do you have for other organizations that want to experiment with blockchain?
Start small. The initial objective should not be to completely change the world. Try to take small, incremental steps towards mastering the technology and its opportunities. Work with your own people so that you can secure the knowledge inside your organization. As with any new technology, specialists are scarce, so blockchain programmers might be hard to find. One of the most important things you can do now is to start developing the competencies or capabilities of your own organization. As soon as blockchain becomes the next market standard, you’ll already have people ready, who know what is possible and what isn’t. A technology partner can kick-start your experiments, but start mastering the technology yourself now.
This article is part of the report Urgent Future - Blockchain.
