Building the
New Economy of Movement

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

MOBI FSSC0001/WP/2021
Version 1.0

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END OF TERMS AND CONDITIONSINTRODUCTION
The Mobility Open Blockchain Initiative is a global, multistakeholder project working to co-design standards basedon distributed ledger technology for connected mobility
ecosystems. The project engages stakeholders across thetransportation value chain, including vehicle
manufacturers, technology solution providers,
governmental, and non-governmental entities. This reportis based on numerous discussions, workshops, andresearch. Opinions expressed herein do not necessarilyreflect the views of individual members or the companies
with which they are affiliated.
Launched in March 2020, the MOBI Finance, Securitization,and Smart Contracts (FSSC) Working Group (WG) strives toimprove accuracy and transparency, create operational
efficiencies, minimize fraud risks, and save on costs andtime in the execution of financings, including
securitizations, for all entities in the financing lifecycle.
Sincere thanks are extended to those who contributed theirunique insights to this report.

Authors
Howard Altarescu, Orrick
Chris Ballinger, MOBI
Joe Bannon, KAR Global
Michelle Corson, On the Road Lending
David Eddy, D.E. Consulting
Josh Fodale, Ford Credit
Griffin Haskins, MOBITu Le, USAA

Phil Masi, BMW Bank
S. Chris Min, Orrick
Daniela Novaro, Reply
Eric Pilat, Altaventure
Andrew Smith, TQ Tezos
Tram Vo, MOBI
Marguerite Watanabe, MOBIFSSC Working Group Co-Chairs
Howard Altarescu, Orrick
Anthony Salamone, RouteOne

FSSC Working Group Team Members
Toby Box, Quant Network
Joe Bannon, KAR Global
Anne-Sophie Cartray, ConsenSys
Michelle Corson, On the Road Lending
David Eddy, D.E. Consulting
Josh Fodale, Ford Credit
Don Ho, Quantstamp
Tu Le, USAA
Phil Masi, BMW Bank

S. Chris Min, OrrickCharlie Moore, Global Debt Registry
Daniela Novaro, Reply
Eric Pilat, Altaventure
Dan Simerman, IOTA
Andrew Smith, TQ Tezos
Jamie Solomon, Accenture
David Wattebled, Quant Network

MOBI Team
Chris Ballinger, Co-director + FounderTram Vo, Co-director + FounderMarguerite Watanabe, Working Group Lead
Robin Piling, Technical Lead

Griffin Haskins, Fellow
Kelly Clark, Communications Manager
Grace Pulliam, Communications Associate

01

Executive Summary

03

The FSSC Standard

07

FSSC Use Cases
Know Your Customer (KYC) Requirements
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

26

Conclusion

Bibliography

TABLE OFCONTENTSExecutive
Summary
Our financial system - including banking, auditing,accounting, and many other components that can becharacterized as “trust services” - underlies markets forgoods and makes all non-barter trade possible. The
financial system is a network of trust services thattogether permit markets to function efficiently. Thesetrust services are quite expensive - transaction fees
alone are estimated to account for almost 1% of global
1
economic activity.
In the US, almost 90% of new car purchases and more
2than 50% of used car purchases are financed. Vehicles
on dealer lots are likewise financed.

The vehicle financeecosystem has many
components that can becharacterized as trust
services. Blockchain has thepotential to radically improve,or even fully replace, many ofthese trust services.

Most of these retail and commercial finance contracts arepooled, packaged into Asset Backed Securities (ABS), andfinanced by third-party investors in a process called
securitization. Blockchain has the potential to reduce risks andcosts associated with the financing of vehicle loans, including
the securitization process, improve visibility of asset values andto 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 deliveringvalue to downstream businesses and consumers. Many processes
within the vehicle and mobility industry will benefit from thestandardization and digital efficiencies that blockchain enables.

MOBI’s FSSC Working Groupwas created to accelerate theimpact of blockchain andrelated technologies on many
areas in the vehicle financeecosystem. The FSSC
Working Group consideredboth B2B and B2C use cases
in its investigation.

The Mobility Open Blockchain Initiative’s Finance Securitizationand Smart Contract Working Group (FSSC) was created toaccelerate the adoption and value creation from blockchain
and related technologies, including smart contracts in themobility ecosystem as applied to consumer and dealer floorplan
lending and financing.
This white paper will overview a variety of use cases that wereconsidered by the FSSC WG. The Working Group consideredboth B2B (business-to-business) and B2C (business-toconsumer) use cases, and each section of this paper focuses on
B2B and B2C use cases separately.

1. “The Social and Private Costs of Retail Payment Instruments: A European Perspective”,
European Central Bank Ecosystem, September 2012,“https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp137.pdf”
2. “Automotive Industry Insights Finance Market Report Q4 2020”, Experian, March 2021,
https://www.experian.com/content/dam/marketing/na/automotive/quarterlywebinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotivemarket.pdf© 2021 MOBI — FSSC Business White Paper

2

THE FSSC STANDARDS
Modern vehicles and trucks are increasingly connected, intelligent,
endowed with large amounts of computing power, and have a wide
range of sensors that can capture data about the vehicle and its
surroundings. Connected vehicles are beginning to dominate global
roadways, and the mobility industry has quickly focused on how
newly available data from those vehicles can be used to power
exciting new applications. However, there are some major barriers
to fully actualizing the value of these developments. Most notably,
the organizations and companies that would utilize vehicle data
operate entirely within data silos, and integrating their closed
systems with external partners or data sources necessitatesbuilding costly integrations every time. As a result, any
coordination or data sharing occurs bilaterally, but such a one-toone approach does not lend itself to scalability, transparency,
openness, or economic efficiency.
Executing multi-party applications requires that each party is able
to communicate and coordinate actions. In other words, multi-party
systems require that each participant’s system have a degree of3© 2021 MOBI — FSSC Business White Paper

interoperability. Truly exciting advances become possible when weare able to seamlessly and easily share data with each other, with
the necessary shared functionality assured. These abilities arecalled data interoperability and functional interoperability; both are
difficult to achieve at scale. Within the vehicle finance ecosystem,
there is very little interoperability between the siloed data systemsof the participants. Lenders, rating agencies, servicers, OEMs,
vehicle dealers, and other organizations operate almost entirely witha siloed model, and most still rely heavily on trusted third parties tomediate and manage multiparty processes.
The staying power of trusted third parties is no accident - financingsof all kinds are subject to regulation, scrutiny, and potential liability,
often necessitating the use of trust services. For example, in vehicle
loan securitizations, a third party is often required to carry out
various functions, including servicing and trustee responsibilities
such as receiving funds and distributing payments to various parties
according to a waterfall structure. Such a third party is providing atrust service.

© 2021 MOBI — FSSC Business White Paper

4The FSSC Standards
Blockchains provide a trust
layer, where the trust arises
from the immutability andtransparency of data on the
chain, as well as the shared
governance of distributed
ledger systems.

The FSSC Standard
prescribes core services andlogical schemas for data
sharing between vehicle
finance stakeholders with thegoal of achieving functionaland data interoperability.

Blockchain, ultimately, provides a trust layer, in that it provides asecure avenue for stakeholders to authenticate each other’s
identity and to immutably record their secured information andto securely expose such information to other permissioned
stakeholders. For example, instead of using a costly third party,
a smart contract can disburse funds according to a pre-definedand agreed upon waterfall structure. All parties can trust in theaccuracy of the payments, as everything is transparent on chain.
Ultimately, the ability to trust arises from the immutability andtransparency of data on the chain and the shared governanceof distributed ledger systems. Distributed ledgers, withstandards enabling necessary data and functional
interoperability, provide a necessary, foundational layer for
creating multi-party applications on top. However, breaking
down these silos requires more than just technology - it requires
community buy-in and coordination.
Interoperability can only be achieved when there are common
standards for core infrastructure - identity, data, and functions.
The FSSC Standard prescribes core services and logicalschemas for the sharing of data between vehicle financestakeholders. In other words, the FSSC Standard is afoundational step towards achieving data interoperability andfunctional interoperability for multi-party financial applications
in mobility ecosystems. This allows for the proliferation andgrowth of multi-party solutions, enabled by the frictionless flowof data between these silos.
Multi-party applications, as the name implies, involve multiple
parties interacting in a shared system to achieve a mutually
beneficial outcome. Therefore, it necessarily follows thatsystems supporting multi-party applications require an existing
set of parties to use those systems. In other words, multi-party
systems rely on network effects to succeed, and indeed, their5© 2021 MOBI — FSSC Business White Paper

value is tied to the level of adoption and the number ofstakeholders. The diversity of features and range of feasible use
cases of a distributed ledger system are thus married to its
network effects. Such network effects grow as adoption grows
over time.
The core services and logicalschemas prescribed by the
FSSC Standard are key forcreating and scaling multiparty applications andallowing communication andcollaboration between thesiloed ecosystems of eachvehicle finance stakeholder.

The FSSC Standard’s main components - core services andlogical schemas - provide the structures required for creating
and scaling multi-party applications, allowing communicationand collaboration between the siloed ecosystems of eachvehicle finance stakeholder. Such structures lay the foundation
for robust, secure data sharing and value transacting at scale.
The FSSC Standard carefully and effectively distinguishes
between what sorts of data and functionality must be standard
across all implementations, versus what considerations are bestleft up to the engineers. Standards are much like mobility
ecosystems and distributed ledgers, in that they all rely on
network effects to provide value. The FSSC Standard enables acompelling array of use cases, and those use cases will grow innumber, complexity, and value as adoption grows over time.

Distributed ledger technology
provides technological trust
structures that can replace
many third-party
intermediaries or processes
that require onerous manualverification. These trust
structures enable a diverse
array of benefits to manyvaried use cases, which are
explored in detail for theremainder of this paper.

Given the widespread use of various types of trust structures
within vehicle finance and securitizations, distributed ledger
technology has enormous potential to quickly disrupt many
traditional processes. Distributed ledger technology provides
technological trust structures that can replace many third-party
intermediaries or processes requiring onerous manualverification. Therefore, the trust layer that is provided by
distributed ledger technology can quickly provide value within awide range of use cases within vehicle finance andsecuritization. The remainder of this document provides an
overview of is focused on overviewing these use cases and theirbenefits.

© 2021 MOBI — FSSC Business White Paper

6Know-Your-Customer (KYC) Requirements
In both the US and the EU,
financial institutions mustcomply with KYC/AML
regulations in order to avoid
facilitating money laundering,terrorism financing, or othercriminal activity.

Each bank has the discretion
to use whatever process it
chooses to verify the identityof a customer. Financial
institutions are required toreport if they have reason tosuspect criminal activity.
These processes are
expensive for banks andcause friction withcustomers.

In the U.S., the adoption of the Patriot Act made it incumbent
upon banks and other lenders, including vehicle dealers, to verify
the identity of borrowers (their customers) to avoid facilitating
money laundering, terrorism financing, or other criminal activity.
The KYC requirement applies to all loans, no matter the size.
Financial institutions must comply with two key components of Title
III of the Patriot Act – the Customer Identification
Program (CIP)
3and Customer Due Diligence (CDD). In the European Union, antimoney laundering requirements are included in the 4th AntiMoney Laundering Directive (4AMLD), and the specific provisions
on electronic identification and trust services are coveredin4
Regulation (EU) No 910/2014 (the "eIDAS Regulation").
Each bank has the discretion to use whatever process it chooses
to verify the identity of a customer and may require different
information. At a minimum, an individual customer is ordinarily
asked to provide government-issued identification, such as a
passport or driver’s license (or both). If the customer is a business,the customer may be asked for filed formation documents and/orreferences. In both cases, financial institutions will often review
information from a credit reporting agency. There is no standard,
uniform approach for establishing a customer’s identity.
Financial institutions are required to report if they have reason tosuspect potential criminal activity, including reporting on activities
that look high risk, such as frequent wires and internationaltransactions. The process is expensive for banks and causes
friction with customers.
3.

“KYC vs. CIP vs. CDD | Know Your Customer Rules and Guidelines”, AdvisoryHQ, accessed
April 2021, https://www.advisoryhq.com/articles/kyc-vs-cip-vs-cdd-know-your-customerrules-and-guidelines/.

4. Charles Krier, Katharina Wagener, “eIDAS and AMLD5: A perfect match?”, PayTechLaw,
September 2020, https://paytechlaw.com/en/eidas-and-amld5-a-perfect-match/.

7© 2021 MOBI — FSSC Business White PaperFSSC
USE CASES
Siloed business lines within
and across institutions andjurisdictions lead to redundant
processes and a poor user
experience. The inability ofbanks to reference a common
dataset reduces theefficiency of the diligenceprocess.

Many banks are running on computing systems with inefficient
data capture methods. Siloed business lines within and acrossinstitutions and jurisdictions lead to redundant processes andwhen the customer is required to repeatedly provide the same
information, a poor user experience. The inability of banks toreference a common dataset reduces the efficiency of thediligence process, creates ambiguity, and may result ininaccurate conclusions. Reducing or eliminating manualinterpretation allows for an enhanced data-driven decisionmaking process. The ability to augment a customer profile thatis accessible to a broad network of financial institutions will
reduce risk, can enhance the customer experience, and bring
down compliance costs.
© 2021 MOBI — FSSC Business White Paper

8FSSC Use Cases
The objective of this use
case is to reduce costs that
financial institutions incur incomplying with KYC
regulations by building astandardized approach to a
global digital customer
identification system.

Most financial institutions use at least some information fromthird-party service providers, although the data and information
services vary. Enabling systems integration with third-party
service providers would reduce repetitive information requestsof the customer and would allow for consistent use of
independently verified diligence.
Customers naturally appreciate simple, fast, and seamless
journeys. As new relationships are increasingly remote,especially in light of the Covid-19 pandemic, an efficient KYC
process should contribute to an improved customer experiencein the customer journey for the purchase of a vehicle.
The objective of this use case is to reduce costs that financial
institutions incur in complying with KYC regulations by building astandardized approach to a global digital customer
identification system. A digital customer ID that is compatible
with blockchain technology (and, of course, consistent withapplicable privacy laws and regulations in relevant jurisdictions)can be a catalyst to virtually connect silos of KYC diligencesystems between institutions across the world.

Dealer Floorplan Financing
Dealer floorplan financing is aform of inventory financing fora dealer of vehicles and trucks
where each loan is secured bya specific vehicle or truck.

Dealer floorplan financing, among other things, is a form of
inventory financing for a dealer of vehicles and trucks, in which
each loan, or advance against a floorplan credit facility (alsoknown as an “asset-backed loan”) is secured by a specific pieceof collateral, i.e., a specific vehicle or truck.

Lenders often pool loans into
ABS transactions. A vehicle
ABS is similar to a mortgagebacked security, except thatthe underlying assets thatform the collateral are a poolof loans secured by vehicles
purchased and owned by car
dealers.

institutions owned and operated by original equipment
manufacturers or “OEMs”), and specialized lenders in the vehicle
wholesale industry, including those owned by wholesale auction
companies that lend money to dealers purchasing vehicles atsuch auctions.

Blockchains and smart
contracts can enable a dealer
to better monitor and manage
multiple maturities of theloans financing its vehicles.
Alerting dealers to upcoming
loan maturities allows thedealer to better coordinate afloorplan financing
management strategy.

Blockchain and smart contracts can enable a dealer (aborrower) to better monitor and manage multiple maturities ofthe loans financing its vehicles. For dealers, a common mistakeis a failure to track loan maturities and to realize that many ofthese loans mature at the same time – although each vehicle
could have a vastly different sales cycle. Smart contracts can becreated to alert dealers to upcoming loan maturities and tobetter enable the dealer to coordinate a floorplan financing
management strategy with its vehicle sales strategy andexpectations.

These lenders often pool these loans into ABS transactions. An
ABS is an investment security—a bond or note—which is backed
by a pool of loans, in this case floorplan loans secured by new
and used cars. A vehicle ABS is similar to a mortgage-backed
security, except that the underlying assets that form thecollateral are not residential mortgage loans secured byresidential properties, but rather, in the dealer floorplan
securitizations, a pool of loans secured by vehicles purchased
and owned by new and used car dealers.

Lenders in the dealer floorplan finance space includecommercial banks, captive finance companies (financial

9© 2021 MOBI — FSSC Business White Paper© 2021 MOBI — FSSC Business White Paper

10FSSC Use Cases
process. Using distributed ledger technology to replicate theaudit process, and the ability to reconstruct the source
information for audits on demand should increase confidence inthe validity of the audit system.

Dealer Floorplan Auditing
The primary purpose of afloorplan audit is to reconcile
dealer inventory used ascollateral for the floor plan
loan to reduce the lender’srisk. The main objective is tocapture the VIN number andto confirm the presence ofthe vehicle at the dealership.
Gathering this information
accurately represents asignificant operating cost.

Distributed ledger technology
can be used to eliminate thecost of a dealer floorplan
audit by capturing data
elements like the VIN, GPS,and time of day. By leveraging
the availability of verifiable
data, the onerous manualverification can be avoided
entirely.

The primary purpose of a floorplan audit is to reconcile dealer
inventory used as collateral for the floor plan loan to reduce thelender's risk. The main objective is to capture the VIN number
and to confirm the presence of the vehicle at the dealership.
Gathering this information and accurately reporting it in atrustworthy fashion represents a significant operating cost.
Floorplan audits are intended to identify fraud, intentional orotherwise, by dealers, including double-flooring (when a dealer
takes out a line of credit with two lenders on the same set ofvehicles); and a dealer has sold vehicles out of trust (SOT)(where a dealer fails to repay an inventory advance and sells
the underlying vehicles), among others.
Audit solutions can be evaluated on a spectrum that ranges
from simply taking a dealer at their word all the way to aperfectly reliable connected car future with autonomousvehicles reporting their location and condition in real-time.
Existing solutions rely heavily on Inventory Control Personnel(ICP). ICPs are either internal employees or those from a thirdparty company contracted by the lender to confirm the relevant
details of the financed inventory.
Distributed ledger technology can be used to eliminate the costof the ICPs with a technical solution that replicates the trustlevel in the existing system while also providing a pathway formore efficient collection of data in the future. A high degree oftrust can be maintained by capturing primary data elements like
VIN, GPS, time of day, etc. In addition, metadata can be used
to capture second order trust indicators like time between
captures, physical movement, distance covered, etc. Lenders, aswell as securitization investors, must be able to trust the audit

11© 2021 MOBI — FSSC Business White Paper

A Blockchain Foundation for Securitization
Vehicle loan securitizations
provide a crucial source offunding and liquidity for thevehicle industry, but they arecomplex and costly, involving
many transaction parties anda vast amount of data. The
FSSC WG has identified andcompiled a list of data
elements commonly requiredin the securitization of loans.
The goal is to improve theefficiency of various multiparty processes involved insecuritization.

Vehicle loan securitizations provide a crucial source of funding
and liquidity to the vehicle industry. Securitization transactions,however, can be complex and costly, involving many transaction
parties and a vast amount of data that must be obtained,
secured, and reviewed multiple times by various intermediaries
in each step of the financing process.
The FSSC WG has identified and compiled a list of data
elements commonly required in connection with the originationand securitization of loans. The goal is to improve the efficiencyof various multiparty processes involved in securitization bycreating a common understanding by lenders (as securitizers),
the rating agencies, and investors of the data elements required
for these processes, and the homogenization of information
required from such lenders and considered by rating agencies
and investors. Also, the use of common data elements in loan
originations can further standardize related securitizations,improving transparency into the underlying loans and liquidity inthe markets. Blockchain technology can provide such data in atrustworthy, secure and immutable format, that could result in
efficiencies and cost-savings for all parties involved.
The creation of a common and trustworthy referencearchitecture allowing multiple stakeholders to expose their data
to shared, multiparty applications, may also provide theopportunity for smaller lenders to sell loans into warehouse© 2021 MOBI — FSSC Business White Paper

12FSSC Use Cases
The creation of a common
and trustworthy referencearchitecture allowing multiple
stakeholders to expose theirdata to shared, multi-party
applications, can ultimately
allow for the reduction or
elimination of the need for
multiple verifications of dataor repetitive due diligence bythird parties.

facilities. Then, such lenders would be able to utilize
securitizations to finance the loans originated, thus providing
the benefits of rated securitization financings to lenders forwhom such capital market efficiencies may not be otherwise
available.

A single source of truth canhelp eliminate the need for
paper-intensive processes
and additional loan-level
diligence at the time of
securitization, which
diminishes opportunities forfraud or errors.

Reductions in transaction costs mean that it can be costeffective to enter the securitization market with a smaller dealsize, which can further lower the hurdle for smaller lenders. A
single source of trusted data may diminish, if not eliminate, theneed to diligence the accuracy of information mined from loan
applications, loan agreements, related contracts, and otherdocuments. For example, tracking the underlying vehicles andtheir associated loans and their ownership is often a paperintensive process, requiring a time-consuming process ofscanning pages, establishing and securing “authoritative”
copies, and multiple manual verifications and diligence reviews.
Such a process, which is typically conducted manually, is also
prone to error, and may present opportunities for fraud. Making
relevant data and other information accessible through a single
trusted blockchain could help eliminate the need for additionalloan level diligence at the time of securitization and diminish
opportunities for fraud or errors.

13

Elimination or reduction of the need for multiple verifications ofdata by third parties and related due diligence costs may also
be possible by putting data on a trusted blockchain. Cost
savings from a streamlined securitization process through theuse of a single trusted blockchain database would lower thecost of entry for many smaller players in the vehicle
securitization industry, giving them access to a valuable funding
source.

© 2021 MOBI — FSSC Business White Paper

It is essential that the rating
agencies, investors, and otherparticipants in the
securitization process haveconfidence in information
made available by the
network. Industry wide
consensus on how theseprocesses are to be carriedout, and what verification
looks like, are critical fortrustability.

Smart contracts can also be used to efficiently bundle loans
with certain characteristics together for securitization purposes.
It is essential that the rating agencies, investors, and otherparticipants in the securitization process have confidence in theinformation made available by the network. Accordingly, it isalso critical that the data attestations be placed on blockchain
by a trusted third party or that the accuracy of the data
notarized on blockchain be verified by a trusted third party.
Alternatively, the process by which the information is verified
and notarized on blockchain can be automated through smart
contracts. Or, the lenders can require the source of information
to be notarized on blockchain which allows for the digitalauthentication of the information, which could significantly
reduce the reliance on third-party verification. In any case, it
may prove useful to have industry-wide consensus on one ormore of these processes, including on the parties that would betrusted to verify the accuracy of the information on blockchain
derived from the database.

Verifiable Credentials in the Loan Application Process
A verifiable credential is a setof tamper-evident claims andmetadata thatcryptographically prove who
issued it. They are theelectronic equivalent ofphysical credentials we use
today, like drivers licenses.
They can be used in many
processes within the credit
application lifecycle.

A verifiable credential is a set of tamper-evident claims andmetadata that cryptographically prove who issued it. By storingthat cryptographic proof on blockchain, it can be easily
accessed for use in various applications and processes.
Verifiable credentials are the electronic equivalent of thephysical credentials that we all use today, such as plastic cards,
passports, driver’s licenses, paper credentials, and awards,
among others. Verifiable credentials can be utilized in many
components of the vehicle credit application process. Some
examples are provided below.

© 2021 MOBI — FSSC Business White Paper

14FSSC Use Cases
Verifiable credentials can
assist with data authenticity
and verifications. A standard
vehicle credit application
contains many data elements
provided directly by thecustomer. Verifiable
credentials can eliminate themanual verification
processes that are
traditionally employed for
those data elements.

Verifiable credentials canalso help protect customer
privacy by reducing or
eliminating the lender’s needto see and keep copies of
personal documents. This
helps reduce oversharing of
personally identifiable
information during the credit
application process.

15

Verifiable credentials can assist with data authenticity andverifications. A standard vehicle credit application contains
several data elements provided directly by the customer. Someof these data elements, such as annual income amounts, are
key pieces of information used in the credit decision process.
Today, a variety of often manual processes exist to verify anapplicant’s income. For example, lenders may need to reach out
and contact the applicant’s employer, in order to confirm theiremployment status. Lenders may also require copies of pay
stubs or previous tax returns. All of these processes are time
consuming. Verifiable credentials carried by an applicant could
alleviate many of these pain points. For example, a verifiable
credential signed by an employer or bank could automaticallyand authoritatively confirm an applicant’s employment status
and income level. Such a confirmation could be carried out inmere seconds as the credential is verified against a registry via
an Application programming interface (API) call.
Verifiable credentials can also be leveraged to help protect
customer privacy. Lenders often acquire and store copies ofan applicant’s personal documents, such as driver’s licenses orother government IDs. Verifiable credentials can reduce orremove the lender’s need to see and keep such copies, as thedata is passed digitally and its authenticity can be confirmed by
the cryptography. In addition, verifiable credentials canpotentially leverage cryptographic techniques, such as zeroknowledge proofs, to mask the types of information given to alender. For example, a credential could prove that an applicant
makes more than $100,000 per year, without giving away their
exact income or it can prove that such an applicant graduatedwith a four-year college degree, without specifying the college
or major (which would typically be on a diploma). This can help
reduce oversharing of unnecessary personally identifiable
information (PII) data in the credit application process.

© 2021 MOBI — FSSC Business White Paper

Digitization of Manual Processes with Smart Contracts
Smart contracts can be used
to automatically implement
conventional contractual
arrangements in asecuritization and theunderlying financing, as wellas programmatically executemany processes involved
within the securitization or
loan.

Smart contracts may be used to automatically implement,
without the need for third-party intervention, the conventional
contractual arrangements in a securitization and the underlying
financing (i.e., the servicer obligations to collect borrower
payments and remit such payments to a securitization account,pursue borrowers to collect delinquent payments or to pursue
recoveries in defaulted loans, and allocate payments toinvestors pursuant to waterfall provisions in the relevant
agreements.

One prime example of where
smart contracts canstreamline traditional
processes is executing thewaterfall distributions andreporting. Smart contracts
can execute the distributionof interest and principal
payments to the investors
and charge the fees totransaction parties pursuant
to the waterfall, eliminating
the need for a third party toprovide such a trust service.

One prime example of an area in which smart contracts canstreamline traditional vehicle finance and securitization iswaterfall distributions and reporting. An immutable and timestamped chronology of borrower payments, and a verified smart
contract that provides for the distribution of such payments
based on the waterfall, could diminish if not eliminate the needfor investors to do monthly payment reconciliations. Smartcontracts can securely execute the distribution of interest andprincipal payments to investors and fees to transaction parties
pursuant to the waterfall, without manual allocations, reporting,
and wire transfers. Blockchain technology allows for seamless,trusted, and audited sharing of data among all of theparticipants in the transaction while being assured that thepotential for fraud or errors has been diminished, if noteliminated.
A typical vehicle loan ABS transaction produces investor reports
on a monthly basis with payment information and loan
performance data from a prior month, resulting in aconsiderable data lag of up to 30 or more days. Smart contracts
can track payments, delinquencies, and other performance data

© 2021 MOBI — FSSC Business White Paper

16

FSSC Use Caseson blockchain and make such data available on a real-timebasis to all the permissioned actors in a transaction, eliminating
the need to rely on stale data and manual processes, increasingtransparency for the related securitization.
While the initial use of smart
contracts is not likely toreplace the transaction
parties traditionally used, asmart contract that is
publicly available and subject
to audit by market
participants will be able tocarry out tasks currently
performed by suchtransaction parties, which
could save on diligencecosts.

Smart contracts must, of course, be consistent in all respects
with the terms of the related documents and the rating
agencies and investors must have confidence that this is thecase. The initial use of smart contracts in securitizations is not
likely to replace the transaction parties conventionally used, atleast until the time when rating agencies and investors have fullconfidence in such replacements. However, having a smart
contract, publicly available and subject to audit by the market
participants, could help streamline the diligence process. If themarket participants can trust in the integrity of the smart
contract being utilized, and the accuracy with which it canperform various tasks that are currently performed by third-party
intermediaries, the diligence that is typically necessary to ensure
the accuracy of the tasks performed by such intermediaries canbe reduced, and can therefore result in both time and costsavings.

Loan Servicing
Most settlements are notreflected in real time; there isa lag between the time of thepayment and when thepayment is actually “settled”
in the lender’s account.
Blockchain allows
settlements to happen inminutes, rather than days.

17

One of the benefits of distributed ledgers systems is the ability
to remove both the friction and costs of intermediaries. Most
settlements are not reflected in real time. When a consumer
makes a loan payment, there is a lag between the time of
payment and the time the payment is actually “settled” in thelender’s account. With blockchain, these settlements can occur
in a matter of minutes, rather than days. While this obviously
benefits the lender, it can also benefit the borrower, particularly© 2021 MOBI — FSSC Business White Paper

lower-income consumers, whose bank accounts can be morevolatile, by avoiding the potential for overdraft fees. These
better on-time payment performance metrics can also boost
their credit scores.
Allowing settlements to bemade directly, rather than
through existing protocols,
can facilitate international
lending for consumers inemerging markets. This isalso made possible by thecost reduction associatedwith providing that credit
through removing
intermediaries and theirassociated fees.

For cross-border transactions, allowing settlements to be madedirectly, rather than via existing protocols like SWIFT, canfacilitate international lending for consumers in emerging
markets. Rather than using correspondent banking and custodialservice arrangements, transactions can be settled publicly andtransparently.
By removing intermediaries and their associated fees, loan
servicing activities have lower transaction costs. The ability toprovide transparent and cryptographically secure payment
histories can bring down costs by reducing the need for
redundant services within portfolio transactions for smaller
lenders.

Issuance and Investor Impact Reporting for Green Bonds
Green bonds are bondissuances that have anenvironmental purpose andare structured to appeal to
ESG investors. Green bondissuances require both preand post-issuance evaluation
and reporting that ordinary
bonds do not.

Green bonds and their variants are bond issuances that have anenvironmental purpose and which are structured to appeal toEnvironmental, Social, and Corporate Governance (ESG)
investors. To avoid instances of “greenwashing” – labelingprojects that are potentially harmful to the environment as
beneficial -- green bond issuances require both pre- and postissuance evaluation and reporting. For the issuance to bemarketable, a Second Party Opinion (SPO) regarding the impact
and credibility of the proposed framework in relationship to theGreen Bond Principles accepted in the ESG marketplace isrequired. The review includes an evaluation of the intended use© 2021 MOBI — FSSC Business White Paper

18

FSSC Use Casesof proceeds, the process to evaluate potential projects for
eligible sustainability criteria, management of proceeds forcompliance with issuer’s Green Bond framework, which outlines
their intended green objectives, and reporting on the actual
allocation of proceeds and relevant impact metrics.
The evaluation criteria forthese offerings is fairly
standardized, so a database
schema development withinblockchain is a viable option
to bring down transaction
costs for users.

Most SPO providers have proprietary systems for capturing anddisseminating the pre-issuance SPO, but the evaluation criteria
is fairly standardized, so a database schema development
within blockchain is a viable option to bring down transaction
costs for issuers. For post-issuance reporting, distributed ledger
technology offers an immutable and transparent way todemonstrate impact. Standardization of impact reporting is
beginning to occur, including by the Partnership for Carbon
Accounting Financials, which adopts uniform approaches byasset class. For passenger vehicles, direct emissions from fuelcombustion and indirect emissions from electricity generation
for EVs can be captured on blockchain and measured inrelationship to the targeted reductions stipulated by an issuer in
its green bond issuance framework. In-vehicle telematics canprovide much more accurate information on miles traveled andgreenhouse gasses emitted (for gasoline-powered vehicles)
directly from the vehicle to the blockchain. Electric vehicles(EVs) can report on miles traveled and electricity consumed,which can then be correlated with the emissions generated at
the grid level. This kind of real-time impact reporting would
enable green bond issuers to efficiently provide a transparent,
immutable record of compliance with their stated goals, adding
efficiencies to the market.
Some lenders have used blockchain in the structure, registration,
sale and distribution of green bonds. While some real estatetransactions have used tokenization to record ownership19© 2021 MOBI — FSSC Business White Paper

There is a great opportunity
for blockchain applications to
disrupt the real estatetransactions space.

transfer (St. Regis Hotel), few parties have thus far used
5
blockchain for payments and settlements. Because securities
issuances require many intermediaries and delayed settlement
times, there is great opportunity for cost reduction, investment
democratization, and the ability of smaller green bond issuers toenter the marketplace using blockchain.
As green bond issuances become more prevalent, the ability todemonstrate compliance with green bond standards will
become a valuable tool.

V2X and Securitization
With hundreds of millions ofconnected vehicles on theroad worldwide, both OEMsand vehicle owners haveaccess to massive amountsof data, which will only
continue to grow over time.
This data is valuable and canbe monetized in various ways.

More than 650 million vehicles are already connected to OEMs
worldwide. This figure will only increase in the coming years withcars equipped with 4G SIM cards and soon 5G. Thus, masses
amounts of data related to vehicle usage will become apotential new source of revenue for OEMs but also for vehicle
owners thanks to the General Data Protection Regulation(GDPR) in the EU, which will give these owners a right ofownership and access to data. Information on road and mobility
infrastructures, cars and drivers will be available in deferred
time and/or in real time due to the advances in connectivity,
artificial intelligence, blockchain, and other technologies.
Several players in the vehicle data marketplace already collectthe data from certain OEMs and resell it to other OEMs, local
mobility authorities, mobility operators and others.

5. Robert Hackett, “Ritzy Aspen Hotel Sells Real Estate on Blockchain with Indiegogo’s Help”,
Fortune, August 2018, https://fortune.com/2018/08/23/hotel-real-estate-aspenblockchain-ethereum-st-regis-indiegogo/© 2021 MOBI — FSSC Business White Paper

20

FSSC Use Cases
Thanks to advances inconnectivity technologies,
vehicles will be able toexchange data between
themselves and surrounding
infrastructure in real-time.
This rapid data exchange andoverall data availability can beleveraged within many use
cases.

For real-time data, thanks to 5G and the low transfer latency
that this technology offers, it will be possible to exchange
information in V2X (connected vehicle-to-everythingcommunication) and in particular between vehicles to improvesafety and the driving of semi-autonomous, even autonomous
cars and supplying information to DAS-type equipment, forexample: exchange of information to avoid a collision in theevent of a road accident or a sudden traffic jam, payment for a
new road infrastructure which will be financed on the basis of
its use per kilometer by motorists, etc.

The combination of fastvehicle connectivity, easily
communicable geolocation,and secure identities will allow
for micro-tolling and dynamic
pricing. With micro-tollingproviding predictable cash
flows, those revenue streams
can then be securitized,
ushering in a massive new
asset class.

Vehicle wallets will be criticalto monetizing telematics data
in real-time, as they will beable to execute payments
associated with transactingthat data. Moreover, smart
contracts will enable new roadand infrastructure pricing
systems.

Vehicles equipped with an on-board hard-wallet will be able tomonetize in real time this information transmitted peer to peer
thanks to the execution of smart contracts giving payment
orders and making financial settlement. These smart-contracts
will distribute payments between the various stakeholders of thevehicle and data infrastructure according to the stipulations of
the agreements integrated into the smart-contracts. In thismodel, all stakeholders, OEMs, vehicle owners, data
infrastructures, and others are encouraged to cooperateaccording to this model of intelligent “coopetition”. This model
makes it possible to avoid recreating data oligopolies as has
been done on the Internet with Google, Apple, Facebook, andothers.

Non-Risk-Based Credit

In addition, smart contracts will make it possible to isolaterevenues and thus the possibility of financing of new road andmobility infrastructures, including through securitizations.
Global transportation infrastructure is expected to require over6
$94T in investment between 2016 and 2040. With the relatively
6. Oxford Economics, Global Infrastructure Outlook; Infrastructure investment needs 50
countries, 7 sectors to 2040”, https://www.oxfordeconomics.com/recentreleases/Global-Infrastructure-Outlook.

21© 2021 MOBI — FSSC Business White Paper

Blockchains allow for thecreation of a digital identity,
unlocking the real-time
potential to use otherindicators to build a
reputational asset profile forotherwise credit-invisible
consumers.

small exception of tolled highways, marginal cost pricing isn’t
possible for much of this infrastructure. Hence, much of theworld’s transportation infrastructure is provided as a public
good, leading to chronic infrastructure financing deficits andinequities in use and payment burdens. The combination of fastvehicle connections, enhanced positioning, and decentralized
identities will permit efficient tolling for much of thisinfrastructure, predictable cash flows and ushering in a massive
new asset class available for financing through securitization.

The issuance of debt, at its core, is a statement of trust. In thepast seventy years, since the advent of bank issued credit cards,
financial institutions have used credit scoring as a proxy for risk
analysis since it allows for instant credit-decisioning.
Unfortunately, for those who have thin or no credit files, their risk
profile is not easily quantifiable and is, therefore, priced higher
than might otherwise be the case.
Credit scores are lagging indicators of risk, using data that may
not be current. They are also built on inductive reasoning andassuming that the past is a predictor of the future. Blockchain
provides a way to establish an individual digital identity,
unlocking the real time potential to use other indicators (such ascell phone payments that could be recorded on chain) to build
a reputational asset profile for otherwise credit-invisible
consumers. This strategy may be particularly useful in emerging
economies that lack trusted credit scoring models.
The ability to track non-traditional sources of credit, such as
payments for utilities, phones, or rent, can make credit more

© 2021 MOBI — FSSC Business White Paper

22

FSSC Use Cases
For thin-file applicants, thisprovides accessible credit ina system otherwise
unavailable to them. This may
be particularly useful inemerging economies without
credit scoring infrastructure.

readily available to these consumers who are not active
participants in the conventional financial system. The
microfinance movement facilitated peer-to-peer lending withfunds from developed countries flowing to borrowers incountries with less developed financial markets. Allowing for thedevelopment of an alternative risk assessment process, using
data captured on blockchain, could bring together a wide poolof potential lenders and borrowers.

Fractional Ownership of Mobility Assets
Today, cars in metropolitan
areas are used only 5-10% of
the time. The rest of the time,
the cars sit still in lots or onstreets. These vehicles areproductive capital, but sit
unmonetized and unutilized
for over 90% of the time.

The vehicle has been a symbol of emancipation and freedom formost of the 20th century. Freedom of movement has become
available to almost all. The growth in vehicle sales over the past
20 years, particularly in China where sales of new cars haverisen from 0.6 to 25.3 million annually, demonstrates theimportance of this freedom of movement.
The vehicle makes it possible to get from point A to point B
relatively efficiently, to find a job more easily, to go on vacationor to go out on weekends. The car is a sign of freedom and alsoa display of social status for some. But today, cars inmetropolitan areas are only used 5% to 10% of the time. The restof the time, cars remain immobilized in parking lots or areparked in the streets. In addition, private car travel isincreasingly restricted or banned in major cities in order toreduce traffic jams, make way for public transportation or bikes,
and to cut down on carbon emissions. In this context, we cansee that the current model is not totally satisfactory for theowners or for municipalities.
The market is increasingly moving towards transportation models
where travel is consumed as a mobility service. Different23© 2021 MOBI — FSSC Business White Paper

A fractional ownership model
may prove to be a costeffective and desirable
alternative to vehicle
ownership for many.
Blockchain technology allows
for the immutable recording
and cost accounting between
parties, and the tamper-proof
recording of shared-usage
rights and restrictions.

transportation models appear on the market, such as car sharing
and new or used car rental of varying duration. However, we
expect that outright ownership may remain a popularpreference. The desire to take your own car for a weekend
getaway may remain, for many, the first choice for a long time.
The development of a fractional ownership model (ownership ofan vehicle by multiple individuals, each of whom has specified
ownership and usage rights) may respond to the low rate of use
of vehicles while honoring, to a certain extent, the desire to own
a car. Such a model becomes possible with the use ofblockchain technology, including payments directed throughsmart contracts. We can also imagine a model of individual or
corporate fractional ownership of autonomous vehicles or robot
taxis.
With the capacity of immutable, and tamper-proof records andmeasures, cost accounting between owners is done
programmatically. Owners through their fractional ownershipright get a shared use right and are liable for their obligations
based on their share of ownership and the use they make of thatvehicle.
This model is virtuous because the users of the cars are also theowners. They are therefore collectively responsible, as opposed
to a classic car sharing model provided by a platform operator
where nobody is responsible. In addition, in the case of the
sharing models managed by OEMs, the OEMs are obliged toprovide capital and/or financing to finance the cars, with very
poor financial performance so far.
Blockchain technology has the potential to make it possible todevelop fractional ownership on a scale larger than previously
experienced.

© 2021 MOBI — FSSC Business White Paper

24

Conclusion

Bibliography

Blockchain technology is strongly positioned to create widespread shifts within the
traditional processes of vehicle finance. The widespread presence of trust services
throughout those processes are precisely where distributed ledger technology
provides value. The potential for smooth, frictionless operation of multiparty
applications by ensuring the availability of trusted shared data is enormous.

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-yourcustomer-rules-and-guidelines/.

Blockchains provide the fundamental technology, but multi-party applications
require the presence of multiple parties interacting. Understanding and creatinginteroperability between those parties is precisely the focus of the MOBI FSSC WG.
The FSSC Standard leverages blockchain to provide a trust layer, where all parties
are able to validate each other’s identity, leveraging an immutable ledger thatallows for the verification of the authenticity of data, resulting in a shared platform
for deploying interoperable applications.

Experian. “Automotive Industry Insights Finance Market Report Q4 2020.” March 2021.
https://www.experian.com/content/dam/marketing/na/automotive/quarterlywebinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotivemarket.pdf.

The applications and use cases enabled by such a platform are precisely the focusof this paper. Today, each of the use cases discussed in this paper are impeded byoperational inefficiencies, which are all caused by the need for trust services.
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 andoperational efficiencies are manifold.

25© 2021 MOBI — FSSC Business White Paper

European Central Bank Ecosystem.“The Social and Private Costs of Retail Payment
Instruments: A European Perspective.” September 2012.
“https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp137.pdf.

Hackett, Robert. Fortune. “Ritzy Aspen Hotel Sells Real Estate on Blockchain with Indiegogo’sHelp." August 2018. https://fortune.com/2018/08/23/hotel-real-estate-aspenblockchain-ethereum-st-regis-indiegogo/.
Krier, Charles, and Wagener, Katharina. PayTechLaw. “eIDAS and AMLD5: A perfect match?”
September 2020. https://paytechlaw.com/en/eidas-and-amld5-a-perfect-match/.
Oxford Economics. “Infrastructure investment needs 50 countries, 7 sectors to 2040.” July
2017. https://www.oxfordeconomics.com/recent-releases/Global-InfrastructureOutlook.

© 2021 MOBI — FSSC Business White Paper

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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 inblockchain, distributed ledgers, and related technologies.
MOBI is creating simple blockchain-based standards to identify vehicles, people, andbusinesses 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 lesscongested. 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