Nine out of ten executives in the financial services sector say that by 2026 blockchain will be a mainstream part of strategies and operations.
Since the rise of cryptocurrencies, with Bitcoin the best known example globally, blockchain – the technology backbone behind the phenomenon – has been touted as a disruptive force in the financial services industry. Several researches have over the past period highlighted the mega potential of blockchain, from the ability to redesign banking processes (e.g. account management in retail banking) or revamp the way transactions are managed (e.g. smart contracts), to more strategic drivers, such as optimising asset management or facilitating cooperation within wider value chains.
Against the backdrop of the rapidly emerging technology, interest for blockchain is soaring. According to a new survey by Synechron among 200 financial services business and IT decision-makers across the US, UK and Europe, over two-thirds (67%) of companies in the industry are actively engaging in blockchain initiatives. 13% of the senior executives said they are assembling a blockchain team, and nearly one in five (17%) have identified a use case for the technology – with respondents citing Global Payments, Trade Finance, and Know Your Customer (KYC) as the most popular areas they are looking to operationalise using blockchain. Furthermore, 15% of respondents said they have already built a pilot blockchain application, either on their own or with a counterparty, and nearly a quarter (23%) are currently participating in a working group on the technology.
In terms of funding, 87% of respondents state that there is sufficient budget to implement blockchain projects, while an even larger group, 94%, believe that key leaders (board members) have bought into developing blockchain projects.
Blockchain to become mainstream
On a more long term outlook, nine out of ten executives (89%) say blockchain-based technologies will be in everyday use in the financial services industry by 2026. The finding suggests, according to the authors, that despite various levels of action on blockchain initiatives, the majority of financial services organisations believe in the long-term, innovative potential of blockchain and are merely calculating how to take action factoring in business unit, use case and resources to achieve maximum business value. “It is clear that many financial services firms are either seriously considering how to utilise blockchain within their organisation or are already putting this technology into practice”, comments Faisal Husain, CEO of Synechron.
As with all new technologies that enter the stage, the rise of blockchain comes with several challenges that need to be overcome, highlights the study. A lack of human resources is cited as the biggest implementation challenge, with 70% of the manager respondents who took part in the survey stating they do not believe their organisations currently have enough equipped talent. Besides recruiting and keeping the right people on board, technical considerations related to the technology is the second most highlighted obstacle to progressing blockchain maturity. Mainly, 29% said their most important issue is interoperability (one blockchain solution being unable to integrate with another using a different underlying infrastructure), followed closely by privacy (21%) and scalability (21%).
Regulation comes third: respondents said that uncertainty, or inconsistency, around the (international) legal landscape surrounding blockchain may slow progress, as well as bring rise to higher implementation costs. Almost 25% said they were waiting for regulatory guidance on blockchain before taking action; however, perhaps, following recent regulatory guidance from FINRA, that may begin to change.
“Businesses will need to assess carefully how they approach each individually, and this will require knowledge across these areas to make the most strategic decision on how to proceed and to take action”, explains Husain.
To help banks and insurance firms with embracing blockchain, Synechron, a global consulting and technology provider to the financial services industry, last year launched a special ‘Blockchain Accelerator’ programme aimed at supporting the fast track development of concepts and prototypes.
Beyond financial services
Although the majority of blockchain headlines goes to improvements in the financials space, the technology is predicted to have an impact across all sectors, including logistics (transactions / flows), energy (smart contracts), public sector (digital e-Government), housing (optimisation of mortgage processes) and so on. Late 2016 a consortium of companies in the Netherlands for instance joined forces to study the potential blockchain could have on the supply chain and logistics industry.