Like most outlets commenting on the current financial services landscape, we’ve dedicated a hearty dose of airtime to blockchain technology in recent months. We’ve outlined what blockchain is, touched on who’s investing in related technologies, and also acknowledged the idea that the word itself is in danger of becoming as oft-repeated but little understood as “innovation”.
And while our own interest in blockchain technology extends beyond industry analysis, it’s easy to understand the closing sentiments of a new report from White & Case, which urges those who stand to benefit from blockchain tech to be more than mere observers in the current climate of experimentation into its uses.
The report – Beyond Bitcoin: The blockchain revolution in financial services – outlines the impressive level of investment blockchain-based research is poised to attract. Banks spent $75 million exploring the tech in 2015, doubling the level of spending from the previous year. By 2019, however, it is estimated they will be pouring in five times the current levels of investment – somewhere around the $400 million mark. The numbers are more dramatic for venture capitalist firms, who invested almost half a billion dollars in blockchain research in 2015.
In line with many other analyses of blockchain’s potential implications, White & Case’s paper is unequivocal in its enthusiasm, stating, “It is tempting to analogize this transformation to the computer processing revolution of the 1980s, but that would understate the extent of the coming changes … For example, the steps required to complete a securities trade are essentially the same today as they were 50 years ago; computers only increased the trading speed. Blockchain, by contrast, fundamentally reorders the mechanics of financial transactions in ways we did not envision just a few years ago.”
The paper goes on to pinpoint seven of the areas most closely connected with current blockchain research, from trade execution and settlement, to supply chain management and smart contracts. Intriguing examples of the technology’s potential uses include more secure escrow services, cross-border business payments that take hours instead of days, and even smart contracts for musicians that allow them to trace any and all uses of their intellectual property without dependence on intermediaries. The possibilities are seemingly endless.
Yet, while the report does not stand alone in excitedly speculating what shared-ledger technology might be used for in the future, it does strike a fresh note is in its implication that all those planning to ride the blockchain train had better jump on board now. As well as concluding that “it is critical for institutions to actively participate in this cycle of innovation and disruption to ensure that they understand how technology is shaping the sector,” the report adds: “We stand at a time when we can predict with reasonable certainty a multitude of changes and developments from blockchain-based solutions. Now, at the advent of the blockchain revolution, the challenge that lies ahead for financial services and FinTech firms may not be so much fashioning solutions as it is identifying problems that will require new and innovative thinking. The most successful firms will be those that take advantage of these opportunities to harness FinTech and the blockchain revolution.”
As the conversation around blockchain technology continues to generate fresh interest, the sense remains that its implementation is still some way off. But, according to White & Case’s findings at least, those who plan to come to the party late might just find themselves underprepared – and unable to get a foot in the door.
For an introduction to blockchain technology, you can read our two-part series on the subject.