27 Jun Preparing for Blockchain in Financial Services
When we think of blockchain, we often think of cryptocurrencies, but it’s more than just Bitcoin. In fact, a Deloitte survey of over 1,000 global executives found that 74% see a compelling business case in blockchain, and 84% expect mainstream adoption. And, we’re not just talking futures—34% already have a system in production and 41% will deploy an app within a year. The unique characteristics of blockchain technology—notably, providing a secure, decentralized ledger that holds a verifiable and irreversible record of every transaction—are particularly appealing for the financial services industry.
Examples of potential use cases for blockchain in financial services
Many financial services organizations are exploring blockchain technologies for a variety of applications, including:
- Cross-border trading—The multi-step process of sending international payments is complex, costing both time and money. estimates that blockchain could reduce cross-border payment transaction costs, which average around 8% of transfer today, by 40-80%, and can speed the 2-3 day process to a mere 4-6 seconds.
- Security offerings—A “security token offering” or STO records ownership information of an investment product on a blockchain, issued as a token. An STO can be used to relatively easily—compared to the arduous process of the traditional IPO—tokenize any asset or financial instrument for online trading, giving smaller businesses an opportunity to raise large sums of capital without paying huge fees.
- Stock trade settlement—Even with digital trading, the settlement process is often still paper-based and requires intermediaries, clearances, and regulatory processes that can take days to complete. Using blockchain could speed the process and improve security.
- Identity management—Traditionally, identity is verified based on physical, often government-issued documents. But fraud is rampant. According to a study by Javelin Strategy and Research, 16.7 million Americans were affected by identity theft in 2017, costing them $16.8 billion. Blockchain enables unalterable and verifiable digital identities, called self-sovereign identity, that allow anyone to prove who they are while maintaining their privacy rights.
And it doesn’t end there. In fact, virtually any financial or insurance process or offering can benefit from the security, transparency, and speed of blockchain technology. And, as the technology matures, we’re sure to see more and more applications emerge and become mainstream.
The infrastructure of blockchain
But implementing blockchain requires having the right infrastructure in place. There are three key elements to the decentralized blockchain landscape. First is storage. You need to store tokens, structured metadata, and files, and all the data must be stored indefinitely. Next is processing. Because of the distributed nature of blockchain, all nodes on the network are involved in verifying and recording each transaction posted to the blockchain—and this requires a lot of processing power. And finally, you need sufficient bandwidth among all the nodes of the network. So, if you’re considering blockchain to transform your financial services organization, make sure your infrastructure requirements are built into the plan from the very start.
BCM One is your trusted infrastructure partner
When you work with BCM One, you get a trusted partner with deep financial services expertise and range of technology solutions, including cloud, managed connectivity services, unified collaboration, network monitoring and management, managed security, and more. We can work with you to plan, design, deploy, and manage a blockchain-ready infrastructure. Contact us to learn how BCM One can help you.