Banking and Blockchain

Similar to the Internet, the blockchain technology has a disruptive potential to drive efficiency, save billions and reduce risk for the banks. However, much of the underlying possibilities have been driven by hype rather than facts, leaving the core tangible costs/benefits behind.

Blockchain has a disruptive potential to drive efficiency, save billions and reduce risk for the banks.

An interesting report has been published lately by Accenture Consulting. Let us take a look at the key takeaways from the value analysis on blockchain for investment banks.

According to the report, the most fundamental opportunity for banks is to repoint key operational, risk and finance systems to blockchain-based, shared data platforms. This would allow decommissioning of large parts of their processes and data infrastructure. Thus, it would mean reduction in costs and efficiency gains.

The most fundamental opportunity for banks is to repoint key operational, risk and finance systems to blockchain-based, shared data platforms.

After analyzing 8 of the world’s largest (in terms of revenue) investment banks, the researchers found out the following possibilities for the banks if blockchain would be applied.

70% potential costs savings on central finance reporting. This would be achieved as a result of more streamlined and optimized data quality, transparency and internal controls.

30 to 50% potential cost savings on compliance. This is applicable at both product level and centralized basis due to improved transparency and auditability of financial transactions.

50% potential cost savings on centralized operations. The most obvious examples could be KYC and client onboarding due to more robust digital identities and mutualisation of client data among participants.

50% potential costs savings on business operations. This includes trade support, middle office, clearance, settlement and investigations by reducing or eliminating the need for reconciliation, confirmation and trade break analysis as key parts of a more efficient and effective clearance and settlement process.

Summing all up, with reference to Accenture, at today’s cost structure, this would result initial savings of $8 billion on a cost base of $30 billion. However, one must note that these are only optimistic predictions. A proper regulatory framework must be established, as well as banks must be driven to move forward and explore new opportunities.

Full report can be accessed here.