Blockchain (or distributed ledgers) offers a new approach to data management and sharing that is being proposed as a solution to many of the inefficiencies afflicting the industry. The prize on offer is a new architecture, where all capital market participants work from common datasets, in near real time, and where supporting operations are either streamlined or made redundant.
Technology experts in Fintech start-ups, incumbent market infrastructure providers and banks are working on the underlying technology and its potential uses.However, the journey from today’s system to a new technological paradigm will take time. The obstacles to be overcome are significant, and it is far from clear what exactly will ultimately emerge.
We see three routes to the adoption of the technology:
- Challenger disruptions developed outside of the core capital markets ecosystem. We expect to see these in the next 18 to 24 months
- Collaborative efforts to shift the existing value chain to blockchains. While such efforts are already starting, with potentially massive benefits, it is likely to take more than ten years to reach core parts of the system.
- Mandated policy where supervisors direct the industry to introduce new market infrastructure, so that costs are reduced or that operational or systemic risk is lessened.
In order to work together to shape a new future, the industry needs to take a collective view on the potential of the technology. It must embrace this potential, show patience with its development and invest in various innovative solutions to bring it to bear.
It is up to major established players in the market to work with innovators to develop standards, while also preserving the existing strengths of the ecosystem, and navigating the complex worlds of regulation and legal oversight.
A Reality Check: Blockchain in Financial Services
These days, no meaningful conversation on financial services innovation can be had without a mention of blockchain. It is believed by many to have the potential to address many limitations of current financial services processes and infrastructure by providing an irrevocable record of identity and provenance, and reconciling events so that there is a single version of truth. But with potential and interest also comes hype and confusion.
In this webinar, industry experts cut through the hype and separate myth from reality. They explore characteristics of blockchain technology that make it suitable for financial services applications, and what current industry issues can really be solved by distributed ledger technology.
Oliver Wyman Partner Ben Shepherd illustrated the recent work around the study “Blockchain in Capital Markets – the prize and the journey” in collaboration with Euroclear.
Click here to view the webinar
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