Financial Services are Spending Billions on Blockchain
The emergence of digital assets has set the ball rolling for technological advancement in finance and other related services. Blockchain is notably the one technology that has made it possible for digital assets – such as Bitcoin – to thrive. Blockchain provides a digital ledger that is secure and non-interferable when it comes to transactions between several parties.
Although the financial services industry consisted of the worst critics of further development and use of digital assets, they have since changed their opinion and embraced both these assets and their related technological platforms. Blockchain has since been described as a game changer in the financial services industry, displaying top-notch security and efficiency within financial transactions.
A recent report by Greenwich Associates indicates the financial services industry spent $1.7 billion on blockchain distributed ledger tech. Banks and other financial institutions have increased their spending on blockchain distributed ledgers, up 67% compared to last year.
This translates to about an excess of $10 million in budget spending for one in every ten financial institutions aligning itself for commercial distributed ledger technology, or DLT. Despite the frenzy, implementing the distributed ledger systems has not been an easy task. The development process takes years for both financial and human resources departments before going live. The number of employees working on these projects also doubled, emphasizing the complexity of the implementation process.
Regardless, more institutions are gearing up to implement DLT. There is significant advancement occurring in the realm of Blockchain; keeping up with each new development in real time is proving difficult for most institutions. However, more than three-quarters of current projects are scheduled to go live in under 24 months.
In another study conducted by Deloitte LLP, 74% of the 1,056 global companies interviewed acknowledge that blockchain technology is compelling for business, while 34% of respondents already have systems in place. 41% of the studied population intend to deploy a blockchain system within a year, while 40% will invest $5 million more for DLT.
Blockchain remains at the top of the future strategy list for a significant fraction of companies; 43% respondents according to the Deloitte LLP report. This begs the question: What are the benefits of a distributed ledger technology for banks and financial institutions? Below are the top 3 benefits of DLT systems.
- Instant transactions and settlements
Unlike previous transaction platforms, blockchain will remove the need for various parties within the bank in order to finalize exchange. Instead of waiting a week or more for your transactions to be settled, all the time that’s required now is a few seconds – removing the wait and saving money in the process.
- Peer to peer transaction
Digital assets eliminate the need for intermediaries during transactions. Banks are looking to achieve this as well by making it possible to move money around without intermediary parties such as custodian banks. This will make transactions easier and ultimately less expensive.
- Reduced risk
When money changes hands before reaching the end consumer, it is exposed to several risks between the parties involved. However, by making transactions instantaneous, secured within a peer to peer environment, the transactional risks are eliminated.
As Blockchain technology continually advances, the financial sector is set to experience drastic operational and management changes in the coming years.