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Banks ready for real-world blockchain

29 September 2016  |  13322 views  |  0 Green light

Distributed ledger technology is set to move out of the test environment and into the wild next year, with nearly two thirds of banks expecting to be in production with full-scale, commercial blockchain projects by 2019, according to research from IBM.

While banks and financial market institutions have been busy joining consortiums and running trials of blockchain technology for everything from remittances to syndicated loans, until recently it was assumed that commercial implementations were some way off.

But of 200 banks surveyed by Big Blue, 15% intend to implement full-scale, commercial blockchain solutions in 2017 and mass adoption is not far behind, with 65% expecting to get there in the next three years.

And it is not smaller startups that are leading the way, the big banks with more than a hundred thousand employees are twice as likely to be "trailblazers" in blockchain, and most of these are retail-focussed players.

These trailblazers hope to reap the blockchain benefits in several areas: 83% of respondents expect to use the technology in reference data, 80% in retail payments and 79% in consumer lending. When asked which blockchain-based new business models could emerge, 80% identify trade finance, corporate lending and reference data as having the greatest potential.

There are still concerns, with 56% saying that regulatory constraints are a top barrier to success, with 54% citing immature technology, and 52% a lack of clear return on investment.

It is not just banks that are enthusiastically pursuing DLT; IBM has also quizzed 200 financial markets institutions, finding that 14% intend to implement full-scale, commercial blockchain solutions in 2017. Of the so-called trailblazers, seven out of 10 are focusing their blockchain efforts on four areas: clearing and settlement, wholesale payments, equity and debt issuance, and reference data.

IBM has been aggressively pursuing distributed ledger technology itself, bagging several major contracts with the likes of China UnionPay and Mizuho. Unsurprisingly, the tech giant says that mass adopters should jump in and follow the trailblazers soon in order to avoid falling behind and losing influence on how the sector develops.

Likhit Wagle, global industry GM, IBM Banking and Financial Markets, says: "There are many advantages to being an early adopter of blockchain technology. To start, first movers are setting business standards and creating new models that will be used by future adopters of blockchain technology. We’re also finding that these early adopters are better able to anticipate disruption, fighting off new competitors along the way."

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