August 16, 2016Michael Sutherland-Shaw
Blockchain, the technology behind bitcoin, will become the “beating heart” of the global financial system, according to a new report from the World Economic Forum.
The Future of Financial Infrastructure, looked at nine uses of blockchain across six separate activities in financial services – insurance, payments, market provisioning, investment management, capital raising, and depositing and lending – to identify how processes in each could be transformed by the emerging technology.
The report, which compiled more than 12 months of research, also considers how blockchain technology could be used to drive innovation within emerging industries such as, biometric, cloud computing, cognitive computing, and robotics.
“The financial services infrastructure will be radically changed by blockchain technology. It will redraw processes and call into question policies that are the groundwork of today’s business models,” said Jesse McWaters, Project Lead, Disruptive Innovation in Financial Services, World Economic Forum.
OK, but before we get too far, what exactly is blockchain technology?
Short answer: A public ledger of transactions that no one person or company owns or controls.
What can implementing blockchain do for the financial system? According to the report, lower operating costs, make financial services more secure as well as increase accessibility.
And we can’t forget about the financial processes that could be replaced with blockchain technology.
- International payments and wire transfers;
- Repacking of mortgages;
- Compliance reporting of banks to regulators
“Rather than stay at the margins of the finance industry, blockchain will become the beating heart of it,” said Giancarlo Bruno, Head of Financial Services Industries, World Economic Forum. “It will help build innovative solutions across the industry, becoming ever more integrated into the structure of financial services, as mainframes, messaging services and electronic trading did before it.”
This all sounds great, so why aren’t all financial institutions jumping on board?
Like any new innovative technology, there are a number of risks (ie. errors in design gaps in security) and factors (formal legal framework) that need to be addressed before full adoption. In addition, for blockchain to work, financial institutions need to work together and understand that this technology will greatly change the global financial system.
For McWaters this is just the beginning. He said, “Our research looks to the future state of blockchain technology and by starting this conversation we believe this will help further build perspective for what is to come.”
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