People in the finance or related industries, have been talking a lot about Blockchain this year and there is a simple reason behind it: 2016 has been a good year for the technology, with opportunities arising to prove its value to, amongst others, the financial sector by running live pilots: across cross-border payments, credit letters, data management, tracking trading activities, etc.
But what is the real future of Blockchain? How will it be used in finance?
Experts both in finance and technology have been monitoring and forecasting the next steps of the technology, which is currently considered to be in its infancy. This disruptive technology prompts a range of questions regarding regulation and standardisation that needs to be addressed, in order for it to really change the current financial landscape. If the FinTech industry continues to develop the technology to offer solutions to the current problems (e.g. cutting the middleman out of the process with the use of smart contract) a consensus amongst experts is reached recommending the industry to be cautious. Some experts suggest using the technology gradually internally, for example in data management, hoping it will be the best way to create a good foundation for great innovation.
When can we expect a shift to Blockchain?
The FinTech industry has launched successful pilots throughout 2016, and is planning some more (e.g. Visa is looking for banks to participate in its pilot regarding cross-border payment) for the remainder of the year, regardless those successes are not considered conclusive enough for the Financial industry. The main reason is that these pilots have not been tested on the whole market but on only with a ‘small’ number of participants. However, the small victories that have already been achieved (e.g. R3 experiment to simplify reference data processes and data for corporate bond issuance) within the Financial Service Industry shouldn’t be brushed aside but seen as new methods and possibilities for the future. Therefore it is quite difficult to estimate when Blockchain will reach its full potential. It is believed that a possible route for the technology to make its way in finance processes will be deploying it to underpin processes in new markets (e.g. BNP Paribas using Blockchain to help private companies issuing minibonds via crowdfunding platforms following the French government’s initiative, allowing private companies to issue minibonds).
When the experts believe that Blockchain won’t be mainstream in finance they open the opportunity for this technology to be in other areas such as healthcare, music or even energy. The current processes in place in financial firms are very complex and it can be risky, potentially damaging, if we were to make the transition to Blockchain hastily. Although the benefits can’t be disputed in terms of customer satisfaction, cost and profitability, Blockchain has yet to prove itself to many people but when the technology reaches maturity it is believed to be a mainstay within finance.