We have heard about it for a very long time, and now, the financial services are taking blockchain to the next level. Currently, the industry spends about $1.7 billion annually on the distributed ledgers that are best known for being the base of digital currencies.
The budgets that have been spent on blockchain increased more than 50 percent last year, with statistics showing that 1 in 10 banks and other firms are spending in excess of $10 million on blockchain technology. Complimenting these statistics, the number of employees working on blockchain initiatives doubled last year, demonstrating that finance is taking the technology more seriously in business operations.
Blockchain Innovation in Financial Services
So, what does this increase in spending mean for the financial services? There are benefits of finance taking the plunge into the world of blockchain, since the potentiality for it to serve the industry appears to be limitless and ultimately have a solution for numerous problems the financial and banking sectors encounter regularly.
“Billions of individuals and businesses are served and trillions of dollars are moved around the antiquated global financial system each day. Still heavily reliant on paper, albeit dressed up with a digital façade, there are many issues with this system that cause added expense and delays as well as make it easier for crime and fraud to cripple it. Despite the financial industry’s resistance to change, blockchain and its expected benefits make it worthwhile.” – Forbes reports.
Even though blockchain is still a relatively new technology, it is transforming finance and banking as we know it. For example, blockchain is paving the way for innovation in the financial services because of its potential to reduce fraud. In the financial world, this is getting a lot of attention since most financial intermediaries such as stock exchanges and money transfer services suffer from economic crime every year. With cost reduction emerging as the biggest driver of blockchain investment and development for financial service firms, implementing blockchain technology into business strategy is getting easier and easier for institutions across North America.
Overcoming the Hurdles of Blockchain in Finance
Before the finance industry, or any industry, can realize all the extraordinary opportunities blockchain technology offers in the banking and financial services landscapes, there are still hurdles that need to be overcome.
“Before blockchain can change the world of financial services – from remittance, trade finance, securities trading and insurance – it will have to overcome six key challenges: Complexity and scale, regulation, interoperability, resources, culture, and lock-in.” – CTMfile reports.
The blockchains that would be used by financial institutions would need to comply with privacy laws of today and the future and need to ensure the safety of the data it collects when implemented. There are still many questions regarding regulatory oversight for this new technology that needs to be sorted out before banks and other firms successfully deploy it. With the typical top-tier bank now having around 15 full-time employees working on the technology, any form of blockchain used in this sector would need to handle an extraordinarily large data set, therefore scalability is important in overcoming hurdles preventing successful deployment.
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Jenny Schecher is a Client Services Director & Social Media Manager at The Millennium Alliance. Jenny is an avid contributor to our blog, Digital Diary, as well as all social media platforms. When she is not writing about digital transformation and technology, she is working with her team to make visions come to life at our events. (and eating all of NYC's best food.) Follow her on Instagram: @jennyschecs or find her on LinkedIn!
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