Moreover, embracing emerging technologies require rigorous validation, verification and signoff by internal compliance teams, which are bound to be extra wary of the technology in light of the hack against blockchain VC firm The DAO, in which perpetrators exploited a vulnerability to steal $60 million worth of Ether digital currency. Boards’ heightened sensitivity around cybersecurity will slow the timeline for most banks. "This is totally new technology and has to be bulletproof," Bussmann says.
Bussmann says blockchain is more likely to be launched more fully into commercial production in supply chain, real estate, healthcare and governments, particularly for implementations of IoT and other solutions. Goldman Sachs projects blockchain will yield billions of dollars in both incremental revenue and cost savings in the so-called sharing economy, insurance and utility sectors over the next decade.
Blockchain uptick on other industries will put more pressure on financial services to join the field but not for 12 to 24 months, Bussmann says. Indeed, IBM says it expects 65 percent of large banks to have blockchain projects in production in three years' time,
Countering the contrarian
Bussmann's caution may seem surprising when you consider the numerous headlines regarding blockchain, whose testing in financial services is happening so breathlessly that it hard to keep track of who is doing what. In recent months:
- Bussman’s former employer UBS is working with IBM to replicate the entire lifecycle of an international trade transaction on Hyperledger's Fabric blockchain.
- Commonwealth Bank of Australia and Wells Fargo & Co completed the first cross-border transaction between banks using multiple blockchain applications, resulting in a shipment of cotton to China from the United States.
- Eight financial services companies, including JPMorgan Chase & Co and Barclays Bank, completed the test of an equity swaps post-trade transaction using blockchain.
Bussmann says such scenarios are encouraging and essential for financial services organizations that wish to become competitive early in blockchain. "The earlier they are part of the learning curve the earlier they can learn about blockchain's limits and benefits to reduce uncertainty, which will attract business,” Bussmann says.
David Schatsky, a managing director at Deloitte.
Other consultants following blockchain closely agree. David Schatsky, a managing director at Deloitte, says the fact that the financial services and banking sectors are putting the most money into blockchain means they will likely yield the most production and applications of the technology than any other industry.
However, Schatsky says that banks will have to overcome the obvious regulatory and compliance hurdles, not to mention legacy trade finance and payment systems that have served them well for decades. "If you have a system that works, the hurdles that are involved in replacing it are so high that it takes a lot to make a bank want to rip out a system and replace it,” Schatsky says.
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