Nine ways blockchain could revolutionise financial services – Editions Financial
Nine ways blockchain could revolutionise financial services
There has been so much talk about blockchain as a ‘silver bullet’ for financial services that it can be difficult to differentiate hype from reality.
Here’s a snapshot of how blockchain, also known as distributed ledger technology, could convert the FS landscape.
1. Smoother regulatory reporting
As a immobilized record of transactions, blockchain has good potential in regulatory reporting, alleviating the cargo of EMIR and MiFID II requirements, for example. Deloitte has undertaken a proof-of-concept with Bank of Ireland, using the technology to produce a single customer view across the bank’s databases to aid MiFID II compliance.
Two. Seamless transfer agency
Blockchain could substitute intermediaries, creating a semi-transparent and direct link inbetween fund managers and distribution platforms. Fund unit transfers and ownership tracking inbetween funds and investors also could be undertaken on a distributed ledger.
For all financial services firms and users, blockchain could significantly improve payment transparency, efficiency, trust and security as well as reduce costs. Leveraging blockchain, Standard Chartered recently conducted a real-time, cross-border business payment in less than ten seconds (such transactions traditionally take an average of two days). It was finished with utter transparency of fees and foreign exchange using the Ripple network.
Four. Accurate and timely fund valuations
Blockchain improves accuracy in record-keeping and provides a time-stamped source of pricing data, which can be collective with service providers. This could significantly accelerate fund valuation and make it more sturdy.
Five. Quicker clearing and settlement
Blockchain could reduce the cost and time to clear and lodge the exchange of financial assets. Many FinTech firms are investigating this. For example, India’s uTrade has launched uClear, a blockchain solution for real-time clearing and settlement of equities and futures. It permits any exchange-matching engine to clear trades post-execution through a private blockchain with real-time risk management.
6. Clear ownership and transfer of assets
Blockchain could help firms to monitor the status and location of pledged collateral assets. UK post-trade blockchain start-up SETL is working with financial administration company Computershare to establish securities ownership registers using distributed ledger technology.
7. Improved Know Your Customer processes
Blockchain services such as KYC-chain are helping financial firms streamline KYC – a labour-intensive and error prone process – across their organisations, reducing the duplication of workload and enlargening trust. KYC utilities (collective repositories) are investigating whether blockchain can improve their offerings, potentially providing KYC updates to banks in real-time.
By providing finish remittance information to all parties in a transaction, distributed ledger technology should significantly reduce the time and manual effort involved in payment reconciliation. It will also reduce errors. Ultimately, straight-through reconciliation will be of benefit to banks and their corporate clients.
9. Electronic trade finance
Blockchain is bringing the paper-based world of trade finance into the 21st century. Financial innovation company R3 and more than fifteen consortium member banks have finished two prototypes demonstrating how distributed ledger technology could automate areas of trade finance. The banks designed and utilised self-executing transaction agreements – wise contracts – to process accounts receivable purchase transactions and letters of credit.
This is just an overview of some of the areas where blockchain could revolutionise financial services. Certain banks are reportedly working on up to one hundred fifty individual proofs of concept, so the technology’s potential is clearly vast.
To understand more about blockchain and download our latest report Blockchain: Connecting the Links, outlining what we believe blockchain means for FS firms and marketers, visit our blogpost Blockchain: Why FS marketers must get with the programme.
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