Since the 2008-09 financial crisis, fintech and Blockchain have grown as much as customers have lost faith in the traditional banking establishment. Capitalizing on smartphone democratization, e-commerce boom, and social networks, fintech startups are redefining financial services.
Initially, Big Banks made their own cryptocurrencies and apps for customers. Now they see how their infrastructure can benefit from Blockchain technology.#EdgyLabs brings you 5 ways #blockchain can save #bigbanks billions!Click To Tweet
Now it’s Blockchain and Big Banks, not Blockchain vs. Big Banks
Blockchain is a decentralized, transparent, secure financial storage and transmission technology that no governing body has control over. It boasts an essentially forgery-proof digital database. Blockchain could prove to be a fabulous asset for or the banking sector, which relies on constant profitability.
According to a new study, Blockchain could generate dramatic efficiencies in the financial sector, save billions of dollars, significantly reducing risks and costs associated with transactions and data processing.
To understand the key impacts of this technology on the banking industry, McLagan, a financial consulting and benchmarking firm, in collaboration with Accenture Consulting, analyzed all the operational costs data of the eight largest investment banks in the world.
By contrasting 50 operational cost metrics of McLagan data with Accenture’s High Performance Investment Bank model, the study concluded that moving to a Blockchain-based database could help Big Banks save billions on their costly data management processes.
The report, Banking On Blockchain, A Value Analysis For Investment Banks, revealed 5 ways in which Blockchain can save banks billions of dollars.
Edgy Labs Brings you 5 Ways Blockchain can Save Big Banks Billions:
1. Recognizable Savings
Using a Blockchain database, savings opportunities arise more obviously in the financial reporting processes. Potential savings on central finance reporting costs could reach 70%, due to an optimized data quality, internal control, and transparency.
2. Taking Advantage of Limitless Databases
Due to robust digital identities and mutualization of client data, Banks could save up to 50% on costs of centralized operations (such as KYC and client onboarding).
3. Simple Regulatory Compliance
The costs of regulatory compliance, both on a product level and centralized basis, would witness a 30% to 50% decrease, due to efforts to enhance audibility and promote transparency of transactions.
4. Business Operations Cost Reduction
Savings on business operations (such as support, clearance, middle office, settlement, and investigations) could be as high as 50%, due to the elimination of the need for reconciliation between firms and an overall efficient settlement and clearance process.
5. Remove the Need for Additional Infrastructure
Blockchain has the potential to reduce infrastructure costs by $8 billion on a cost base of $30 billion for eight of the world’s ten largest investment banks. This equates to about 30% annual savings, and 50% for higher performers.
Banks are Buying in
Aite Group, LLC estimated that, in 2014, capital markets spent $30 million on Blockchain technology, $30 million in 2015 and then $130 million in 2016. Aite expects investments to keep growing each year, reaching $400mn by 2019.
According to the benchmarking research firm Greenwich Associates, in 2016 financial companies have invested $280 million in Blockchain technology.
Like an underrated film that, upon its release, would flop both critically and commercially, only to gain a cult status in the following years, Blockchain, frowned upon at first, is now hailed as a lifesaver.
Blockchain is no longer a competing obscurity. It is more of an opportunity than a threat for banks. Only the threat of regulatory obstacles can hinder the development and democratization of this technology.