Breaking down blockchain’s progress and potential
Blockchain is certainly entering the conversation more and more. But given how fast fintech news and trends change these days, we understand it may be tough to gauge its true impact or understand what, exactly, has industry experts so excited.
Based on what we’re hearing from our clients, the impact of blockchain will indeed be real and profound. However, it’s important to remember that the current technology is in a nascent stage and not ready for large scale adoption.
Momentum building among key blockchain players
Just about every major bank around the world is testing blockchain. Many are partnering with fintech companies that use blockchain or are investing in start-ups.
A number of global banks – such as Morgan Stanley, UBS and Goldman Sachs – have released research papers on the technology.
Most recently, RBC announced a partnership with JPMorgan and Australia and New Zealand Banking Group to move international payments using a blockchain system. Plus, the Toronto-based Blockchain Research Institute just added 16 new founding members, including Deloitte Canada, the Depository Trust & Clearing Corporation (“DTCC”) and Interac/Acxsys.
“Most recently, RBC announced a partnership with JPMorgan and Australia and New Zealand Banking Group to move international payments using a blockchain system.”
Decentralization driving potential
What, precisely, has all these key players buying in at such a frenetic pace? In a nutshell: decentralization and huge enhancements to the transaction process.
Let’s break this down a little more. Blockchain doesn’t rely on any centralized third parties (like banks or governments) to process and record transactions. It can reconcile transactions nearly instantaneously between two parties, as the data is shared and continually validated through millions of collaborative “processing nodes.”
“Blockchain doesn’t rely on any centralized third parties (like banks or governments) to process and record transactions.”
By cutting out third-party intermediaries and decentralizing the transaction process, it holds the potential for much faster settlement times, lower operating costs, and more secure and accessible financial services.
Decentralization may slow progress
However, blockchain can’t merely be added to existing systems. Its core characteristic – decentralization – may slow its own progress, for now.
The blockchain shared format works with no central location but each network node existing on the blockchain may be subject to different legal requirements. Pinpointing jurisdictions and territoriality issues, then, will impede the regulatory process needed for greater adoption.
“It’s important to remember that blockchain can’t merely be added to existing systems.”
It will take some time to fully understand its benefits and risks, but leading firms won’t sit on the sidelines. Expect the pace of innovation and integration to pick up as blockchain’s future meets today’s financial services.
For more insights into the future of the financial industry, contact us at 416.925.1700, 844.843.1830 or info@ext-marketing.com.
Read more: