BearingPoint Institute paper: financial institutions must recognize the power of blockchain to disrupt current banking and business models or they risk losing out to fintech start-ups
London, May 12, 2016 – Blockchain technology is a potential game changer for global financial markets. The shared ledger technology that underpins bitcoin has the power to transform business models, connect new counterparties and generate sweeping efficiencies. A new paper from the BearingPoint Institute highlights how traditional financial institutions risk being edged out by agile fintech start-ups if they fail to act on the opportunities.
The power of blockchain
Cryptofinance payments are made directly between payer and payee (P2P) and remove the need for a central authority.
Given the current number of intermediaries involved in front-to-back securities and derivatives processing today, developing a viable means for using the technology can deliver significant cost and time savings.
Iris Grewe, Partner at BearingPoint and author of the paper
BearingPoint Institute’s analysis estimates an average 24-hour processing time per transaction would be slashed to 0.1 seconds, and average costs of up to 40 euros cut to just 5 euros1 . Meanwhile, recent industry figures predict the technology could save between EUR 13-18 billion2 per year in banking infrastructure costs by 2022 through the rollout of blockchain technology to optimize cross-border payments, securities trading and regulatory compliance.
The BearingPoint Institute’s paper explores the disruptive power of blockchain and potential implications for financial institutions through four key insights:
- Blockchain will change established principles of governance and value creation
Blockchains are the first systems to overcome the limitations of synchronizing databases: individuals and companies can store data and run applications with 100% reliability.
- Open source software enables all players to forge new solutions
Bitcoin has proven the concept of blockchain and was the starting point for all current activities around this technology. The fact that the bitcoin software is open source enables all players to forge new solutions.
- Traditional players must defend their role
The financial industry as a whole is set to spend USD 1 billion on blockchain initiatives by 2017, with leading organizations already implementing up to 20 individual projects, often working alongside start-ups.
- Retrofitting established technologies is not an option
The disparate structure on which traditional technologies are based means blockchain principles cannot be applied. New solutions are needed that can be produced at scale.
The blockchain revolution over the coming decade could mirror the impact of the Internet in the previous one.
It’s entirely imaginable that once companies and individuals decide they don’t really need banks they will realize they also don’t need central banks, replacing current government-controlled currencies with some form of digital payment. We are very much at the beginning of the journey, and blockchains may provide the heavy lifting that eventually becomes an existential threat to the financial system.
Dr Philip Godsiff, Senior Research Fellow at the Centre for the Digital Economy at Surrey Business School
For more on the disruptive power of blockchain, and what financial institutions should be doing about it, read the paper on the BearingPoint Institute website > http://inst.be/006IOY
About the BearingPoint Institute
Founded in 2009, the BearingPoint Institute is an incisive, authoritative voice on business-critical topics, bringing together the finest minds from both within and outside BearingPoint. The Institute's ambition goes beyond traditional 'thought leadership’: we aim to equip business leaders with actionable insights and advance the science of management by combining our consultant’s experience 'in the field' with research into topical business issues.
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BearingPoint consultants understand that the world of business changes constantly and that the resulting complexities demand intelligent and adaptive solutions. Our clients, whether in commercial or financial industries or in government, experience real results when they work with us. We combine industry, operational and technology skills with relevant proprietary and other assets in order to tailor solutions for each client’s individual challenges. This adaptive approach is at the heart of our culture and has led to long-standing relationships with many of the world’s leading companies and organizations. Our global consulting network of 9,700 people serves clients in more than 70 countries and engages with them for measurable results and long-lasting success.
For more information, please visit: www.bearingpoint.com
1BearingPoint Institute estimates
2BearingPoint Institute estimates