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Blockchain is a powerful new technology that is already making a difference in the financial services industry. But this is only the beginning of the story. What does tomorrow hold?
This is an impossible question to answer with certainty, of course. But useful insight can be found in the 2018 Accenture Tech Vision for Banking, built on interviews with 800 global banking executives and experts.
The report confirms that blockchain is here to stay. Seventy-one percent of surveyed banks reported that blockchain will be critical or very critical for their organizations over the next three years. Cross-industry, that figure is 60 percent.
Blockchain is likely to significantly reduce processing costs for banks and payment speeds for customers. One study concluded it could cut $20 billion in costs for banks by 2022.
But the move towards blockchain in FS can only happen if one crucial problem is solved: what is to be done with legacy systems and records? For many mature FS organizations, the cost of replacing or repurposing either is prohibitive. How can financial institutions embrace the future of the industry if legacy systems anchor them to the past?
One popular solution to this is “digital decoupling,” which retains a legacy system for books and records, but greatly reduces dependency on it for anything other than recordkeeping purposes.
This strategy, which is also called “freeze and wrap,” offers many advantages. It minimizes development and investment in dead-end systems while customer engagement and analytics systems are decoupled and powered by a cloud-based data layer that connects to the legacy systems as needed.
The emergence of new cloud-based core banking-as-a-service providers, along with the power of blockchain, will beckon banks down a path where ultimately the legacy systems can be shuttered and decommissioned.
The future of anything is difficult to predict. This is especially true when considering a technology of such power and flexibility as blockchain and its impact on the fast-moving world of financial services.
A few things about blockchain and FS are certain. Blockchain matters for FS. It is here to stay.
And, for FS firms, the time to start the blockchain journey is now.
Looking to continue the conversation about blockchain in FS? I’d love to hear from you. Reach out using my contact info, which can be found at the top of this page.