A recent Bloomberg report quotes research by Greenwich Associates that proves the financial industry’s love for blockchains. Banks and other entities in the financial service sector are spending $1.7 billion annually on developing distributed ledgers for their businesses. The budget for this development has increased by 67 percent in just one year as the number of employees working on the technology doubled.
A New Beginning for Banks
The report said that banks and other companies developing their own decentralized distributed ledgers have moved beyond the proof-of-concept stage and now working on commercial DLT products. Ten banks spend over $10 million annually on developing these systems.
Forty-nine percent of the 213 survey respondents came from the banking sector. Four out of five respondents were confident that DLT would have a meaningful impact on the industry in the next two years. As a majority of these respondents come from the banking sector, a significant change can be expected in the industry by 2020.
The problems that the new technology could solve include shortening settlement times, reducing capital loss risks and streamlining operations. Fourteen percent of companies operating in the capital markets claim to have deployed a distributed ledger in place of their redundant legacy software frameworks.
The Blockchain Isn’t Easy or Cheap
In the past few years, many financial service enterprises have experimented with DLT products, but most find it difficult to work around. Richard Johnson, vice president of Greenwich Associates Market Structure and Technology, noted:
“More than half the executives we interviewed told us that implementing DLT was harder than they expected.”
Such a project demands experienced blockchain professionals with innovative thinking, who are already challenging to find. It also requires millions of dollars in funding. Nonetheless, it also requires clear thinking and determination from top management, which helps in solving scaling, development and growth issues quickly. Regardless of these limitations, 75% of the projects that are currently under development are expected to go live within the next two years.