Why 2020 will be year of the blockchain

Blockchain sentiment is strong according to a report by Infosys Finacle and Let’s Talk Payments (LTP), with a clear majority of global bankers expecting mainstream commercial adoption of the technology by 2020.

The joint survey of 100 financial services professionals (“Blockchain Technology: From Hype to Reality”) also determined the average cash investment in blockchain projects this year is estimated to be a touch over $1 million with 51 per cent of CTOs and CIOs driving such initiatives.

At the time of writing, about 50 per cent of global banks are either working with a fintech start-up or tech company to augment their blockchain capabilities, whereas another 30 per cent are going with a consortium model.

Almost seven out of ten banks are already experimenting with permissioned blockchains.

The report suggested blockchain rollouts will be prioritised in business areas where the distributed ledger technology can significantly improve transparency, automate processes across enterprises as well as reduce settlement and transaction time.

Significantly, a full third of respondents expect to see commercial blockchain adoption by 2018, while nearly 50 per cent envisage full, mainstream adoption by 2020. Only four per cent of the survey respondents said they had spent more than US$10 million on their blockchain initiatives.


CBA on blockchain

Earlier this month, the Commonwealth Bank of Australia (CBA) issued a crypto-bond for Queensland Treasury Corporation (QTC) in the first trial run of the bank's private, permissioned blockchain platform for the end-to-end issuance of bonds.

CBA said the QTC bond was created in digital form using smart-contract technology and has the ability to automatically pay coupons to the current holder when due.

Commonwealth Bank’s inhouse blockchain team developed the prototype in the bank's secretive Innovation Lab, alongside the Institutional Banking & Markets’ debt markets team.

George Confos, executive general manager of business & corporate finance at Commonwealth Bank, said the technology’s proof was already in the pudding.

“Our proof-of-concept demonstrates blockchain is capable of delivering efficiency to issuers, investors and other market participants," he said.

The survey also echoed recent IBM blockchain research showing a clear majority of governments are actively looking at how blockchain technology can improve systematic efficiencies, with nine out of ten planning to invest across financial transaction and asset management, contract management and regulatory compliance by next year.

The Infosys research showed the focus for blockchain use cases are: cross border payments, digital identity management, clearing and settlement, letter of credit process and syndication of loans.

“This research reaffirms our belief that the blockchain technology has potential to help banks reimagine banking processes,” said Sanat Rao, chief business officer and global head, Finacle.

“We believe, in the coming quarters, the industry will experience greater momentum towards rolling out lab pilots to real-life use cases."

 

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