The impact of decentralization to financial services was abundantly clear to me on the first day of Sibos.
Moving almost $2 trillion in securities from a legacy system to distributed ledger technology (DLT), the transition of the Australian Securities Exchange to a blockchain is one of the more public use cases to date. Transitioning banks to DLT, whether that be for treasury services, correspondent bank payments, settlements, securities or other applications, getting the use case right from the beginning is an important first step to successful adoptions.
To find the right use case, organizations are looking beyond the mechanics of banking systems, to find those factors that slow processes for all associated parties. With common challenges identified, potential partners can rally around a shared vision – cutting across divisions with representation from legal, compliance, risk, technology, and security, to name a few.
Favoring collaboration over competition can involve thinking through incentives and working through ways to extend use cases that include those who may not be ready to fully participate (and who may prefer a trial period to build trust in the DLT).
The potential of decentralization
As a more open business model, with open governance for securing transactions without traditional institutional involvement to establish trust, blockchain was described at the conference as having the potential to help serve unbanked populations with e-wallets, and providing small business loans for those that lack traditional credit history.
“Intrapeneural” (my favorite new word) efforts to improve transactions within the bank’s four walls were seen as a solid way to prove the value and experience with DLT. And while it may not be the answer, futurist Steven Johnson walked the audience through his January, 2018 article, describing how blockchain may be a way to define an open protocol for individual identity on the web.
Despite challenges, financial services companies know they need to explore new ways of doing business. As some banks, such as ASX, perceive the time and cost associated with centralized reconciliation of transactions breaking down with both consumer and corporate expectations to operate faster, we see new networks of partnerships being formed – ones that adopt openness, transparency, and trust as part of the business model.
And banks aren’t doing this alone – partnering with each other and with fintechs to move more use cases into production. One of our Fintech partners at the conference is focused on blockchain – learn more about how BlockApps can deliver Blockchain-as-a-Service via our solution brief.