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Financial firms need to prepare for revolutionary blockchain technology


By Olivier Gillerot, Managing Director, Accenture.






Olivier Gillerot
Olivier Gillerot
Blockchain is one of the three technologies that Accenture anticipates will have an enormous impact on financial services institutions (FSIs) over the next several years.

We expect that its effects will be felt in ways far beyond the technology’s current application of providing a real or near-real time incorruptible distributed ledger of cryptocurrency transactions in a linear, chronological order.

As Accenture details in its report, Three technologies that are changing the financial services game (1), blockchain technology could fundamentally re-architect much of FSIs’ functionality over the next decade by revolutionizing the speed, security and transparency of how assets are moved and counterparties share information through financial markets.

Over the medium term, blockchain technology is expected to:

- Provide secure ledger for transactions for all parties in an established, distributed network.
- Provide real-time tracking and a clear audit trail for any transaction, eliminating the need for error handling or record reconciliation.
- Automate the execution and settlement of transactions under the control of an incorruptible set of business rules, which would eliminate any need for human involvement.
- Serve as an asset registry, reducing the risk of fraud.
- Execute, verify and enforce negotiations or contracts, thus eliminating the need for many contract clauses.
- Reduce—as a result of automated smart contracts—the costs associated with current contracting practices and reduce infrastructure costs.

All of this should increase customers’ trust in FSIs. Financial firms, meanwhile, should benefit from significantly reduced costs and balance sheet risk as well as improved audit and compliance functions.

To that end, how should FSIs prepare?

Over the short-term, FSIs need to guard against failing behind on blockchain technology. They should immediately begin investigating how the technology can be best leveraged within their organizations, which includes conducting small-scale proofs of concept.

The ability to recruit, train and support the talent needed to develop, leverage and support blockchain technology will be critical to FSIs’ success in being a leader in adopting this technology. This is complicated by the dearth of professionals whose skills bridge blockchain and financial services and the crush of competition seeking them. FSIs will need to develop creative solutions to determine which skills they will need and how they should best attract and retain the talent with them.

Over the medium term, FSIs should continue planning and conducting internal proofs of concept to build the competencies required to bring blockchain technology to scale.

For instance, a Santander Bank study reports that blockchain has the potential to eliminate infrastructure costs for cross-border payments, security trading and regulatory compliance, with savings amounting to $15 billion to $20 billion annually.

Meanwhile, FSIs also have to study and understand the legal, regulatory, risk and capital implications of the technology. Careful thought should be given to where accountability will reside.

Another key issue is the technology’s effect on profitability—both in short term and over the medium term. For example, will the workforce shrink or grow in the short term, and how much should be budgeted for training?

One way to build blockchain competencies is to establish partnerships within a broader business ecosystem and share experiences and knowledge. For instance, several dozen firms across finance, banking and technology, including Accenture, have joined a collaborative effort called Hyperledger Project10 to advance blockchain technology by addressing the important features needed in a cross-industry open standard for distributed ledgers.

The implications of blockchain technology also are significant for a wide range of market intermediaries. To remain relevant, those intermediaries will need to redefine their business models to capture the opportunities the technology offers.

(1) www.accenture.com/us-en/insight-three-technologies-changing-financial-game?src=SOMS

Olivier Gillerot, Managing Director, Accenture
Olivier is Managing Director at Accenture. He is leading the Financial Services practice in France and Benelux. With more than 20 years of experience in this sector, Olivier has advised banks, insurance and capital markets companies in multiple transformation programs. He has been developing and executing strategies to explore new distribution and marketing approaches, back-office optimizations and also new market entries. He has always been exploring the use of new digital technologies to enable change and transforming business models. Olivier is based in Brussels and Paris.

Original link:
insuranceblog.accenture.com/financial-firms-need-to-prepare-for-revolutionary-blockchain-technology/

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Thursday, January 5th 2017
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