Banks and financial firms worldwide are adopting blockchain technology “dramatically faster than initially expected,” according to two IBM studies, which each polled 200 institutions.
Though 15% of global banks and 14% of financial-market institutions plan to implement full-scale, commercial blockchain solutions in 2017, “Mass adoption isn’t that far behind, with roughly 65% of banks expecting to have blockchain solutions in production in the next three years,” the company said in a statement Wednesday.
Furthermore, one of the IBM studies finds that large banks are “leading the charge” to embrace blockchain technology.” In other words, early adopters are twice as likely to be large institutions with more than a 100,000 employees rather than small startups or fintech firms (blockchain is a database that serves as an automatic public ledger for transactions and is the basis of bitcoin).
Why are banks and financial firms rushing to embrace blockchain? Future profits.
According to the IBM Institute for Business Value, more than 70% of early adopters in banking want to break down barriers that inhibit both the creation of new business models and the expansion of businesses into new markets, while defending themselves against non-bank startups.
For financial markets institutions, 7 out of 10 trailblazers surveyed say they are focused on using blockchain in four main areas: clearing and settlement, wholesale payments, equity and debt issuance, and reference data.
“There are many advantages to being an early adopter of blockchain technology,” said Likhit Wagle, global industry general manager of IBM Banking and Financial Markets, in a statement. “To start, first movers are setting business standards and creating new models that will be used by future adopters of blockchain technology. We’re also finding that these early adopters are better able to anticipate disruption, fighting off new competitors along the way.”
Banks that are moving early to adopt blockchain technology say it they will do so in reference data (83%), retail payments (80%) and consumer lending (79%). When asked which blockchain-based new business models could emerge, 80% of banks surveyed state that trade finance, corporate lending and reference data have the greatest potential.
The top barriers to success include regulation (56%), immature technology (54%) and a lack of clear return on investment (52%).
— Related on ThinkAdvisor: Blockchain-Powered Financial Tools Get Big Push From IBM, Deloitte