Blockchain has the potential to provide a universal distributed system that can be used by retail banks to drive efficiency and bring systems together allowing improved quality of service – opening up options for new products and services.
Nonetheless, Blockchain is still three to five years away from full commercial viability.
The predictions comes from independent data and analytics company GlobalData, whose Retail Banking Analyst, Sean Harrison, notes, “The need of the hour [for financial services leaders] is to focus on domains where the legal, regulatory, or political environments hinder the establishment of a central controlling authority, crucial for the commercial adoption of Blockchain.”
Banks globally have been testing the blockchain technology for some time now, points the group – either to implement in their core banking system or integrate into their traditional systems.
2018 has also been witnessing the discussion around blockchain move beyond the initial excitement of ‘Blockchain will fix everything’ to a clearer and more considered view of its most appropriate use cases, Harrison believes.
You might also like
Emerging use cases with a clear application potential for the technology include blockchain could potentially transform the global retail banking system in the following areas: smart contracts, know your customer (KYC), payments, fraud reduction and customer management, says GlobalData.
The fear of missing out in Blockchain is palpable, the group adds – but cautions that “in the rush not to miss the boat”, incumbent banks must make sure both that they take the time to get any deployment right and create value that impacts their customers.
Small-scale experiments and pilots will help shed light on any unconsidered problems and on any issues of integration with existing systems, suggests the group, with Harrison also stating that, “Regulators across the world, especially in the financial services sector, are expected to scrutinize Blockchain technologies thoroughly throughout 2018.
“However, blockchain is still three to five years away from commercial feasibility, primarily because of the difficulty to establish common standards [so] in the long term, the strategic value of Blockchain will only be realised if cooperation among multiple players is achieved at scale.”