Financial services industry spent $1.7B on blockchain projects in 2017
The financial services industry spent $1.7 billion last year on blockchain and other distributed ledger technology (DLT) projects, according to new research from Greenwich Associates – an increase of 67 per cent on the year before.
The report, one of the largest studies of DLT use in financial services, said that one in 10 companies surveyed has a blockchain budget of more than $10 million. The firm added that a “typical top tier bank now has about 18 full-time employees working” on blockchain and DLT projects.
Two-year plan for most
Greenwich Associates based its report on more than 200 interviews and said that 14 per cent of those questioned claim to have “successfully deployed a production blockchain solution”. The company added that more than 75 per cent of the projects under development are expected to be live within two years.
Though there has been plenty of debate about the effect blockchain technologies will have on business, this research leaves little doubt about the interest from financial services firms.
“Payments and trade finance are the businesses targeted most frequently,” said Greenwich Associates. “Although early tests showed the potential of DLT across a range of important functions like creating revenue opportunities, shortening settlement time, and reducing risk and cost of capital, cost reduction has emerged as the biggest driver of blockchain investment and development for financial service firms.”
Banks trying to keep up
The report follows news that BBVA, the Spanish bank, used blockchain technology to issue a loan earlier this year. The negotiation and completion of the €75m corporate loan was handled entirely on a private blockchain before the completed project was registered on Ethereum’s public blockchain.
Projects like the ones Greenwich Associates identified are important for a banking industry that fears losing ground to disruptive technology. As far back as 2015, McKinsey, the management consultancy, reported that banks had lost 40 per cent market share globally for consumer-to-consumer payments across borders.
New market entrants, such as TransferWise, will have driven this change rather than blockchain technology. However, it seems that banks are hoping DLT projects can help them keep costs down and protect their existing business.