A new era of automated mechanisms is set to disrupt how businesses, institutions and the government work. One of such technologies is the Blockchain and it’s said to impact current values and means of participation in our society’s financial and governmental systems.
Blockchain: how it all started and widening its context
As applied in the Bitcoin context in 2009, Blockchain is a decentralised ledger where information entering the technology is securely stored and recorded amongst a global network of computers. Third parties like banks, clearinghouses or middlemen are not required for completing transactions, which makes Blockchain a trusted carrier.
This feature alone is game-changing for the financial services industry and insurance, trade finance and healthcare businesses. The distributed ledger could prove to become a broader changing force and improve transparency and integrity in today’s society systems and how businesses and the government work.
Not to forget that all types of transactions can be processed by the technology. Think of documenting digital asset transfers, recording the ownership of intellectual property or establishing rights through smart contracts. In this way, Blockchain is cost-effective and enables businesses to operate both faster and more cheaply.
The Financial Services industry responds to the Blockchain trend
A growing belief in the technology is reflected in investments trends. There’s significant venture capital Blockchain start-ups and Fintechs in the financial services industry are more than willing to invest (a spending of $20 billion was detected from 2013 – 2015 alone), which puts even more pressure on banks in terms of limited Blockchain growth opportunities.
The Blockchain is feared by many in the financial sphere because it democratises value and current legacy and changes the way consumers behave and how intellectual property is organised. Other areas and applications that receive a great deal of attention are trade execution, asset exchange, physical asset registration, supply chain management and cash reserve management.
Blockchain’s substitutive power is why banks are doing everything to hop on the Blockchain train. They invest money in innovative technologies and reassess business models – but is this enough?
Act, don’t sit on the side-line
Change takes time and so do financial institutions need time to adapt to Blockchain and get a grip of its benefits and risks. Whereas only a few can afford to sit on the side-line, many businesses need to actively participate in the ongoing innovation cycle. They need to understand how Blockchain is shaping the sector and how to pursue opportunities as the financial landscape converges and evolves.
Banks and financial institutions will be challenged during the Blockchain revolution. It is not so much about finding solutions but about identifying complex problems that require a Blockchain way of thinking. Businesses that will prosper are the ones that act fast, take advantages of new opportunities and harness the Fintech and Blockchain revolution.
The original document of The World Economic Forum can be found here.