Blockchain technology pushing the envelope in fintech innovation
Blockchain solutions might be rolled out for syndicated loans as early as Q2 , some use cases such as derivatives may still take at least two to five years to materialize. However, the equity settlement adoption is still at least a decade away. We cannot ignore the hundreds of millions of dollars the banks would have to spend on integrating this new technology with existing systems and workflows.
Some within our industry look at blockchain as a disruptive technology that will replace all clearinghouses. Our analysis indicates that this is not necessarily true. In fact, the exact opposite may be true. Instead of replacing these institutions, blockchain may facilitate their growth depending upon the markets they exist within and the limitations of their individual charters. There is a lot of testing and proving that needs to be done before this technology becomes mainstream in the financial industry.
However, when talking about blockchain adoption within financial markets, there are several challenges that need to be addressed before we see this technology become mainstream. Blockchain requires further due diligence for defining industry standards with regards to settlement, counterparty and other transactional risks involved.
The market needs regulations to maintaining a balance between security and future mass-market blockchain scalability. This note also highlights the initiatives of a number of the startups in this space including Chain, Digital Asset Holding, Hedgy, Ripple, R3, and Symbiont. Skip to main content. Pushing the Envelope in FinTech. Shagun Bali, Terry Roche. Executive Summary Blockchain is one of the most talked about technology innovations in finance today. Areas of Interest FinTech. However, in our view, many claims as to the transformative nature of their business models are overstated.
The technological solutions offered are often micro-oriented, aimed at solving specific problems or tasks techfin in other words. In our experiences, we have found that Asian startups, especially in China, are more inclined to characterize themselves as techfin. Large global financial institutions are undoubtedly sensitive towards anything that threatens services they provide. This includes innovations promised by Fintech disrupters.
Unlike Fintech , which is a substitute, techfin is complementary. Financial transactions and banking in particular are heavily dependent upon trust.
Without trust, no bank or bank-like entity can survive. As recent events show technology alone may be insufficient to secure this most important financial commodity. This event could very easily damage public faith in cryptocurrencies; a prerequisite for them to widely adopt and challenge existing banking systems. Real innovation in financial services is only possible as and when the technology upon which it is based gains widespread public acceptance. By offering their customers familiar products and services but better or cheaper, it gives them the best chance to ensure their ongoing profitability or more dramatically viability.
In Asia, there is the famous triumvirate Baidu, Alibaba and Tencent ; businesses that illustrate our point:. Baidu can better sell information by letting you not only search for your favorite restaurant, but also handle the reservation of the table, the payment of the menu and the taxi ride back home.
Alibaba can better sell products by facilitating express checkout via Alipay and can facilitate the number of products available by financing the SMEs that it knows will sale. Tencent can better connect people by splitting bills in a restaurant via WeChat Wallet or reconnecting families millions of kilometers apart during Chinese new year simply by digitizing Red-envelopes.
Although its growth is finite — there are only so many friends you will have, restaurants you will search and products you will buy — what is exponential is the information around your decision.
Finally, Asia is well-positioned to benefit from the more incremental approach of techfin because consumers in the region have a clear preference for being offered a complete solution as opposed to the trial-and-error beta testing approach often associated with Fintech.
Paras Sidapara contributed to this article. Energize your workflow from start to finish and benefit from enterprise data management with our complete market data and technology offering.