PwC has recently spoken with Asset and Wealth Management asking it to estimate the potential impact of distributed ledger technology on their business.
The Partner at PwC & UK Lead for Blockchain Steve Webb commented: “From our work across the financial services sector, it is clear to us that Blockchain applications have the potential to transform the industry.”
The panel discussion comprised Dr. Lee Braine of Barclays Investment Bank CTO Office, Simon Taylor of 11:FS, Eris Industries’ Casey Kuhlman, and PwC’s Ajit Tripathi. The members of the panel concurred that Blockchain technologies implementation is unavoidable.
Dr. Lee Braine’s blockchain work at Barclays specializes in smart contracts and shared ledgers. He is also well-versed in the fields of stock exchanges, investment banking wealth management, and corporate banking.
Before becoming a co-founder of 11:FS, Simon Taylor was working at Barclays, assisting with the blockchain start-ups through Barclays TechStars accelerator. Currently, his company assist banking executives with organisational realignment and next generation services and products.
Ajit Tripathi, before funding PwC’s Blockchain and Smart Contract practice, was dealing with global technology and innovation holding various positions at Goldman Sachs, Barclays, GE and Bell Communications Research.
Case Kuhlman is the co-founder and chief-executive of Eris Industries. The company’s name has been recently changed to Monax, and now offers a blockchain platform that operates using smart contracts as legitimate applications.
“Asset and wealth managers have largely preferred to sit on the side lines while the sell-side banks take the lead in exploring potential use cases.”
– Steve Webb, Partner at PwC & UK lead for Blockchain
While numerous financial institutions have been examining the technology, corporations acquiring securities and assets for either their own needs or those of their customers, chose not to tap into.
To Webb’s mind, their hesitations might stem from the fact that blockchain benefits settlement.
Webb also stated that in comparison with banks, asset managers are less pressured to save on expenses. Apart from that, he said, some asset managers reckon that banks are collaborating to advance their own interests, ‘which may not be aligned to those of the investment community.’
This statement correlates with the report by HSBC published in June, according to which, “few asset managers are currently contemplating blockchain investment.” Nevertheless, the bank assures that blockchain technology is capable of “revolutionising” asset managers’ business models and customer services. The HSBC report suggests that ‘industry-wide transformation is very possible, especially in developing markets such as Asia.’
We expect to see most wealth and asset managers take a growing interest in their service providers’ investment plans. It follows that banks, brokers and other blockchain investors should make a positive effort to engage with their asset management clients about potential use cases.”
Webb claimed that the question of mass implementation is a question of ‘not if but when.’ He also mentioned that PwC panel participants are certain that that blockchain implementation would be gradual but will speed up over time.
This September, Roubini ThoughtLab published a report based on the results of a survey of 2,000 investors and 500 investment providers across 10 major wealth markets. 45% of those surveyed said to opt for blockchain technology because of growth, with 65% stating they would be targeting this technology in the following 5 years.
In June, JPMorgan and Oliver Wyman published a blockchain guide which describes the most industries’ approach as a wait-and-see one. However, they are also said to be anxious for learning more and tap into technology.
Webb stated that the biggest problem slowing down the process is the influence on interactions between parties. He explains: “Many of the early technical barriers to widespread adoption of Blockchain are now being broken down.” Such issues as confidentiality and visibility are being brought up.
“Many regulators see Blockchain as a potential opportunity to deliver greater transparency at reduced cost, which will make the financial system easier to oversee,” Webb states. “They are also conscious of the desire of government to support innovation – Blockchain represents an opportunity for nation states to secure competitive advantage.”
The industry mammoth IBM has recently published 2 reports on commercial blockchain solutions for banks and financial market institutions. The report is based on the results of a survey conducted by the IBM Institute for Business Value, with the support of the Economist Intelligence Unit. Those surveyed were 200 world’s most powerful banks and financial market institutions from 16 countries.
“Fifteen percent of banks and 14 percent of financial market institutions interviewed by IBM intend to implement full-scale, commercial blockchain solutions in 2017. Mass adoption isn’t that far behind with roughly 65 percent of banks expecting to have blockchain solutions in production in the next three years.”
Webb claimed that the main factor levering the blockchain adoption is the “size of the prize”.
Santander InnoVenture made an evaluation which suggests that by 2022, the blockchain could cut banks’ infrastructure expenses of between $15-20 billion per annum.
Webb drew the balance saying that it would be a great loss for asset and wealth managers if they neglected a Blockchain strategy. He suggests the asset managers to reconsider their major technology investments with a one to three year timeline. He commented: “If this is not done then the technology delivered may not be appropriate for the environment it is delivered into.”