Blockchain technology is set to ‘revolutionize’ the financial industry by growing to $30-$40 billion in trade finance by 2026.
It still seems hard to believe that–in the grand scheme of the technology sector–blockchain technology is still a relatively new development.
With the introduction of the first blockchain technology–bitcoin– in 2008, blockchain is defined as a transaction in which cryptocurrencies, such as bitcoin, are recorded chronologically and publicly. When bitcoin was first introduced, it’s alleged that it was in response to the US market crash of 2008–and since then, it has evolved into a digital currency to pay for goods and services.
That said, it wasn’t until 2014 when investor focus shifted to blockchain itself–the technology behind bitcoin. Now, the blockchain market is poised to revolutionize the financial industry in a number of ways–and that doesn’t include the countries that already accept bitcoin as a method of payment, or the countries that are working towards making it a legal form of payment.
Long story short, a recent market intelligence report done by BIS Research, called “Blockchain Technology in Financial Services Market: Analysis and Forecast: 2017 to 2026” released in July 2017 showcases just how far blockchain technology has come–but more specifically where it’s heading–namely in the financial services industry.
The report states that blockchain applications could potentially reach a per-year cost savings of between $6-$8 billion in KYC/AML, $30-$40 billion in trade finance, and as high as $50-$60 billion in capital markets.
“Blockchain technology offers a secure, fast, and cheaper medium of carrying out online transaction and online transfer of information without the need of third party verification,” the report’s overview states. “The adoption of blockchain technology in financial services sector has gained traction.”
Expanding on that, tech mammoth IBM (NYSE:IBM) announced at the end of June its plans to build a blockchain technology that will be used by seven banks in Europe, including HSBC and Rabobank, which CNBC reports will be used to enable international trades. The article goes on to say this will be one of the first “real-world” uses of blockchain technology in financial institutions.
What’s more, the BIS Research report goes on to say that financial institutions have led the way in the development of blockchain technology, and it’s expected the technology will cut transaction and infrastructure costs by at least 50 percent for finance companies. The report also says that financial institutions and banks like Citibank, J.P. Morgan (NYSE:JPM), and Goldman Sachs (NYSE:GS) are all working towards establishing the technology.
In fact–Goldman Sachs has only recently come around to blockchain technology; for example, the company dedicated an entire webpage on its site to blockchain, which went live at the end of June.
“The blockchain technology could save the financial institutions over $40 billion per year in infrastructure, IT, operational, third party fee, and administrative personnel costs,” Shazlie Kahn, a BIS Research analyst said.
To that end, with heavy financial institution influencers, such as Goldman Sachs, working to implement blockchain technology into its portfolio, it’s telling as to how far it will go in the future.
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Securities Disclosure: I,Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.