Blockchain Tech ‘Could Save’ Banks £9.7bn Billion A Year


Moving to a distributed database using blockchain could help banks save billions on costly data processes

Blockchain, most commonly known as the technology underpinning the digital currency Bitcoin, is a highly secure database system which enables an organisation to create a digital ledger of information and share it with multiple parties.

Although still mysterious to many, new research has found that blockchain technology has the potential to reduce infrastructure costs by an average of 30 percent for eight of the world’s ten biggest banks.

That equates to annual cost savings of $8-12 billion (£6.5-9.7 billion), according to research carried out by Accenture and financial services consulting firm McLagan.

The findings of the Banking on Blockchain: A Value Analysis for Investment Banks report are based on an analysis of granular cost data from the eight banks to identify exactly where value could be achieved.


Blockchain potential

“Capital markets institutions have faced a perfect storm of regulatory-compliance costs and revenue pressures in recent years, prompting them to invest in emerging technologies as a lever to improve profitability,” said Richard Lumb, Accenture’s group chief executive for financial services.

“Through this first-of-its-kind analysis of real-world cost data we draw a clearer line under blockchain’s value to investment banks. Our goal is to help banks move rapidly from proof-of-concept to production system with blockchain technology, generating real cost savings and improving bottom-line results.”

A vast amount of cost for today’s investment banks comes from complex data reconciliation and confirmation processes with their clients and counterparts, as banks maintain independent databases of transactions and customer information.

However, blockchain would enable banks to move to a shared, distributed database that spans multiple organisations. With the technology, records of transactions exist in a tamper-evident data structure that provides the required levels of data security and can be verified across a network of participants.

banking, blockchainDavid Treat, managing director for Accenture’s financial services industry blockchain practice, said: “Given the tremendous cost of data reconciliation – which is part of every aspect of the capital markets industry – it’s no surprise that we’ve seen a significant amount of investment in blockchain technology. But, as with any emerging technology, understanding what these investments might yield is a challenge.”

By replacing independent, fragmented databases with a distributed system, banks can reduce data reconciliation costs while also improving data quality and ensuring data security.

It also has the potential to result in cost savings in a range of key areas. For example, finance reporting costs could decrease by 70 percent as a result of optimised data quality banks could save up to 50 percent on compliance costs due to the improved transparency of transactions.

It has become increasingly obvious in recent months that blockchain will be key to the future of the banking industry, with the majority of banks expected to adopt the technology within the next three years.

The Bank of England started testing Blockchain with PwC last year and IBM has been throwing its weight behind it over the last 12 months or so. Even the UK government has been getting involved so, although there is still work to be done, the future of blockchain is looking bright.

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