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Professionals in the financial services #industry are focusing their energy on #regulation and #data #management, according to a survey from consulting firm and #technology services provider Synechron. Financial regulation remains the top concern for the new year among those in the financial industry, with 38% of the firms surveyed markingRead More
Patent filings for #blockchain #technology have more than tripled since 2014; this spike includes patents filed by #cryptocurrency exchanges such as Coinbase, payment processors like Mastercard, and #banks like Goldman Sachs and the Bank of America. According to a report conducted by law firm Reed Smith, the most popular areasRead More
There’s been a lot of talk about blockchain over the past year. Sometimes I think back to when I opened the first Blockchain Conference back in 2015, and the look of bewilderment on people’s faces as #they tried to get their heads around my chosen focus. ‘Don’t you mean #bitcoin?’ they used to say.
But the distributed ledger technology that was initially overlooked as the underlying tech that facilitated bitcoin transactions soon rose to prominence and is now being discussed at a global level by key players and not just in the financial sector. Investors, developers and entrepreneurs have recognised the versatility of Blockchain and its potential for greater transactional speed, security and simplicity.
PSD2 and Blockchain
As the relationship between countries fragments, blockchain will take a leading role in financial services, notably cross border payments and trade finance, and leading concepts that have been in the making will see the necessary investment that lifts them off the page and into fruition. The planned revisions to PSD2 in 2018 will undoubtedly lead to stronger relationships between #banks and fintech start-ups over the coming year.
Closer to home, the UK government will take centre stage as the driving force behind blockchain development. This year saw Credits awarded the first G-cloud blockchain platform-as-a-service agreement by the government – a major step forward in public sector acceptance of the technology.
There’s no doubt more UK government funding will be pumped into blockchain, in a report on the subject, the Government Chief Scientific Adviser, Sir Mark Walport, wrote: “distributed ledger technology has the potential to redefine the relationship between government and citizens in terms of data-sharing, transparency and trust,” which accurately sums up the benefits for wider society, from healthcare to pensions.
Something that’s impossible to miss is the wide variety of sectors that blockchain is applicable to. Supply chain transparency and simplicity of asset transfer make it a popular point of focus for industries that rely on provenance, such as the diamond trade. To have an immutable ledger that traces the authenticity of precious materials all the way back to their inception is of obvious benefit and investors will no doubt be pouring money into platforms that confirm attribution and improve logistics.
Cut out the middle men, Brexit and Trump&8230;
Systems that cut out the middle men, streamline processes, cut costs and prevent fraud are of natural interest to sectors that count the pennies. With charities, large scale aid and infrastructure projects always see a percentage fall through the cracks. The digitisation of aid will continue as organisations like #UNICEF work on projects (e.g. Donercoin) to increase transparency in global aid.
Additionally, the creative industries, historically underfunded and plagued by complex revenue streams, will look to the support of big names to promote blockchain as a means for ensuring artists are paid fairly and digital content is accurately measured and attributed to the right parties, taking blockchain into the mainstream.
2017 is set to be a year of many uncertainties: Article 50 & Brexit, global markets, Trump… but the one thing that you can be sure about is that fintech will play a big part in helping to overcome some of the bigger obstacles that we face, and London will lead the way, as it always has, with innovation and expertise in developing new technology.
A survey conducted by Deutsche Bank and FT Remark, the research arm of the #Financial Times, found that a staggering majority (87%) of financial #market #participants are confident that #blockchain #technology will #disrupt the settlement model for securities.
62% believe that the introduction of distributed ledger technology will produce substantial savings ranging from 11% to 25%. Almost half say that it will help the #industry cope with the risk of system failure and market disruption.
“Blockchain may completely change the settlement model for securities processing, creating a utility around securities processing and cash management,” commented David Rhydderch, Deutsche Bank’s head of alternative fund services.
&8220;The entire back end would become a far more efficient, far less costly, more accurate and less risk-prone function. This has an obvious knock-on effect on the cost of service provision. In the administration space, blockchain may not be quite the disruptor. It’s more in the functional utility elements within the securities processing settlement chain. In that context, it may be totally revolutionary.&8221;
Respondents believe that blockchain technology will be widely used within the next three to six years (75%).
The industry is still struggling to figure out how to implement the technology in the current web of legacy infrastructure, the report says, noting that market participants are trying to determine how it can be deployed in a way that works, given ongoing data protection and security concerns.
The document a previous report released earlier this year by Euroclear and Oliver Wyman which praised the merits of blockchain technology in capital markets and highlighted the potential of the technology to provide a new approach to data management and be a solution to many of the efficiencies afflicting capital markets.
The Deutsche Bank report, titled &8220;Powering the flow of global capital: Capital markets investor insights,&8221; highlights the key findings of a survey of 200 market participants to examine what is driving today&8217;s capital market.
The research found that regulation, new technologies and emerging markets are key issues impacting strategic thinking. These three areas have caused the vast majority of respondents to partially or completely reshape their operating models, buying behavior and capital/fund allocations over the past two years.
&8220;These three themes are fundamentally redefining the securities services landscape and the knock-on effects will impact the business models of many capital markets participants,&8221; according to Satvinder Singh, head of global securities services and head of GTB EMEA ex Germany.
Notably, a majority of market participants are convinced of a revival of emerging markets. 54% believe emerging markets will deliver growth rates close to those seen during the 2001-2011 boom, noting that India and South Asia will likely be the most attractive region (88%).
China, Indonesia, Russia and Turkey in particular are ranked highest for their capital market infrastructure. Respondents said that China and India have made the greatest infrastructure improvements during the last five years.
That being said, investing in emerging markets remains risky and some investors are hesitant.
Respondents ranked regulatory hurdles as their greatest or second greatest challenge (62%) when carrying out securities transactions in emerging markets, followed by political interference (53%) and instability as a challenge, and unreliable capital markets infrastructure (40%).
Featured image: Stock market chart by bluebay via Shutterstock.com.
An #upcoming #blockchain #hackathon organized by EPAM in collaboration with #Swiss Finance + #Technology Association and Validity Labs is looking for innovative solutions to #disrupt the #insurance #industry.
The EPAM 2016 Blockchain Hackathon, taking place on November 18 and 19, 2016 in Zurich, is seeking dynamic teams to take on the challenges set by the three largest insurance companies in Switzerland, namely SwissLife, Zurich and SwissRe.
Apply for Blockhain Insurance Zurich Hackathon
You still can apply for it or join as a visitor, hurry up!
The teams will be judged by representatives from these three companies on the following criteria: originality and innovation, usefulness and practicality, business potential and commercialization to go to market, design and interface, and technical implementation.
Industry experts will assist the teams during the hackathon to provide insights and answer questions about specific industry characteristics.
Insurance and Blockchain?
Like #banks, insurers have been exploring the merits of blockchain technology to disrupt their industry and streamline payments of premium and claims.
According to a Deloitte paper, blockchain technology could support the significant digital transformation underway in the industry because much of this transformation relies on data.
&8220;Contracts and claims could be recorded onto a blockchain and validated by the network, ensuring online valid claims are paid. […] Smart contracts would also enforce the claims – for instance, triggering payments automatically when certain conditions are met (and validated).&8221;
Blockchain technology could allow the industry as a whole to streamline its processing and offer a better user experience for customers. Storing claims and customer information on a blockchain would also cut down fraudulent activity.
Early blockchain developments have tended to focus on optimizing current ways of working within organizations. For instance, London-based #bitcoin startup Everledger uses the blockchain to create a permanent ledger for diamond certification and related transaction history. The ledger lets insurers and potential buyers check the history of any individual stone, helping insurers prevent, detect and counter fraud.
Blockchain Industry Challenges
Despite the enormous potential, the biggest challenges to industry-wide implementation are facilitating collaboration between market participants and technology leaders, succeeding in the operational transformation, and shaping a stimulating regulatory environment, according to McKinsey and Company.
Validity Labs, a startup created by several blockchain technology experts in Zurich, aims at bridging the shortage of educated blockchain engineers, entrepreneurs and executives. The company organizes various educational events and workshops in Switzerland.
Swiss FinteCH is an independent association aimed at promoting and supporting Switzerland&8217;s #fintech industry. It connects stakeholders, creates research papers, advocates for solutions and promotes Switzerland as a global fintech hub.
After the financial crisis in 2008, P2P lending emerged as a new method for consumers to get loans easily and quickly, bypassing traditional #banks that had tightening their #consumer lending policies.
The model quickly grew in popularity, attracting borrowers with the new platforms’ perceived low interest rates, simplified application process, and quick leading decisions.
In 2014, an estimated US$ 5.5 billion worth of loans have been issued in the US alone with an average growth of 84% per quarter since 2007.
Growth has been largely influenced by technological breakthroughs and demographical shifts. Most particularly, the Millennial generation – those born between the early 1980s and the early 2000s &8211; has set new standards in the financial services #industry.
P2P lending and Millennials
This demographic is demanding greater convenience, mobility, real-time update, and are using entirely different channels.
Tech-savvy and socially-minded, Millennials are changing the face of finance and have embraced fintech solutions. A recent report by Oracle and Wharton Fintech suggests a notable increase in the use of non-bank options by this demographic in solutions such as mobile wallets, mobile money and overall alternative payment solutions.
In the P2P lending area, Millennials are ten times more likely to use P2P lenders than those 50 and older, according to the Fair Isaac Corporation. The demographic is becoming a larger portion of the consumer loan market as they seek credit to finance major purchases or refinance their student debt.
P2P lenders vs. banks
While the industry is experiencing strong growth, lending from large banks, on the other hand, has decreased dramatically. In the US, the ten largest banks lent US$ 44.7 billion in 2014, a drop of 38% from its peak of US$ 72.5 billion in 2006, according to Techcrunch.
That said, banks shouldn&8217;t be afraid of these new players as P2P lenders &8220;are unlikely to pose a threat to banks in the mass market,&8221; according to Neil Tomlinson, Deloitte&8217;s head of UK banking.
In a report released earlier this year, the consulting firm argued that these new platforms &8220;will not be significant players in terms of overall volume or share.&8221; It said that P2P lenders cannot compete with banks in mainstream markets and should in fact focus on profitable niche segment markets where their knowledge can be a competitive advantage.
The report encourages banks to start collaborating with P2P lenders to deliver superior UX capability, maintain customer relationship, gain access to data to improve the bank&8217;s risk scoring, as well as provide an option to under-served segments.
For these platforms, collaborating with banks would allow them to increase awareness among borrowers and investors, gain scale and lower their customer acquisition costs.
A number of banks have already teamed up with P2P lending startups: JP Morgan Chase provides loans to its SME customers using OnDesk&8217;s platform; Metro Bank deploys customer deposits through Zopa; and RBS and Santander UK are both regering SME customers rejected for a loan to Funding Circle.
Featured image by Anton Gvozdikov, via Shutterstock.com.
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