How Blockchain is Transforming the Financial Services Industry

How Blockchain is Transforming the Financial Services Industry

Current Use Cases Propelling Growth Opportunities in Trade Finance, KYC/AML, and Cross-Border Payments

RELEASE DATE
17-Jan-2020
REGION
North America
Research Code: K3AE-01-00-00-00
SKU: IT04002-NA-MR_23988

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Description

Blockchain has begun to come into its own in 2019. In this study, we provide use cases and growth opportunities in 3 sectors: global payments, trade finance, and KYC/AML. These are 3 of the areas where Blockchain has been tested and leveraged with key use cases emerging in financial services; in particular, cross-border payments, and digital identification and verification. There have been use cases in smart contracts across multiple sectors; smart contracts have been especially effective in real estate, supply chain logistics, and law.

The number of mergers and acquisitions (M&A) in blockchain and cryptocurrency had a peak year in 2018. Year-over-year to date, the 2019 M&A count is only at 48% of 2018. In terms of value, 2019 is at 64% of the amount at the same time in 2018. The study also includes key findings and growth opportunities going forward. The interest in blockchain solutions as a means of reducing cost, improving efficiency, and increasing collaboration among private and public players is still growing in financial services. Establishing consortia and utilizing the services of large players like Hyperledger and Ethereum confirms this interest, even as smaller blockchain start-ups continue to emerge globally and make an impact.

Regulating blockchain is in development. There has been significant advancement in the United States though; leading banks and blockchain fintechs are collaborating with regulators and experts to potentially influence future regulations. Currently, a majority of the states in the country have taken action to legislate cryptocurrency and/or blockchain. This lack of industry standards for the technology is one of the biggest concerns across industries in using blockchain.

Fintechs have been partnering with banks for several years. This cooperation will continue but there will also be consolidation; as start-ups develop and test new technologies, and grow their businesses, the larger companies will acquire them to utilize that technology. The enthusiasm for blockchain and its promise is demonstrated in the annual global survey that Frost & Sullivan conducts on the state of digital transformation in different industries. We found in that survey that the top 3 reasons banks, financial services companies, and insurance companies are investing in blockchain are: to improve security of certain classes of data, enable systems with blockchain-specific capabilities, and to gain efficiencies in their external operating ecosystem. Financial companies identified the advantages they are already seeing from blockchain – it improves cost efficiency, enhances customer care, and facilitates further innovation.

Some of the strategic imperatives for financial services companies that are interested in transforming their operations with blockchain include education – internally and externally in their ecosystem; focus on customer expectations when developing technology; recognizing its advantages and what it enables, since it is only likely to continue to grow.

Author: Clare Walker

RESEARCH: INFOGRAPHIC

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Table of Contents

Key Findings

Research Scope

About Blockchain

Blockchain Market Segmentation and Ecosystem

Blockchain in Financial Services—Market Size, Global

Blockchain in Financial Services—Market Size, US

Overview of Blockchain in Financial Services

Largest Financial Institutions are Among the Top Players in the Blockchain 50

First Consortia, then “Universal Trade Network”

Blockchain Consortia are Redefining the Blockchain Space

M&A Overview

Landscape Overview

Overview of Distributed Ledger Technology (DLT)

Smart Contracts

Role of Regulations—Outlook and Impact

Role of Regulations—Outlook and Impact (continued)

Recent Initiatives in US Blockchain Regulation

Market Drivers

Drivers Explained

Drivers Explained (continued)

Market Restraints

Restraints Explained

Trade Finance is an Obvious Application for Blockchain

Using Blockchain in Trade Finance

DLT Emerging as a Critical Technology in Trade Finance

Example Market Initiatives

Key Disruptor Profile—TradeIX

Key Disruptor Profile—Axoni

Overview of Cross-Border Payments

Overview of Cross-Border Payments (continued)

The Status Quo Payment System and the Opportunity for Blockchain

Benefits of Blockchain in Global Payments

Example Market Initiatives

Key Disruptor Profile—Veem

Key Disruptor Profile—Circle

Ripple and SWIFT—Competition Fueling Innovation

The Cost of KYC/AML

The Cost of KYC/AML (continued)

Preventing Money Laundering Through Collaboration

Blockchain—Uniquely Positioned to Improve KYC/AML

Example Market Initiatives

Potential DLT or Blockchain-enabled KYC Solution

Example Market Initiatives

Key Disruptor Profile—Templum

Key Disruptor Profile—Cambridge Blockchain

Growth Opportunity in Financial Services—Blockchain

Growth Opportunity in Financial Services—Blockchain (continued)

Growth Opportunity in Financial Services—Blockchain (continued)

Strategic Imperatives for Blockchain Companies

Global Survey Results—Digital Solutions: All Industries, 2019

US Survey Results—Digital Solutions and Blockchain/Distributed Ledger: All Industries, 2019

US Survey Results—Blockchain/Distributed Ledger: All Industries, 2019

Global Survey Results—Blockchain/Distributed Ledger: Banking/Finance/Insurance, 2019

US Survey Results—Blockchain/Distributed Ledger: All Industries, 2019

US Survey Results—Blockchain/Distributed Ledger: All Industries, 2019 (continued)

Global Survey Results—Blockchain/Distributed Ledger: Banking/Finance/Insurance, 2019

Global Survey Results—Blockchain/Distributed Ledger: Banking/Finance/Insurance, 2019 (continued)

Global Survey Results—Blockchain/Distributed Ledger: All Industries and Banking/Finance/Insurance, 2019

The Last Word—Predictions for Blockchain in Banking

Legal Disclaimer

Additional Sources of Information from Frost & Sullivan on Fintech, Blockchain, and Financial Services

List of Exhibits

List of Exhibits (continued)

The Frost & Sullivan Story

Value Proposition—Future of Your Company & Career

Global Perspective

Industry Convergence

360º Research Perspective

Implementation Excellence

Our Blue Ocean Strategy

Related Research
Blockchain has begun to come into its own in 2019. In this study, we provide use cases and growth opportunities in 3 sectors: global payments, trade finance, and KYC/AML. These are 3 of the areas where Blockchain has been tested and leveraged with key use cases emerging in financial services; in particular, cross-border payments, and digital identification and verification. There have been use cases in smart contracts across multiple sectors; smart contracts have been especially effective in real estate, supply chain logistics, and law. The number of mergers and acquisitions (M&A) in blockchain and cryptocurrency had a peak year in 2018. Year-over-year to date, the 2019 M&A count is only at 48% of 2018. In terms of value, 2019 is at 64% of the amount at the same time in 2018. The study also includes key findings and growth opportunities going forward. The interest in blockchain solutions as a means of reducing cost, improving efficiency, and increasing collaboration among private and public players is still growing in financial services. Establishing consortia and utilizing the services of large players like Hyperledger and Ethereum confirms this interest, even as smaller blockchain start-ups continue to emerge globally and make an impact. Regulating blockchain is in development. There has been significant advancement in the United States though; leading banks and blockchain fintechs are collaborating with regulators and experts to potentially influence future regulations. Currently, a majority of the states in the country have taken action to legislate cryptocurrency and/or blockchain. This lack of industry standards for the technology is one of the biggest concerns across industries in using blockchain. Fintechs have been partnering with banks for several years. This cooperation will continue but there will also be consolidation; as start-ups develop and test new technologies, and grow their businesses, the larger companies will acquire them to utilize that technology. The enthusiasm for blockchain and its promise is demonstrated in the annual global survey that Frost & Sullivan conducts on the state of digital transformation in different industries. We found in that survey that the top 3 reasons banks, financial services companies, and insurance companies are investing in blockchain are: to improve security of certain classes of data, enable systems with blockchain-specific capabilities, and to gain efficiencies in their external operating ecosystem. Financial companies identified the advantages they are already seeing from blockchain – it improves cost efficiency, enhances customer care, and facilitates further innovation. Some of the strategic imperatives for financial services companies that are interested in transforming their operations with blockchain include education – internally and externally in their ecosystem; focus on customer expectations when developing technology; recognizing its advantages and what it enables, since it is only likely to continue to grow. Author: Clare Walker
More Information
No Index No
Podcast No
Author Clare Walker
Industries Information Technology
WIP Number K3AE-01-00-00-00
Is Prebook No
GPS Codes 9705-C1,99D5-A1,9AD1-C1,9B0E-C1,9B07-C1