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Blockchain – A Specter over the Financial Industry

Dozens of large banks are researching the potential behind Blockchain technology for financial transactions. A current study sees major potential benefits to efficiency.

30 May. 2016 Mark Schröder
The Blockchain technology could soon turn the entire financial industry inside out. (Photo: Julia Tsokur /

Bitcoin and Co.

Blockchain technology has the potential to fundamentally change the global financial markets. A recent study by the BearingPoint Institute shows how Blockchain puts the entire legitimacy of intermediary bodies in question by allowing transactions to be handled directly between payer and beneficiary. As such, payment processing services, asset management firms and central banks all face an "existential" threat, BearingPoint says.

BearingPoint partner Iris Grewe needs only one example, an international payment transaction, to illustrate the potential inherent to BlockChain technology: the average processing duration for transactions can be shortened from 96 hours to 0.1 seconds. At the same time, average costs can be cut from up to 40 US dollars per transaction to just 10 US dollars. In Grewe's view, the intermediaries are primarily responsible for delays in transaction processing, and high costs as well.

Over the course of its study, BearingPoint determined that by 2022 the technology could save between 13 and 18 billion euros per year in banking infrastructure. Blockchain can for example be used to make international payments, trade in securities or optimized compliance with regulatory requirements.

By 2017 the financial industry will have invested one billion US dollars in the technology, BearingPoint explains. The banks claim to have already implemented around 20 projects, typically in coordination with a startup. Credit Suisse and UBS for example are working with the startup R3 on researching practical applications for Blockchain in financial transactions. Barclays and UBS developed "intelligent" contracts on an Ethereum (Blockchain 2.0) technology basis for implementing complex financial products.

Bitcoin instead of Euro

If financial transactions handled using Blockchain technology make intermediaries superfluous, then the entire financial system itself could be put in question. For Philip Godsiff from the Centre for the Digital Economy at Britain's Surrey Business School, it's entirely conceivable that the central banks will no long be required if companies and private consumers move away from banks. He provided the scientific underpinnings for the BearingPoint study.

The expert and co-author of the BearingPoint study believes that without central banks, nationally controlled currencies could also be replaced with digital payment instruments such as Bitcoin. "Blockchains may soon lead to an existential threat for the financial system," Godsiff opines.