Spotlight on Blockchain in Financial Services - Time to Rein in Expectations

<p>As technology innovations go, few can have had as much impact – or have been the subject of as&nbsp;much fevered speculation – as blockchain. For some it’s a revolution – likely to be as important as the&nbsp;arrival of the internet. Others, wary of hype, are more sceptical. Much of the debate has been about&nbsp;whether blockchain could revolutionize financial services – and financial institutions, traditional and&nbsp;new, have high expectations for its power to cure their ills and boost their business.</p>

<p>At its heart, blockchain technology verifies transactions based on a network of consensus; once&nbsp;approved, transactions enter an online ledger that cannot be tampered with (for a more detailed<br />
definition, see Chapter 6). That blockchain is built on transparency, consensus and trust should make&nbsp;it a natural fit with risk management and compliance, and there are many areas where its attributes can&nbsp;easily add value to a risk management function. But it has several important shortcomings, not least&nbsp;its built-in anonymity, and the lack of available computer processing power to operate it at scale.</p>

<p>Blockchain is, however, highly customizable, and if successfully tailored to financial firms’ needs,&nbsp;it will be a great way to add value, share information and streamline business processes. But any&nbsp;financial institution exploring its possibilities should understand the issues before making blockchainbased&nbsp;decisions that could transform their business processes. Views must be balanced, and&nbsp;expectations tempered.</p>

<p>This report demystifies blockchain by setting it in a more realistic financial services context, and&nbsp;comparing it to more established technologies that can offer at least the same, and in some cases more,&nbsp;functionality. We also analyze blockchain’s features and developments – such as smart contracts and&nbsp;public and private blockchains – to understand its challenges and opportunities. Finally, we provide&nbsp;Chartis’s view, to enable financial institutions to evaluate blockchain’s true potential before deciding&nbsp;whether it’s right for them.</p>

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