Accenture’s report is based on concrete estimates based on the analysis of actual cost data from 8 of the world’s 10 biggest banks.
Going by a report prepared by Accenture, the world’s biggest investment banks could trim their infrastructure costs from $8 to $12 billion if they were to embrace blockchain technology by 2025.
The report, based on an analysis of cost data from eight of the worlds ten largest investment banks, has been jointly prepared by Accenture and McLagan, which is part of Aon Hewitt, a consultancy firm.
It only goes to underscores the potentially huge savings in deploying blockchain technology based on concrete estimates.
Blockchain is essentially a distributed record of transactions and other data, maintained by a network of computers on the internet which does away with the need for a central authority.
The technology creates a shared “golden record” of data which is virtually tamper-proof and eliminates the very need to reconcile balances, which could speed the arduous task of auditing.
Of late, large financial institutions, including banks, have been ramping up their efforts to develop blockchain technology so as to alleviate the burdensome load of back-office processes, including the clearing and settlements of securities.
Despite widespread scepticisms from many, who have argued that banks have jumped on to the “blockchain bandwagon” for the sake of publicity, the fact is for banks investing in blockchain makes business sense “given the tremendous cost of data reconciliation, which is part of every aspect of the capital markets industry”, said David Treat, managing director for Accenture’s financial services blockchain practice
According to the report, if 8 of the world’s biggest banks were to adopt blockchain technology to run some of their processes, including financial reporting, they could, significantly reduce their infrastructure costs by as much as 30%, on average. In the process, they would further gain by way of better data quality and transparency.
Costs associated with business operations, including, know-your-customer checks, trade support and centralised operations, could be trimmed by as much as 50%.
However, do note, that these estimates did not factor in the potential costs of investments to deploy the technology.
The report stated that although the emerging technology has significant potential regulatory hurdles could come in the way of widespread adoption, which could rein in its benefits.
“After the credit crisis of 2008, regulators will likely be reluctant to materially reduce the role of newly created and strengthened clearing and settlement infrastructure… without being absolutely confident that blockchain networks are a safe, secure and resilient alternative,” said the report.