A study conducted by market intelligence firm Juniper Research indicates that by deploying blockchain technology financial institutions stand to generate savings amounting to over US$27 billion on cross-border settlement transactions before the end of 2030. On the basis of on-chain transactions, the costs will be reduced by over 11%.
According to the Juniper Research report titled ‘The Future of Blockchain: Key Vertical Opportunities & Deployment Strategies 2018-2030’, other areas where banks are likely to realize cost reductions include treasury operations and compliance.
Some banking departments will, however, generate bigger savings than others. With regards to compliance, for instance, the automation of money-laundering checks by deploying blockchain will lead to cost reductions of up to 50% within a couple of years.
Benefits to Materialize Gradually
The market intelligence firm, however, warned that due to the fact that legacy systems will initially run parallel to blockchain-based services, cost reductions would not be immediate but would instead take several years to materialize. Juniper Research projects that cost savings will not reach an annual figure of US$1 billion until the year 2024.
The report also acknowledges that other industries besides banking will also benefit from efficiency enhancements as a result of blockchain deployment. This will include the food export trade where the costs associated with fraud are expected to be cut by almost half within a period of 12 years.
The report coincides with a projection by global information provider IHS Markit that blockchain’s business value will grow from US$2.5 billion in 2017 to reach a figure of US$2 trillion in 2030 as reported by CCN.
Notably, just like with the Juniper Research report, IHS Markit pointed out that the financial sector was going to be one of the major beneficiaries of blockchain technology’s transformative potential.
Financial Vertical Market
“There is barely a day that goes by without a fresh announcement about how banks and financial institutions are seeking to use blockchain technology to transform significant parts of their business. The financial vertical market will be the largest-value market to use blockchain,” senior blockchain analyst at IHS Markit, Don Tait, said in a statement.
Besides cross-border settlement transactions, IHS Markit observed that other areas in the financial world that will reap the benefits of distributed ledger technology include collateral management, assets custody, derivatives, claims management, share trading and corporate actions processing. Due to the large size of some of the financial sub-sectors, the blockchain business value will be enormous.
“[For example] the market capitalization of all the world’s stock markets is equal to $73 trillion, even small cost savings and efficiency gains can lead to significant business value for companies and industries that decide to introduce blockchain technology,” according to the press release.