February 13, 2018 | By Lisa Dare, TEKsystems Digital Content Strategist
Financial services IT leaders might be forgiven if they’ve grown a bit tired of all the disruption. With the lighting-quick rise of mobile banking, competition from fintech startups, algorithm-based wealth management services and a newfound appetite for using data—not to mention the innovation they’re seeing from hackers—they’ve had a lot to manage.
And as large, monolithic institutions, large banks and investment firms are less prepared to move nimbly than their would-be disruptors. But to their credit (ahem), many financial services institutions have jumped into blockchain discovery, and have been pursuing use cases, patents and even finished products.
Just how big will blockchain be compared to other technologies?
“Blockchain will definitely be a part of how money is moved in the future, but I don’t see it being quite as transformative as mobile banking or competition from peer-to-peer platforms,” says Michael Shook, an account director for a major financial institution.
TEKsystems polled financial services IT leaders for our 2018 IT Forecast, and half of them reported having projects in the works or commencing in the next two years.
“Most of our larger financial services customers already have blockchain projects well underway because they realize the enormous applications blockchain has for secure financial transactions, and they’re preparing for its potential for disruption. However, many are still in the ‘skunk works’ phase to understand how they can insert it into their products and platforms,” says Micah Hemmer, a director of strategic financial accounts for TEKsystems.
Financial institutions see many possible uses for blockchain in reducing their costs, enhancing transparency and trust, and building new financial products.
Some use cases being explored:
Banking is at a crossroads. There’s a lot of drive to innovate, and deregulation is freeing up a lot of capital to do it.
Some institutions are creating their own blockchain technology in house but many are experimenting with open source platforms such as Ethereum, or using infrastructure being built by providers like Microsoft and Oracle. JP Morgan Chase has already built a smart contract tool upon Ethereum.
“Right now, there are some big limitations on transaction capacity of these open blockchains,” says Chuck Thomasma, a business systems account manager. “Institutions can’t use them as a base layer for their product architecture because they’d overload.”
While institutions are excited to realize some of the efficiency gains blockchain represents, they’re also nervous about its ability to make some of their function obsolete. “The tough thing about blockchain is that it’s going to be very disruptive for all kinds of intermediated industries,” says Thomasma.
“Banking is at a crossroads,” says Hemmer. “There’s a lot of drive to innovate, and deregulation is freeing up a lot of capital to do it. They’re in a race to develop the best products.”