Credit Suisse Predicts Consolidation Of Financial Markets Due To Blockchain Integration

04.08.2016

Financial conglomerate Credit Suisse has published a report on possible impact of blockchain once it’s implemented across diverse economy sectors. The report was prepared by thirty-one expert from different countries.

Whereas the report is mostly focused on payments industry, it states that the technology might be applicable to the benefit of multiple industries.

“Our broadest conclusion is that blockchain is less relevant in sectors where there has already been significant investment and innovation. For instance, consumer payments and pretrade execution already takes place in milliseconds; it is hard to see how blockchain could materially improve this efficiency. However, in sectors where there is more friction, blockchain has the potential to materially disrupt the landscape,” the report says.

The document names four industries that may experience a drastic change of pace in case of blockchain’s implementation, namely payments, financial markets, financial services, and media.

Below is a brief summary of the report focusing on the industries which are said to be the most promising for blockchain technology.

Payments

Payments is an enormous industry covering acquirers, card issuers and processors. Bitcoin and blockchain may dramatically change it, the report says. Still, Credit Suisse thinks it unnecessary to worry about possible threat from blockchain to major players. They expressed their doubts that bitcoin may become a leading payments tool, or that blockchain may outrun VISA or MasterCard.

Financial Markets

Blockchain is more promising than risky for financial markets, Credit Suisse concluded. In particular, depositories, regisrars, and exchanges may use the new approach towards data management. This would make the market more inexpensive and resistant to external impacts. Removal of existing time gaps between trades and actual execution of financial operations may benefit the market as well. Currently, it takes nearly three days to transfer ownership of a security.

“We see the biggest impact in areas like financial services, exchanges and post trade settlement, where T+3 settlement looks ripe for optimization. In particular, we see scope for vertical integration across exchanges, clearing, settlement and registration. The winners and losers from this consolidation are still not clear, but the market appears to be overlooking risks for exchanges (ASX) and, we would argue, unfairly pricing the registrars (Equiniti and Computershare) for disappointment,” the report reads.

Financial Services

The report describes two most probable scenarios of further events. One of them sees blockchain cutting security/cross-border remittance expenses. The other provides customers with greater amounts of information, thus enabling companies to enhance their financial results.

The document analyzes banks interested in blockchain technology, like Goldman Sachs Group, JPMorgan Chase, Experian, and Santander. Credit Suisse concludes that in the next three to five years, the effect of blockchain will be most pronounced.

Media

There was a separate research studying blockchain’s impact on non-financial companies, and media businesses in particular. It is expected that the music industry will completely switch to blockchain platforms, while the piracy level in the realm of media content will seriously decrease. However, the report noted, it might take at least five more years to see any real changes.

Another financial giant, American Express, has issued its own report in early June. The report covers possible applicability of blockchain in general, and bitcoin’s public blockchain in particular on international financial markets. Remarkably, the report’s authors were also very interested in the second most capitalized cryptocurrency, Ethereum.

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Tags: banks, blockchain, Credit Suisse, fintech, report