Through our work across the financial services sector, it is clear to us that blockchain technology has the potential to transform our industry. During NICSA’s recent Strategic Leadership Forum, disruptor technologies were a focus, and blockchain applications seemed to attract real interest. During last week’s Blockchain Trends & Applications webinar (NICSA members can access the replay here), we invited several industry leaders to take a deeper dive into this evolving topic.
Should blockchain be a strategic focus? Or, is it just hype? Could the technology gain enough traction to have a meaningful and lasting impact on the tracking and settling of financial assets?
To start off, Angus Champion de Crespigny, Financial Services Blockchain and Distributed Infrastructure Strategy Leader at Ernst & Young, discussed how distributed ledger technology impacts data storage capabilities and provides transparent access to single-source data. He also took a look at how the technology may impact, or “change the shape of,” financial intermediaries in the future.
Serge Weyland, Head of Financial Institutions at Banque Internationale à Luxembourg, took us through some pretty compelling proof-of-concept case studies from across the pond. The first example, FundChain 2016, was a collaborative initiative of industry participants including distributors, TAs, and administrators and used the smart contract concept embedded in blockchain technology to enable automation of certain shareholder recordkeeping processes. The second example, FundsDLT (led by KPMG, Intech and Fundsquare) addressed the changing distribution landscape as regulations abroad increasingly push asset managers toward disintermediation. In this case, distributed ledger technology was used to create an engine for asset managers to perform a variety of TA functions—including transactions, settlement, and record keeping—providing good insight into how a direct B to C business model can work using blockchain.
Rounding out the discussion, Justin Chapman, SVP and Global Head of Market Advocacy & Innovation Research at Northern Trust talked about how infrastructure efficiencies, cost savings, and increased transparency are a few of the potential benefits of blockchain technology that are gaining attention from asset managers around the globe.
The conclusion: While technical challenges, data confidentiality, and regulatory barriers remain, none of these issues seem insurmountable. Integrating processes across parties seems to be the big issue but this panel largely agreed that a collaborative industry environment is necessary for companies to successfully incorporate this technology into how they do business.
What should companies be doing to prepare for blockchain?
Even if the strategy is to simply gain an understanding of the technology, or to put some governance structures in place to ensure further review, action is essential. Asset managers not taking the time to comprehend the potential impact of blockchain may be putting themselves at risk.
Many thanks to The Association of the Luxembourg Fund Industry for hosting the webinar, and to Chuck Gallant, Managing Director at BNY Mellon, for moderating the call and engaging our listeners in such a lively and informed discussion. We invite you to share this post and the webinar replay with a colleague who may have missed the event.