It’s been a strange decade for the financial industry. After enduring one of the most disastrous economic crisis in modern memory, a resurgent stock market and a booming economy have restored many of the most prominent institutions to their former grandeur.
Even so, all is not well in paradise.
The financial industry is humming along, but it continues to be plagued by problems and inefficiencies that require repair. For instance, the financial sector has the highest crime percentage of any industry. Moreover, in an assessment of the financial industry, research and consulting firm, Deloitte, identified several challenges ahead for the financial sector. Their findings include “multiple challenges tied to regulations, legacy systems, disruptive models and technologies, new competitors, and restive customer base.”
Now, in a season of abundance, it’s time for the financial industry to give itself a makeover before their indifference leads to a new set of problems that can stifle the industry’s growth. Interestingly, the blockchain, a multipurpose new technology best known for powering Bitcoin, offers compelling solutions to many of the financial sector’s most pressing problems.
Blockchain: Everyone’s Favorite New Tech
As cryptocurrencies captured mind and market share last year, the blockchain’s unique capabilities and dynamic potential captivated the imagination of leaders from virtually every industry. However, no other industry is as ready for the blockchain’s disruptive ethos to promote change and foster innovation. Government officials and financial leaders are leading the charge for blockchain’s integration into the financial sector.
In their 2018 Joint Economic Report, members of the U.S. Congress lauded the blockchain’s capabilities. Their report concluded that “So far, the technology has proven largely resistant to hacking…Yet the blockchain has many other more potential applications, such as…securing critical financial and energy infrastructure.” In more muted terms, JP Morgan Chase CEO, Jamie Dimon, described the blockchain as “real.” Dimon famously derided cryptocurrencies in their early stages, so his comments and his company’s significant investment in the technology is a notable endorsement.
In comments at the 2017 Fintech Transformation Conference hosted by Yale University, Digital Asset’s CEO, Blythe Masters, indicated that she sees a path forward for the blockchain to become the infrastructure for the financial services industry. She said, “You don’t just build enterprise-grade systematically meaningful infrastructure overnight. It takes time. But the adoption rate is building. Momentum is building.”
This momentum may allow financial institutions of all sizes to address their problems with one fell swoop. The blockchain provides profound solutions to issues of integrity and secure data transfers, so that the sector can maintain as much of its profit and market share as possible.
Blockchain: Helper and Disruptor
To be sure, the blockchain won’t just empower existing institutions. It’s also giving rise to a slew of new blockchain-based companies that, in some cases, are providing different and better financial services than the established institutions.
Although not all of this funding is directed at the financial sector, new ICOs, the launching mechanism for blockchain companies, are surging in 2018. According to data compiled by CoinSchedule, ICO funding has already surpassed $6 billion, and we are only a quarter of the way through the year. That’s a precipitous jump from the $3.8 billion raised in all of 2017.
It’s easy to see why this funding is pouring in: the platforms are very compelling.
ThinkCoin, a new ICO focused on the investment industry, is powering a new platform, TradeConnect, that removes brokers and exchanges from the equation and, instead, facilitates direct p2p connections between buyers and sellers.
This model is cheaper, more direct, and more secure than current offerings, and its investment offerings are on par with existing institutions. FX and CFD trading are already enabled, and it will include futures trading, commodities, derivatives, options, bonds, and other investment products.
In this way, ThinkCoin will not promote growth among the existing financial institutions. It will challenge their preeminence by providing a more compelling option for investment platforms. Therefore, it can feel like big banks are playing catchup when it comes to blockchain adoption and innovative new offerings.
Financial consulting and auditing service provider, PWC, sees blockchain integration moving beyond rudimentary code discussions and into broader, ecosystem-wide talks surrounding implementation. In other words, it’s not an “if” but a “when” the blockchain will be normative in the financial industry.
To some degree, it will help existing institutions improve their practices, and new platforms launched using blockchain technology will challenge the status quo and challenging everyone to put their best foot forward. These are good days for the financial industry, and a technological makeover will ensure that they continue well into the future.