Bain Study: if Implemented Right, Blockchain Will Dramatically Reduce Costs for Banks

Blockchain technology has the potential to revolutionize transaction banking according to a study by major global management consultancy firm Bain & Company, Cointelegraph auf Deutsch reports today, June 14.

According to Bain, “transaction banking revenues tend to be less volatile than other types of banking revenues, and bankers can cross-sell products, which is critical for client loyalty.” Bain concludes in its study that this particular area of banking will change substantially in the future through the use of Distributed Ledger Technologies (DLT), like blockchain:

“Using this technology, execution, clearing and settlement could occur simultaneously, minimizing liquidity and credit risks. Custody and other post-trade security services also are under threat from new technologies.”

According to the consultancy firm’s study, trade finance operating costs could be reduced by up to 50 to 80 percent by blockchain tech “if adopted in the right way by participants in the trade ecosystem.” The cost cuts would arise from significant increases in processing speed –– Bain calculates three or even four times faster settlement, billing, and payment.

In a press release accompanying the study publication, Bain partner and bank expert Dr. Christian Graf noted that overall, banks are facing a similar upheaval as the telecommunications industry over the last decade. He predicts that "small-scale, purely transaction-driven fee structures will be replaced in the future by flat fees for the provision of comprehensive solutions." According to Graf, banks who act early and begin implementing blockchain tech now “will gain a competitive advantage.”

In Liechtenstein, Bank Frick has been working intensively with fintech clients for some time, and Hypothekarbank Lenzburg recently became the first bank in Switzerland to provide business accounts to blockchain and cryptocurrency companies.

Today, June 14, the senior research director at the Bank of Canada’s funds management and banking department questioned the effectiveness and security of using blockchain for banking at the 2018 G20 Global Financial Stability Conference in Seoul.