A new report from the World Economic Forum (WEF) on the future infrastructure of banking has found that blockchain will play an integral part, with 80pc of banks expected to be using it as early as next year.
The blockchain technology that has defined how the cryptocurrency bitcoin operates is emerging from its once-niche use to defining the future of banking and multiple other industries.
In the WEF’s latest report on the infrastructure of banking, the organisation specifically discussed distributed ledger technology (DLT) as being the key technology that will emerge from the blockchain revolution.
$1.4bn in research over past three years
Based on the findings of hundreds of the world’s leading figures in the financial sector, the report has determined that, by 2017, 80pc of banks will begin initiating DLT projects, with nearly 100 corporations having already joined blockchain consortia.
This is down to the fact that, over the past three years, more than $1.4bn in venture capital has been pumped into developing DLT, helping researchers file more than 2,500 patents for advanced blockchain technology.
Three areas of banking the report says will be fundamentally challenged by DLT and blockchain include the cumbersome process of international payments and wire transfers; the repackaging of mortgages – that led to the 2008 economic crisis; and compliance reporting of banks to regulators.
Growing trust from banks
Discussions surrounding the potential importance of blockchain technology might not come as a surprise to those within the fintech sector, with groups like PwC having already issued a glowing report on the future of blockchain technology.
However, this latest endorsement from the WEF – one of the most influential and powerful business organisations in the world – could bring it to the fore.
“Rather than stay at the margins of the finance industry, blockchain will become the beating heart of it,” said Giancarlo Bruno, head of financial services industries at the WEF.
“It will help build innovative solutions across the industry, becoming ever more integrated into the structure of financial services, as mainframes, messaging services and electronic trading did before it.”
When discussing the most likely risks that could come with a rapid adoption of DLT and blockchain, the WEF report cites cybersecurity as one of the greatest factors, including both errors in its design and malware that could target financial institutions.
One recent example was seen just this month with the theft of 120,000 bitcoins from a Hong Kong server, resulting in the price of bitcoin dropping by 20pc overnight.
Safe deposit boxes image via Shutterstock