WIN Magazine - Summer 2017 - 37
4.5-MINUTE READING TIME
destroy the financial
An in-depth look at the potential
pitfalls brought by new technology -
as well as the perks.
by PATRICK SCHWERDTFEGER
HE FINANCIAL SERVICES
industry is buzzing with
and ominous warnings
about blockchain protocol, but few acknowledge it is both exciting and scary at the
same time. This article will attempt to do
just that. Let's take a closer look.
The businesses most threatened by
blockchain are financial services companies. Still, the businesses investing the
most in blockchain are financial services
companies. In that sense, the industry is
racing to develop the very technology that
might eventually lead to its own demise.
Financial services companies are looking for ways to coexist with blockchain,
at least in the short run, by incorporating the technology into their existing
business models. There are indeed plenty
of applications promising financial
rewards. But their investments will also
accelerate the development curve, and
that will bring disruption along with it.
Blockchain is a protocol that automates
trust. It's a mechanism that requires consensus and guarantees immutability -
one that allows people who don't know
each other to conduct transactions and
trust the integrity of the system, eliminating the need for reconciliation. There
are multiple layers of reconciliation in the
financial services industry, so the elimination of those functions could cut costs.
The problem is that blockchain could
eventually eliminate intermediaries all
together. Financial services companies
do many things but in the end, they
are primarily intermediaries. It'll take
a while for the technology to develop
to that point, but the ultimate promise
of blockchain is to disintermediate the
financial services industry entirely. That
means industry giants could eventually
disappear. In the short term, blockchain
offers tremendous opportunities, but in
the long term, it spells potential disaster.
This is the predicament in which financial services companies find themselves.
The technology is developing either way,
so they have no choice but to participate.
Large consulting operations are in on the
action as well, developing cloud-based
solutions for every possible use case, not
to mention dozens of startups doing the
same. With so much money and talent,
innovation comes quickly.
It's difficult to predict which use-cases
will succeed and which will fail. Blockchain
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