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Blockchain and Asset Management

Contributed by Finscoms
04 July, 2017


We're moving from the 'internet of information' to an 'internet of value'. We know that the banking sector is getting behind blockchain technologies but will the asset management sector adopt?

A recent Santander publication reports that global banks could save up to $20bn a year by 2022 by implementing blockchain technology. There is an immense cost pressure on financial institutions and therefore inevitability about the pursuit of the encryption technology. We will no doubt see an aggressive application imminently. The World Economic Forum estimates that by 2027, assets equalling 10 percent of global GDP will be kept on a blockchain.

How do asset managers view this sea change?

It would seem that the asset management sector is sitting back and watching from afar despite the obvious benefits. According to the Wealth and Asset Management 2021 report by Roubini ThoughtLab, the widespread introduction of blockchain could push static asset managers out of business.

So why are asset managers not adopting?

There are a number of reasons for this. Asset managers don't encounter the same weight of pressure on costs as the banks do.  This is due to the ability to pass costs on to customers, predominantly retail customers. Therefore the investment sector is under less pressure to chase prospective savings.

Also, blockchain applications will mainly be utilised in settlements. Many asset managers outsource this service to custodians.

Is ignoring blockchain strategy wise?

It would be a mistake for asset managers not to consider their Blockchain strategy. Committing modest resources to understanding what is happening is much more affordable than immediately making major technology investments with a 1-3 year timeline i.e. the technology may be out of date by the time it is delivered. There should be governance structures in place to ensure timely reviews so as to chose the optimal opportunity to adopt.

What is the threat to the sector?

There are threats to the asset management business model. The threat comes from disruptors who may be inspired by the lower costs brought about by blockchain technologies. This may well be a new pasture for fintech entrepreneurs. There is a clear move by P2P firms to utilise blockchain across their distribution platforms to offer an expanded variety of investments.

The asset management sector must get a grasp of this nascent technology and prepare for it's imminent arrival. Finscoms cares about the future of the sector, talk to us about how to prepare yourself.





 

 


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