Corporate Finance, DeFi, Blockchain, Web3 News
Corporate Finance, Fintech, DeFi, Blockchain, Web 3 News

Davos 2016: Will blockchain be the tipping point for financial services disruption?

Some say that technology revolutionized knowledge. Once controlled by a privileged few, knowledge is now becoming available to everybody. What if the same were about to happen with trust?

Robert Contri
Robert Contri
That’s one of the issues up for discussion at this year’s World Economic Forum meeting in Davos, Switzerland, which begins on January 20. As I prepare to go, I’m excited to meet with clients. I also look forward to the session “The Fintech Revolution”, which Deloitte is helping with. Of all the trends we plan to explore at Davos, one in particular has been much in the news lately. That would be blockchain.

Like cloud computing, blockchain is an elegant idea somewhat obscured by a non-intuitive name. It’s simply a technology protocol that ties individual transactions together to create a common ledger that everyone in a network can trust. In other words, it’s a type of database, but it’s distributed rather than centralized.

What does a blockchain look like? In a typical scenario, people make trades using what looks like a normal app. Behind the scenes, the app records each transaction in a contained place known as a “block.” Each block has a unique label. Blocks are semi-public in that others can see the container and its label, but they can’t see the contents without a key. A series of such containers is called a “chain,” hence the term blockchain.

In theory, a blockchain doesn’t need a bookkeeper, because participants maintain the ledger collectively. It doesn’t need an outside examiner, because transactions can’t be altered or faked. It doesn’t need the intervention of a certifying authority, because the assets being transferred are validated through a system of agreed-upon controls. Even more exciting is the emergence of smart contract technology (which is where blockchain really provides exponential benefits), and how the effect of automation will spur innovation in ways we cannot imagine today. Our project has considered smart contract use cases in automated insurance (e.g., crop insurance), collateral deposits, and syndicated loans, to mention a few. There are many more applications of smart contract technology which will continue to disrupt financial services creating change and opportunity.

This means blockchain is potentially very disruptive. As we observed in Deloitte’s recent blockchain report,(1) “A world in which parties can effect transactions securely without banks, stock exchanges, or payment processors is a very different one.” Of course, disruption is about gain as well as loss. In blockchain, financial institutions may have a powerful tool to fight fraud, improve compliance, and clear trades in an instant.

But blockchain still has hard problems to solve. For trust, it needs security. For speed, it needs capacity. For stability, it needs governance—no small challenge in a distributed environment.

So we have our work cut out for us at Davos.

How do you see blockchain affecting financial services? Where does it fit with evolving customer expectations, a changing regulatory landscape, and other advancing technologies? Please weigh in here or contact me directly. I’m interested in what you think.

Disruptive Innovation in Financial Services is a project of the World Economic Forum. Deloitte is the project advisor. A report on some of the project’s work was published last summer; you can find it here (2).


Robert Contri - Global Financial Services Industry Leader at Deloitte

Bob Contri is the Global Financial Services Leader for Deloitte Touche Tohmatsu Limited (DTTL). In this role Bob is responsible for overseeing DTTL’s four global financial services sector groups - banking and securities, insurance, real estate, and investment management – across all of DTTL’s businesses and member firms. He is charged with developing and executing on the industry’s overall strategic direction and go-to-market strategy for the group which includes over 35,000 people in more than 40 countries.

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Mercredi 3 Février 2016