And that doesn’t capture a range of other challenges, including the switch to digital platforms, Open Banking or the fight to hire and retain talent.
“There is a significant gap between the help clients are looking for in developing approaches to blockchain and current bank offerings”
In this context, the world’s banks might be forgiven if, following the recent decline in value for “classic” cryptocurrencies such as Bitcoin, they are somewhat sceptical about the benefits of distributed ledger technologies (DLT), digital currencies and blockchain.
After all, certain business lines such as cross-border transactions remain broadly profitable for banks even if – as our new study, “The Great Switch: Major Corporates are Ready for Blockchain – but can Banks Deliver?” shows – corporate customers consider current arrangements to be slow, expensive and complicated to use.
The temptation is to run these existing services while competing for business in those services and investing in near-term priorities such as client web portals. Taking this option, however, misses a number of milestones over the next three to five years that will revolutionise banking as much as the switch from cash to electronic payments over the last 50 years.
These include more and better regulation surrounding digital currencies and blockchain – think the 2021 US OCC ruling that stablecoins are valid for banking transactions or the EU’s MiCA regulation due in 2023 – as well as moves by national central banks to introduce Central Bank Digital Currencies (CBDCs).
At present, some 90 per cent of the world’s central banks are some way along the path to creating a CBDC. According to the Atlantic Council, 11 countries have launched CBDCs, 14 more are piloting them and a further 73 countries are known to be actively researching or developing a CBDC.
The advent of CBDCs – which most major jurisdictions predict will happen by 2028 – will trigger huge adoption of blockchain technologies and banks must do more to prepare for this future. Especially when it comes to their client product and service portfolio.
