Here's why blockchain will be widely used by 2021

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Financial services firms maintain their faith in the potential benefits of blockchain, with firms operating in securities services the latest group to express their belief in the technology in a new survey conducted by Deutsche Bank.

The study, which surveyed 200 institutional investors, banks, financial sponsors, brokers, and sovereign wealth funds, found that 87% of respondents believe that blockchain technologies will have a significant impact on the securities services market.

Here are some of the study's key findings:  

• 78% of respondents think blockchain will be actively used within six years. Given that financial services firms have historically been slow in implementing new technologies, this could be considered surprising. However, we think it illustrates the belief that firms have in the potential of the technology to drive increased efficiencies and cost savings.
• Systems failure and market disruption is the risk blockchain technology is most likely to mitigate, according to 48% of respondents. That's because blockchain technology can be used to eradicate single points of failure, where one part of a system fails and takes the rest down with it. A decentralized, distributed ledger system by nature does not have a single point of failure because there is no central authority, and transactions must be verified by multiple network participants. 
• 38% said blockchain could lower the costs of providing securities services by more than 20%. Cost reductions through the use of blockchain in securities services are most likely to occur in the area of settlement because blockchain technology was foremost designed to enable and automate record-keeping. It therefore has the potential to make current settlement processes more efficient and reduce the possibility of human error — both of which could significantly reduce costs. 

There are still hurdles to overcome before we see widespread adoption of blockchain in securities services. That includes the need for real-world examples of blockchain delivering the benefits it promises and a network of users committed to the same system. In order for these hurdles to be overcome within the six years that industry players expect, firms will have to work together, as it seems unlikely any one entity will be able to create a system acceptable to all. 

Blockchain technology, which is best known for powering Bitcoin and other cryptocurrencies, is gaining steam among finance firms because of its potential to streamline processes and increase efficiency. The technology could cut costs by up to $20 billion annually by 2022, according to Santander.

That's because blockchain, which operates as a distributed ledger, has the ability to allow multiple parties to transfer and store sensitive information in a space that’s secure, permanent, anonymous, and easily accessible. That could simplify paper-heavy, expensive, or logistically complicated financial systems, like remittances and cross-border transfer, shareholder management and ownership exchange, and securities trading, to name a few. And outside of finance, governments and the music industry are investigating the technology’s potential to simplify record-keeping.

As a result, venture capital firms and financial institutions alike are pouring investment into finding, developing, and testing blockchain use cases. Over 50 major financial institutions are involved with collaborative blockchain startups, have begun researching the technology in-house, or have helped fund startups with products rooted in blockchain. 

Jaime Toplin, research associate for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on blockchain technology that explains how blockchain works, why it has the potential to provide a watershed moment for the financial industry, and the different ways it could be put into practice in the coming years.

Here are some key takeaways from the report:

• Spending on capital markets applications of blockchain is expected to grow at a 52% compound annual growth rate (CAGR) through 2019, according to Aite Group, to reach $400 million that year.
• Banks and major financial institutions are working both collaboratively and independently to develop blockchain tech. Over 50 major financial institutions are involved with collaborative blockchain startups, like R3 CEV or Chain. And many are investing in the technology on their own as well.
• Putting blockchain to use for real-world transactions is likely not that far off. If working groups' tests are successful, firms could be using it to transact real value as early as the end of this year and we could see widespread industry application within the next few years. 

In full, the report:

• Examines the funding increases that are pouring into blockchain
• Assesses why blockchain is becoming so popular and what factors are driving up increased research and development
• Explains in full how blockchain technology work and what assets make it valuable and vulnerable
• Identifies pain points in the financial industry and profiles how various firms are using blockchain to solve them
• Demonstrates the challenges to mainstream adoption and their potential solutions

To get your copy of this invaluable guide, choose one of these options:

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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of blockchain technology.