Blockchain technology to hit bank profits
Revolutionary blockchain technology threatens to slash the profits of banks and wipe out lenders which fail to quickly adopt the online record-keeping innovation, a high-powered panel of finance and technology experts warned.
Jose Fernandez Da Ponte, global digital business executive at Spanish banking giant BBVA, said digital disruption to financial institutions by blockchain posed “extremely large” threats and opportunities.
“Those institutions not up to that are likely to cease to exist,” he said at a conference in Washington.
At a panel convened by the International Monetary Fund, financiers, technologists and regulators debated the ramifications of the evolving blockchain.
IMF deputy managing director David Lipton said banks and regulators were grappling with fintech advents including virtual currencies, distributed ledgers like Blockchain, smart contracts, crowd-source funding and peer-to-peer lending.
”One significant source of risk may be the erosion of bank revenue in payments services,” Mr Lipton said.
This could deliver big savings to consumers, but undermine financial stability, he said.
Blockchain, the online general ledger that publicly records transactions, allows customers and suppliers to directly transact over the internet.
It reduces the need for intermediaries such as banks, by creating a safe and transparent record keeping system.
The shared database technology was originally the platform for the virtual currency Bitcoin, but is now being adopted across the financial services sector.
Charley Cooper, managing director at technology firm R3, said it was too early to know how blockchain would disrupt retail banking and investment banking.
“Any financial services firm right now that is not paying attention to this technology and the potential existential threat is being foolish,” Mr Cooper said.
“This could be really as transformative as anything we’ve seen in our lifetimes.”
New York-based R3 is working with a consortium of about 40 banks, including Commonwealth Bank of Australia and Westpac Banking Corp, to grasp how the distributed ledger technology could be applied across the industry.
The firm’s representatives will be in Australia next month to meet clients and regulators.
“Your regulators and central bank are ahead of the curve on this,” Mr Cooper said.