If 2016 was the year of the Blockchain POC, 2017 will be the year of the Blockchain application. In 2016, analyst firms and industry bodies such as the World Economic Forum (WEF) laid out the top use cases to tackle.
According to 2017, work from industry leaders like ConsenSys, a custom software consultancy led by Ethereum founder Joe Lubin, indicates that 2017 will be the year of the Blockchain application.
In order to accelerate the development of Blockchain applications, ConsenSys joined forces with Synechron, a global digital consulting firm working with financial institutions, to adopt innovative technologies such as Blockchain and artificial intelligence.
With Synechron’s team of specialized financial services consultants and ConsenSys’ Blockchain application toolkits, a powerful partnership has been formed.
Cointelegraph spoke with Lubin and Sandeep Kumar, managing director of Synechron, to find out what’s next for Blockchain in the financial services sector.
From R3 to mini-consortiums
Cointelegraph: What was the most important event for the industry in 2016?
In 2016, Blockchain banking leaders like BOA, J.P. Morgan and others announced projects in trade finance and other applications that proved the concept of Blockchain to be workable within financial services.
“However, toward the end of the year, Goldman Sachs and others leaving the R3 Consortium marked a significant shift for Blockchain development, whereby the consortium model, which proved helpful for building industry consensus around Blockchain, showed its limitations.”
As R3 reworks its membership model, Goldman Sachs has created a wave of other companies leaving the consortium and breaking out on their own to form mini-consortiums with 2-3 banks and non-bank intermediaries. Given this, we expect to see considerable movement in Blockchain ecosystems around shared use cases across three or four parties like insurance claims or mortgage processing where multiple parties in the transaction come together to create straight through processing using Blockchain.
Further, in addition to the six accelerator applications Synechron launched in 2016, Synechron’s collaboration with ConsenSys and BlockApps provides an opportunity for development which could include accelerators related to total return swaps, call spreads, syndicated loans, bond issuance, tokenized securities and tokenized fiat currencies. Additionally, identity will increasingly become a significant focus for what Blockchain is asked to achieve in future applications.
CT: Where do you see things headed for Blockchain in financial services in 2017?
It is not surprising that some estimates have shown that Blockchain technology applications will reach $20 bln by 2025. As a technology that has the potential to be as transformative as cloud technology was ten years ago, if you look at the problems related to fraud, reconciliation, compliance with regulations like KYC and the efficiency gains Blockchain can address, $2 bln of investment per year over the next ten years seems even a conservative estimate. If the technology can make it past what Gartner refers to as the trough of disillusionment after the hype dies down, the business KPIs per firm could be much more.
Synechron also sees projects like Dun & Bradstreet’s initiative to map 6,500 of its unique identifiers onto Blockchain as a critical data component for Blockchain ecosystems requiring credit rating data as a building block for Blockchain initiatives when it comes to identity and reputation of corporates on Blockchain.
CT: What brought you to work together?
While Blockchain has the potential to be a transformative technology, financial institutions need highly customized applications. Three things drew Synechron to Ethereum and our partnership with ConsenSys; their vast technology expertise which would put Synechron close to the source, their future release plans and their cross-industry expertise which we felt we could bring to financial services. Synechron’s financial services clients look forward to the next version of Ethereum for enhanced transaction consensus.
Reciprocally, ConsenSys is advising providers and financial services firms on how to evolve the technologies to address evolutionary issues like scalability, interoperability and data privacy. Synechron will allow the company to amplify the speed of adoption of these new technology capabilities as they are introduced to Blockchain infrastructures so that their clients are working on the absolute latest Blockchain infrastructures.
CT: What does this partnership bring to the financial services industry?
Together, Synechron and ConsenSys are tackling the most significant barriers such as privacy, scalability and interoperability critical to Blockchain’s adoption in financial services. Synechron’s large bank clients want technical depth and ConsenSys has deep technical talent for Ethereum, while Synechron holds a deep knowledge of financial services regulation, operations and overall business practices. This level of financial services domain knowledge, development expertise and influence over the future of Blockchain infrastructure advancements does not otherwise exist in the market.
A year of Blockchain experimentation
CT: With so much competition in the tight Blockchain industry, how do you see the development and usage of Blockchain moving forward?
2017 will continue to be a year of Blockchain experimentation, and whilst we are likely to see the rise and fall of some Blockchain consortiums, one trend that will remain is the appetite for banks to work together and leverage Blockchain accelerators to run proof of concepts or controlled pilot programs.
“The biggest challenge facing the industry today is the scarcity of Blockchain talent, not only from an application development perspective but also from a domain expertise angle in which business use cases are validated and earmarked for Blockchain transformation – making real development experience a unique asset.”
In fact, when asked if their company currently has enough talent capable of implementing Blockchain technology, our survey of 200 financial services decision-makers, conducted with TABB Group, found that 39.3 percent of respondents answered “no” – Blockchain technology talent is still difficult to find and 31.3 percent said “no” – we’re working with partners, vendors to supplement – as compared with 23.4 percent saying they would reallocate resources and 6.1 percent support training.
CT: What are the anticipated regulatory changes around Blockchain that you expect to see?
In 2016, regulatory bodies have taken a wait and see approach, publicly stating they are researching Blockchain and examining projects to understand it better. While 2017 may be the year that regulators become involved, perhaps, more importantly, 2017 will be the year that real Blockchain applications and ecosystems take hold, giving regulators real, fully functional business applications of the technology in action to understand.
“Blockchain is a long journey but will fundamentally change how Wall Street does business today. 2016 was all about proof of concept. 2017 and beyond will be about proof of value through applications that work to achieve real, measurable benefits for businesses.”