Why Is the Financial Industry so Interested in Blockchain?

Executive Brief

With huge money and effort being put into blockchain research by almost the entire financial industry, many have wondered what the reasoning behind it is. To investigate this, Goldman Sachs, the global banking business, has used its research division to put together a report on the effects of blockchain implementation will have on the industry itself. Showing massive cost savings, improved security and a wide range of suitability for other market sectors, the report identifies the many benefits of blockchain technology and emphasizes the robust nature of the foundation of digital currency itself.

Read the full story below. 

Over the last 18 months to 2 years, we have seen a dramatic increase in interest, and funding, for blockchain research and applications from within the financial industry itself. Many have wondered just why there is so much interest, whether the added security or efficiency is driving the push, or if blockchain offers something else. Goldman Sachs, the global banking business, has been investigating this as well, and have recently published a report that shows where the benefits lie.

According to the new report, implementation of blockchain technology could offer streamlining of the clearing and settlement of cash securities that could save the industry $6 Billion a year globally, including a massive $2 Billion a year just within the U.S. itself. The report looked at cash securities exclusively, that is equities and leveraged loans, and the wider industry would likely see even bigger savings as more areas adopted the blockchain model.

The report also shows where the savings would be produced, and include cost savings through IT infrastructure, savings due to reduced personnel requirements as well as operational savings simply through the more efficient processes that blockchain brings. Additional savings would be seen by adapting anti-money laundering procedures, customer identity verification and other essential administration to blockchain infrastructure.

With the level of savings predicted, it is perhaps no surprise that the industry itself is putting so much into the development of blockchain solutions. Indeed, it reflects just how versatile blockchain technology is that it can provide the infrastructure for so many differing processes within financial operations and bring efficiency savings to all of them.

The report is also notable for showing other market sectors where blockchain could offer the most value and be particularly suitable, in particular within the ‘Internet of Things’, where Goldman Sachs suggest it could significantly reduce the chance of fraud and corruption in transactions while increasing transparency and efficiency for all parties involved in those transactions.

This kind of analysis is not only good for the blockchain concept, but for the cryptocurrency industry itself, reinforcing the benefits, reliability and security that underpins all digital currencies.

Author: Thomas Moore

Thomas Moore is a writer and researcher with a love for the eclectic, family and the world we inhabit. He spends his spare time photographing the varied wildlife that surrounds us daily and contemplating why Firefly never made it past season one.

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