The bitcoin gang wins. But not the way it expected. Blockchain, the technology underpinning the world’s favorite digital currency is rapidly going mainstream with the potential to deliver a huge wave of financial services disruption.

Block chain is a distributed public ledger designed to securely record any information and the ownership of any asset. If offers market insurgents and disruptors a path to bypassing traditional banking altogether.

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In fact almost  (45 percent) of respondents to a recent global study of finance execs agreed the combination of blockchain wallets and Peer-to-Peer lending could even herald the “end of banking as we know it.”

And yet there remains a huge knowledge gap even at the very top of the global finance sector.

That at least is our reading from a new study called The Future of Retail Financial Services by research outfit Marketforce (which was sponsored by Pegasystems) and which sought the views of over 500 senior industry executives in 56 countries. (The study itself ranges widely over disruption in the finance sector with the discussion on blockchain appearing towards the end)

The reports authors say their study highlights the fact that “…although the overwhelming majority of those who had an understanding of blockchain see it as a potential game-changer across the global financial services landscape, there are still a significant number of organisations who risk being left behind as a result of their own lack of knowledge or understanding.”

Here’s the really interesting moment in the study “One-third (35 percent) of all global respondents admitted they have never heard of blockchain while of those who had, nearly a quarter (23 percent) said they had no understanding of the technology.”

But for those finance service retailing execs who u have peered over the precipice,  nearly two-thirds (60 percent) say blockchain believe it will prove to be the most significant technological development since the internet.

More than half (53 percent) of respondents said the technology would have a significantly disruptive impact in clearing and settlement markets, while more than one-third (36 percent) also expect to see significant disruption from blockchain on the checking accounts market.

The study notes, “There are no aspects of the financial services chain that will not be impacted by widespread use of blockchain, although front-end retail will be less affected than back-end clearing and settlement area. While nine out of ten of our respondents agree that blockchain will disrupt all areas of the financial chain, including current accounts, it is cards & payments and clearing and  settlement that will bear the brunt of the upheaval: over half our respondents said these areas will feel significant disruption from blockchain technology.”

blockchain graph

For now, say the authors,  financial institutions are scrambling to understand the implications of blockchain and how to harness its power. “There has been a splurge of investment in blockchain start-ups and fintech joint ventures: venture capitalists ploughed almost US$400 million into dozens of digital currency start-ups in the first six months of 2015, a fourfold jump from all of 2013 – and that does not count investments kept quiet for stealth projects.”

Among the other findings;

  • One in five (22 per cent of our respondents) expect it to be mainstream practice for consumers to hold most of their financial assets in a blockchain wallet within five years, rising to 55 per cent in ten years and 71 per cent in fifteen years
  • 12 per cent expect the settlement of insurance claims using IoT data, blockchain and smart contracts to be mainstream practice within two years and 74 per cent expect it to be mainstream by 2025
  • 42 per cent say it will be mainstream for consumers to hold their personal data, including ID, in a blockchain within five years

Graham Lloyd, Director and Industry Principal of Financial Services at Pegasystems, said: “For many, the jury is still out on whether or not blockchain will be a force for good or not. However, we do know there’s no longer room to be complacent about such a potentially significant source of disruption. Banks and insurers must prepare themselves for the day when they might have to manage blockchain-stored customer data – whether it be their personal information, details of their assets, or even real-time data from virtual currencies.

“To do this, they will need to take the time to understand blockchain and how this emerging technology could affect them moving forward. The earlier this technology is understood at the highest levels of the business, the sooner organisations will be able to develop strategies to mitigate risk and harness the power of digital transformation. The smart players are those who already have teams dedicated to exploring this new technology.”

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