Alongside robo advice, one of the most commonly-asked questions I get from wealth management executives is “What should we be doing about blockchain?” My answer at the moment would be “watch and learn.” For many industries, blockchain—a distributed ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly—is in its infancy. Aptly named as a “disruptive technology”, blockchain breaks free from traditional technologies and governance and instead relies on trust within the blockchain network.
But what it lacks in tradition, it makes up for in agility. A distributed ledger shared in near real-time between capital markets participants and validated among separate nodes creates a platform which can ease difficulties in the current financial landscape—for instance, by introducing unprecedented cohesion to internal bookkeeping processes or providing strong auditability to strengthen risk management.
Despite these early days, blockchain technology is being used in investment banking instances such as know your customer/anti-money laundering, data sharing, trade surveillance, regulatory reporting, collateral management, trading, settlement and clearing. I would say to all wealth managers everywhere, it is coming and it will be important—but for the time being we must just be interested and be ready.
In my conversations with wealth managers, I do share where distributed ledger or blockchain solutions could be considered. Blockchain has potential for certain types of processes and functions, such as:
- Multiple validation and control points: Process step and data element level controls and immutable data capture to help with control and auditability
- Multiple actors: Enhanced coordination and choreography between actors in a process through a mutualized view of the latest status, obligations, and information
- Reconciliation: Golden sources of mutualized data as an alternative disparate data stores that require constant alignment and reconciliation
- Data quality or lineage: Data element level controls for data that is continuously updated or maintained by multiple actors
- Auditability: Reliable and accurate audit trail through an immutable data store with transparency of the identity for each data change
Accenture is already demonstrating a commitment to blockchain. As recently as February 2016, we launched a specialized practice within our financial services group to help institutions implement blockchain technology to improve operational efficiency, security, and client service, as well as to capture new revenue opportunities. The announcement referred to an alliance with Digital Asset Holdings, a developer of blockchain technology, and is a first step in helping the industry unlock scalable and transformative uses of this innovative technology.
Blockchain could reinvent the industry and there will be a time, coming soon, when wealth managers need to be bold. For my part, I’ll be sure to keep you posted on the topic, so “watch this space” for more.
If you would like to discuss this topic further or get additional information, please email firstname.lastname@example.org.