Pervasive deployment of blockchain across financial services won’t occur for at least another three years.
This is according to the latest data from global research and advisory firm Gartner, released to coincide with the 2019 Gartner IT Symposium/Xpo taking place in Cape Town this week.
There are a number of industries where blockchain technology is expected to have tremendous potential, with financial services often touted as one such industry.
Although they are still uncertain of the impact blockchain will have on their businesses, 60% of CIOs said they expect some level of adoption of this type of technology in the next three years, according to the 2019 Gartner CIO Survey.
On the other hand, nearly 18% of banking and investment services CIOs said they have adopted or will adopt some form of blockchain technology within the next 12 months and nearly another 15% within two years.
In its latest research, Gartner found that lack of interoperability is one of the key factors that will constrain blockchain deployment across financial services ecosystems.
“Blockchain standards for financial services companies are currently fragmented and immature,” says Fabio Chesini, senior research director at Gartner. “We are three to five years until standards mature and settle.”
The firm believes standards are critical for financial entities because they are constantly moving assets between clients, partners and other institutions.
Chesini explains: “Bank CIOs must be mindful of this nascent and fragmented state of blockchain standards. It is unlikely there will be a single de facto standard like in the Open Systems Interconnection model, at all levels. Given how new and fragmented the state of blockchain standards is, we expect no more than four standards to lead the market in the next three to five years.”
In addition to standards, the Gartner senior research director warns financial services CIOs of other barriers when deploying blockchain projects; namely governance, integration and interoperability.
In terms of governance, the firm says blockchain governance is important because it regulates activities occurring across the ecosystem and provides legal assurances that their arbitrary decisions will not be made as an abuse of power against other participants.
“Governance and management of private and permissioned blockchains in any form, including consortia, will remain centralised and hierarchical during the next three to five years, making blockchain governance in financial services a key impediment for the same period,” according to Chesini.
Turning to integration, Gartner highlights that implementations must be seamlessly integrated to achieve the true potential of blockchain.
In conclusion, Gartner says Bitcoin, R3, Ethereum, Hyperledger and others often use differing implementations, data formats, data interchange and directories, making interoperability among different blockchains difficult across organisations.
“As financial services companies constantly move financial instruments and assets to other financial services companies and partners, cross-industry interoperability standards are, and will be, critical,” notes Chesini. “Today, they are looking to replace current banking vehicles for payments like Western Union, or international money transfers like SWIFT, with blockchain-based platforms.”
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