PwC Blockchain Market Research: Application Potential and Key Trends

“The key idea that we want to express is that the blockchain is an evolutionary leap in the development of technologies for optimizing business processes. Decentralized distributed databases provide market participants with such opportunities to change the face of the financial sector, which, as a rule, appear only once a generation. ”

Such a conclusion regarding the blockchain and related technologies is made by the reputable international company PriceWaterhouseCoopers in its large-scale study of the FINTECH market conducted this year. We at Wirex , as a financial services provider using blockchain and without banking intermediation, adhere to the same point of view. In the course of the study, PwC conducted a large survey, which involved 544 heads of large financial institutions and their divisions from 46 countries of the world. The survey showed that 56% of respondents were aware of the importance of the blockchain technology, but 57% of the participants acknowledged that at the moment they do not have a clear idea of ​​how their companies should respond to the opportunities it provides.

PwC experts believe that, despite its prospects, the blockchain still encounters many obstacles and challenges in its path. In many ways, this can be explained by a lack of understanding of technology by financial sector players. Eighty-three percent of respondents answered that they were familiar with it in general terms, and only 17% of managers answered that they knew it very well (15%) or called themselves experts in the field (2%).


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At the same time, as the authors of the study note, “the understanding of the blockchain and its commercial opportunities requires a clear idea of ​​how to connect the most diverse, often not intersecting fields of knowledge in any way”. And the lack of such an understanding, in their opinion, leads to the fact that “market participants are at risk of underestimating the potential impact of the new technology on their main activity.”

The highest level of awareness is noted among payment companies and other institutions engaged in money transfers. Thirty percent of survey participants working in this area responded that they are very familiar with the subject.

Like many other experts, PwC experts also noted the speed with which this field of activity undergoes changes: “The blockchain is developing and spreading at an unprecedented speed. To turn from a start-up idea into a mature technology, it took only a small part of the time it took the Internet or personal computers to become familiar to everyone with the attributes of everyday life. ”

The potential of technology

The authors of the study believe that the proliferation of blockchain can lead to a radical change in the competitive landscape in the financial sector. Current profit funds will be redistributed in favor of the owners of new efficient blockchain platforms.

PwC specialists highlight the following positive opportunities associated with the practical use of the blockchain:

1. Simplify access to financial services for people in developing countries

Billions of people around the world lack access to banking services and currency exchange. We already wrote in our blog about examples of how new financial technologies can completely solve this problem.

2. The emergence of new startups and companies

Blockchain startups appear with unprecedented speed. The number of ideas is large, and they themselves are diverse. According to PwC, the market has more than a thousand players, both new and already established, and this figure is only growing.

As examples of other interesting startups, PwC cites the Coinbase cryptocurrency exchange, which helps its customers sell and buy cryptocurrency, store digital assets and protect them from theft. Libra helps corporations keep records and analyze and audit operations with digital assets, regardless of which blockchain base they use. Companies such as Blockstream , Digital Asset Holdings and itBit simplify working with digital assets for financial institutions, and the experience of Eris Industries, a provider of solutions in the so-called smart contracts, is used by PwC itself as part of its integration into the existing client business.

3. Improving accounting methods

The blockchain offers the possibility of creating a distributed, transparent, almost real-time ledger, which can also be used to analyze data and verify their authenticity. The use of the blockchain in such a key reduces the time and effort spent on synchronizing (reconciling) data between different computer systems, and opens up the possibility of integrating the company's accounting department with many external sources of information.

4. More flexible cash management

The increase in speed and the possibility of instant notification will reduce the amount of money and other collateral assets that a bank needs to hold in order to reduce the risks of mutual settlements with other banks and financial institutions. The transparency of the technology also contributes to this, as it increases the level of trust of partners in such systems.

5. Improving interaction with financial regulators.

Having a central, unchangeable and transparent base of operations will allow auditors and regulators to quickly and in real time monitor the flow of financial data, eliminating any need for cross-checking of data after the fact.

6. Improving the quality of everyday financial transactions

New types of brokerage accounts based on smart contracts can eliminate mediation and provide an opportunity for participants in the stock, currency and other markets to work directly with each other. It is possible that some functions, such as messaging, clearing and settlement, performed by SWIFT, central banks and payment networks, will be carried out directly by automated exchanges. Even the release of new assets can be based on the blockchain.

7. Smart contracts

PwC calls them one of the most relevant ways to apply the new technology. Smart contracts are sets of rules written on the basis of the blockchain database. It is believed that the scope of their application is very wide: from simple voting organization during the discussion to more serious tasks, such as pledging, creating futures contracts and even prioritizing payments on structured financial products.

Major trends in the blockchain market in 2016

In addition to the survey, PwC also closely monitors developments in the market and analyzes the activities of individual companies. In total, according to the company, its specialists investigated more than 1 thousand blockchain-related startups, and also carried out financial and technical expertise of a group of similar companies, devoting more than 10 thousand hours to this activity.

In order to provide financial sector players and other participants with a comprehensive picture of how the financial technology market now looks, PwC has launched a separate analytical platform called DeNovo , devoted to researching the impact of technology on the financial sector.

In the field of blockchain technologies, the company experts counted more than 700 new market participants, 150 of which deserve close attention, and 25 of them have the potential to become market leaders. Based on the available data, the company identified three main trends in the development of the blockchain segment, which, in its opinion, will be clearly traced in 2016.

Trend number 1. Proven market players will focus on protecting intellectual property.

Companies whose activities are somehow connected with the FINTECH market are probably already considering options for integrating blockchain into their business. Reputable players like banks or exchanges are looking for ways to improve the quality of all the services and products they provide. At the same time, startups and service providers who understand blockchain technology are looking for the best ways to complement such business processes. In 2016, PwC recommends that traditional financial institutions engage in a similar dialogue in order to gain a better understanding of what intellectual property they will have to share with other players.

From a technical point of view, many market participants are already working together on the implementation of various developments. Nevertheless, strategic and business partnerships clearly do not fit into such an open model of interaction. Based on this, traditional financial institutions should form a fundamental technical understanding of the issue, since it will allow us to better determine which information should be shared in open forums and which should be kept confidential.

Trend number 2. The adoption of risk-related technical solutions should be based on the company's strategic plans.

In 2016, more and more new players will come to the market and enter into competition with the participants who have already settled there. As a result, financial institutions will face a huge choice of options for cooperation. In 2015, many participants began to talk openly about their innovative ideas related to the blockchain. Nevertheless, other companies that have not made such statements have also been working on creating their own technical solutions all this time. This allows us to assert with confidence that this year the market will reap the benefits of this investment. Considering the available options, financial institutions will face a new challenge that needs to be addressed: an assessment of the prospects for cooperation with various FINTECH partners.

Companies wishing to develop concept testing projects, pilot projects or even make direct investments should understand the financial position of their potential partners and their strategic goals. In the current situation, it is impossible to determine who will survive the next round of funding, but PwC indicates that there is a difference between successful startups and those who have almost exhausted the funding or will soon be acquired, and companies that want to succeed should be able to see it.

Ultimately, PwC recommends that companies develop strategic plans that will help set specific parameters and criteria for selecting projects and partners, as well as decide on the general direction of investment.

Trend number 3. The focus of development and testing of blockchain projects will shift from operating activities but elaboration of procedures associated with it.

In 2015, the market paid the lion's share of its attention to solutions aimed at testing the concept at the level of operations. This year we will see how the focus will gradually shift to supporting the new level of systems and processes that will be based on previously proven and successful operational solutions.

This means that if earlier the main question that financial institutions asked was: “How can we use blockchain for our own purposes?”, Now the relevance will receive a new question: “How to build other processes related to blockchain in order to get maximum benefit? "; or another, even more important: “What impact will these new processes have on our risk profile?”

In this sense, the company recommends that market participants pay special attention to such areas of activity as management organization, auditing and information security.

The main patterns that should be guided in 2016 and in the future

The benefits of new technologies are rarely distributed equally among market participants. In other words, there are always winners and losers. Thus, we can already say that many players will not receive the business benefits that they expect to see from the advent of new technologies.

PwC experts believe the following scenario is possible: technically savvy market participants will establish strategic partnerships with small groups of other advanced players (micro-consortia). This will allow them to focus on the transformation of expensive internal processes and to offer the results of this work within the framework of effective public platforms. Such platforms can subsequently be sold as services to smaller competitors.

The ability to build partnerships with a small group of key partners at the strategy and business level, according to PwC, may be the key to gaining competitive advantage over the next few years. In general, all participants in the financial sector should take a proactive stance in terms of responding to emerging threats and new opportunities that will arise with the spread of technology.

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