TABB Report Indicates Growing Interest In Blockchain Among Custodian Banks
On June 20, 2017, consulting firm TABB Group issued a report titled, "Safekeeping Empowered: Reimagining the U.S. Custody Business," indicating growing interest in blockchain technology among custodian banks.
The report was commissioned by global custodian bank BNP Paribas Securities Services (BNP Paribas). According to the report, chief among the impacts to operational efficiency will be blockchain technology. "Our respondents expect their own operational efficiency to be impacted most by blockchain or distributed ledger technology (DLT) both in the next year, and over the next five years." The report goes on to say that participants in the study mentioned that internal teams are either working on blockchain technology projects or joining industry work groups "to clear repos [repossessions] on the blockchain" as well as settlements.
During an interview, Bruno Campenon, head of clearing, custody, and corporate trust America at BNP Paribas, shed some light on the banking world’s interest in blockchain technology.
"What you see is that a lot of people want to invest in it," said Campenon. "But at the end of the day, what's difficult is to see – what is the pragmatic approach?"
To that end, added efficiency may be the answer. Blockchain technology may be capable of delivering the efficiency customers desire to custodian banks, possibly reducing fees. The report indicates that when selecting a new custodian, customer service is chief among concerns; efficient operations can translate to better customer service.
DLT ranked third among top priorities in 2017 out of the banks queried. Cloud computing and storage ranked first while the second priority was digital identity, which could be aided by blockchain technology. The report also said U.S. customers of custody services expect institutions to keep pace with emergent technologies, and integrate automation where possible to reduce fees.
Overall, TABB Group's report portrays a future when blockchain technology becomes a staple of the custodian banking industry. "Looking to the horizon, [custodian banks] see blockchain/ distributed ledger technology as being transformative to their business and to the industry."