Earlier this month, securities rating firm Moody’s produced a report on blockchain technology and the implication for financial services firms. In a release, Moody’s stated that “blockchain technology has the potential to significantly reduce the costs and time involved in cross-border banking transactions, increasing banks’ efficiency but putting pressure on their fees and commissions.”
In effect, distributed ledger technology can eliminate much of the friction in the global banking industry that exists today by reducing middlemen and streamlining operations.
Moody’s said that Swiss banks would be most exposed to reductions in fees and commission, as half of their revenue coming from that source.
Banking systems with significant cross-border transactions such as the United Kingdom, Belgium and Switzerland — may see the most disruption from blockchain tech.
Colin Ellis, Moody’s MD of Credit Strategy and co-author of the report said that blockchain has the potential to substantially change how a wide range of financial services are executed:
“Banks could benefit significantly from the development and implementation of blockchain technologies in terms of enhanced efficiency, cost savings and risk reduction. But the adoption of these technologies will also limit processing fees, commissions and gains on foreign exchange transactions, which will pressure revenue.”
In a separate report, Moody’s says blockchain improves operational efficiency for securitizations but adds risk. It has been widely reported that Moody’s cautions on possible system risk in structured finance as blockchain gains traction.
Other governmental agencies have been monitoring the crypto/blockchain sector of finance as they are keenly aware that the next crisis is never easy to predict. Such a seismic shift in financial services may bring with it unwanted baggage that is unknown, yet most researches believe the tech is too nascent to cause any concern. Only persistent monitoring for the time being.
Moody’s has also written recently about the impact of Fintech and mortgages stating that the digitization of loan underwriting, e-mortgages, artificial intelligence and more will completely change how homes are financed.
In brief, Fintech, and blockchain specifically, is radically redefining the landscape of financial services.