Why banks are so excited about cryptocurrency

PwC has released its Global FinTech Report for 2017, which details FinTech’s growing influence on the financial services industry.

The report reflects data collected from the financial services industry throughout 2017, including from banks, hedge funds, and investment firms.

According to the data, the financial services sector is adapting to recent advances in technology and becoming increasingly focused on FinTech-based solutions.

One of the new technologies being considered by banks and financial companies is cryptocurrency, or more specifically, the blockchain technology digital currencies are built on.

Blockchain applications

Blockchain technology is quickly spreading from the IT and FinTech sectors into industries all around the world.

Its implementation as a foundation for cryptocurrencies like Bitcoin and decentralised platforms like Ethereum is what it is famous for, but blockchain technology has considerable potential to change the way banks and businesses process payments and keep records.

According to PwC, 55% of companies surveyed planned to adopt blockchain technology as a production system or process by 2018, and 77% by 2020.

The most likely business cases are:

  • Payments Infrastructure
  • Fund Transfer Infrastucture
  • Digital Identity Management

Many companies across the financial services industry already use blockchain technology, it added.

While early infrastructure-based implementations will run on private blockchains, public blockchains like Ripple also offer potential value for companies like banks.

Innovation

While companies are aware of the potential applications of blockchain tech, they are also afraid of losing business to innovators.

According to the report, 88% of businesses surveyed were worried that part of their business was at risk to standalone FinTech companies.

To alleviate these fears, financial institutions are embracing the disruptive nature of FinTech as much as possible – with 77% of respondents expecting to increase internal innovation efforts in the near future.

In South Africa, 63% of financial institutions surveyed are currently engaged in partnerships with FinTech companies, and 96% aim to increase these partnerships over the next 3-5 years.

FinTech partnerships

PwC FinTech partnerships by country

Now read: You should buy Bitcoin, even if it is a bubble

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Why banks are so excited about cryptocurrency