Beyond the hype: Euroclear and Oliver Wyman collaborate on blockchain report
A new white paper by Euroclear and Oliver Wyman aims to help the market understand the potential of blockchain, how to utilise the technology and lays out the path for its adoption
Brussels/London/New York, 3 February 2016 – Euroclear and Oliver Wyman have published the white paper “Blockchain in
Capital Markets: the Prize and the Journey.” The paper’s objective is to go beyond the hype of a topic that has generated a huge amount of interest within capital markets and investigate the real potential of the technology.
The paper calculates that IT and operations expenditure in capital markets is currently close to US$100-150 billion per year among banks. On top of that, post-trade and securities servicing fees are in the region of US$100 billion. Significant capital and liquidity costs are also incurred as a result of current delays and inefficiencies within market operations.
There are seven suggested steps for the industry to take advantage of the blockchain technology:
- Work on concrete proofs of concept
- Challenge service providers to innovate
- Understand current quantification of operational costs, isolating savings from blockchain
- Continue industry-wide engagement
- Participate in prototypes and embrace “learn by doing”
- Bring the business mind to technological start-ups
- Prepare the narrative for regulators and supervisory bodies
Blockchain (or distributed ledgers) offers a new approach to data management and sharing that is being proposed as a solution to many of the inefficiencies afflicting the industry. Ben Shepherd, Partner in Oliver Wyman’s Strategic IT and Service Operations Practice, said: “The prize on offer is a world where all capital market participants work from common datasets, in near real time and where supporting operations are either streamlined or made redundant.”
Direct savings from blockchain would need to come from the decommissioning of redundant or duplicative systems, reduced operational overheads and cost-sharing across institutions. Reducing firms’ financial resource requirements (e.g. by reduced counterparty credit risk) may also help to drive down economic costs of business.
The paper concludes that it is up to major established players in the market to work with innovators to develop standards, while also preserving the existing strengths of the ecosystem, and navigating the complex worlds of regulation and legal oversight.
Angus Scott, Head of Product Strategy and Innovation, Euroclear said: “In order to work together to shape a new future, the industry needs to take a collective view on the potential of the technology, which was the intention of this study. The market must embrace this potential, show patience with this development and invest in variousinnovative solutions to bring it to reality.”
Note to editors
Euroclear group is the financial industry’s trusted provider of post trade services. At the core, the group provides settlement, safe-keeping and servicing of domestic and cross-border securities for bonds, equities and derivatives to investment funds. Euroclear is a proven, resilient capital market infrastructure committed to delivering risk-mitigation, automation and efficiency at scale for its global client franchise.
The Euroclear group includes Euroclear Bank - which is rated AA+ by Fitch Ratings and AA by Standard & Poor’s - as well as Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland, Euroclear Sweden and Euroclear UK & Ireland. The Euroclear group settled the equivalent of EUR 674.7 trillion in securities transactions in 2015, representing 190.7 million domestic and cross-border transactions. By December 2015, the group held EUR 27.5 trillion in assets for clients.
About Oliver Wyman
Oliver Wyman is a global leader in management consulting. With offices in 50+ cities across 26 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm's 3,700 professionals help clients optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a wholly owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].