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Banking in a world of programmable assets

How programmable assets could transform financial markets and lead banks to consider their future roles.

Overview

The Bitcoin cryptocurrency has been making headlines for several years. But in recent months the focus has widened to the broader potential of the blockchain technology that underpins it—including the creation of distributed consensus ledgers (DCLs). Now the focus has shifted again, to the implications blockchain brings for financial assets in general.

Why? To date, financial assets have existed as passive digital entries on separate ledgers. With blockchain, these same assets can become active, programmable objects that exist simultaneously on ledgers worldwide, and can initiate and undertake transactions themselves. This is a seismic shift for all financial markets.

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Key Findings

A new vision for the entire financial system is taking shape.

Programmable Assets Infographic

The anticipated move to programmable financial assets means financial markets will never be the same again and the opportunity to be the trusted institutions at the heart of this new, "smart" world could pass banks by.

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In light of the profound impacts of blockchain, banks must think through the wider implications of a world where programmable assets have the embedded intelligence needed to provide verification, instant or near-instant execution, a verifiable audit trail, and other functionality. These capabilities create a fundamentally new way of running a market, driven by four key benefits:

  • Drastically reduced counterparty and operational risk in the financial system

  • Elimination of a significant proportion of today’s market inefficiencies and embedded cost and complexity

  • Reduced risk of fraud

  • The potential for unprecedented auditability and transparency for regulators

As banks move to realize these benefits, it’s clear they have no time to lose. The early movers are already stepping up their investment, with global spending on blockchain in the capital markets alone estimated at US$75 million this year, rising to US$400 million by 2019.

Recommendations

To position themselves for a world of programmable assets, Accenture believes banks should take four steps as a matter of urgency:

Understand the impacts.

Identify how best to manage adoption and the restructuring it implies for them.

Determine strategies to position themselves at the core of this new world.

Identify what new services they can and should provide.

With adoption of blockchain rising, banks urgently need to define their blockchain strategies. The move to programmable financial assets means financial markets will never be the same again. Banks must move now—or risk getting left behind.

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Authors

Lupus Maltzahn
Managing Director – Accenture Strategy
Business Strategy

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Steven Westland
Managing Director – Accenture Strategy
Technology Strategy

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