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Mega Blockchain Research on Banks: Strategic Analysis of Activities and Roadmap

National Australia BankBlockchain, the underlying technology behind cryptocurrency, is exciting the world’s major banks. It is considered to be a potentially disruptive force in finance by major banks and institutions. Blockchain is a decentralized network and very difficult to hack, steal or counterfeit.

The report is a strategic analysis of various initiatives taken by banks to study and research on blockchain technology, such as investments in blockchain startups, in-house product/process development based on blockchain concept, workshops, contests and competitions based on blockchain technology innovation, patenting various blockchain use cases, etc. Financial institutions are also actively participating in groups focused on blockchain study and research areas at global and regional level. The year 2015 saw US$ 180 million investments in blockchain technology globally. Banks' investment in blockchain is expected to reach US$ 400 million by 2019 from US$ 75 million in 2015.

Leading banks like Citibank, the Commonwealth Bank of Australia, Westpac Bank, Deutsche Bank and State Street have set up innovation labs to study and research applications of blockchain technology. Some banks like BBVA have hosted competitions for startups interested in blockchain technology. The Royal Bank of Scotland, JPMoragn, and BNY Mellon have introduced in-house pilot products/processes and applications to understand the reach of blockchain technology. Banks like Banco Santander, Wells Fargo, Citibank, Nomura and CIBC have invested in blockchain startups.

A consortium of 42 banks, led by FinTech company R3, is developing a framework for applying blockchain technology to markets. The consortium started on September 15, 2015, with nine financial companies: Barclays, BBVA, Commonwealth Bank of Australia, Credit Suisse, Goldman Sachs, JPMorgan, Royal Bank of Scotland, State Street and UBS. By the end of 2015, 42 leading banks from around the world were members of R3 blockchain consortium.

The report highlights what these major banks have been saying about the potential of blockchain.

JPMorgan

JPMorgan has spent about $9 billion in 2015 on technology investments across the company and a big focus has been on blockchain.

It's still unclear whether blockchain-based solutions will be more efficient and secure than post-trade financial services products such as those offered by companies like Depository Trust & Clearing Corp. - JPMorgan CEO Jamie Dimon said at Barclays Global Financial Services Conference in New York (Sep. 2015)

Recent initiatives from JPMC show the bank is interested in blockchain technology.

Wells Fargo

The bank has shown interest in blockchain technology much before its competitors.

Many firms are evaluating blockchain technology for the transactional, transparency and settlement innovations it may hold. The open ledger project enables institutions across industries to collectively explore how to create value, reduce cost and improve accessibility to financial systems and services for customers. - Steve Ellis, Head of Wells Fargo Innovation Group.

It also talks about the blockchain initiatives and in-house blockchain developments in blockchain technology by leading banks and various investments and partnerships done by the banks in blockchain startups.

Banco Santander

The bank is highly interested in exploring blockchain technology to reduce cost.

"For us, the first obvious space to explore all of this in is payments, particularly international payments. Later on, we think smart contracts have the potential to transform many of the other things we do. We still haven't made anything official, we haven't announced anything publicly, but we have an internal team working on this. We've done some proof of concepts. - Julio M Faura, Head of Innovations at Santander (June 2015)

Goldman Sachs

The bank is one of the frontrunners in blockchain technology. Goldman Sachs noted a number of industries and uses that the blockchain could be applied to including voting systems, vehicle registrations, wire fees, gun checks, trade settlements and cataloguing ownership of artworks.

Blockchain has the potential to redefine transactions and the back office of a multitude of different industries. From banking and payments to notaries to voting systems to vehicle registrations to wire fees to gun checks to academic records to trade settlement to cataloguing ownership of works of art, a distributed shared ledger has the potential to make interactions quicker, less-expensive and safer. - Robert D. Boroujerdi (Analyst Goldman Sachs) (Author of blockchain report published by Goldman Sachs)

Citigroup

The bank has a kept a keen interest in blockchain technology since 2014.

"Blockchain technology not only has an opportunity to transform financial services but also extend far beyond payments to new use-cases and applications across industries," - Debby Hopkins, Chief Innovation Officer at Citi (July 2015)

…and many more.

The report also talks about in-house developments by banks using blockchain technology, e.g., pilot projects or workshops etc. The report also highlights various investments and partnerships done by banks in blockchain startups.

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