Bain Warns Of $150B Missed Opportunity For Banks

Financial institutions that don’t accelerate their implementation of blockchain technology are exposing themselves to the threat of falling behind the competition, according to a new analysis from Bain.

The consulting firm released its report late last week as a warning to banks, as many of those that have invested resources into exploring the technology have yet to actually move from an experimental phase to making use of the tools they develop.

“The wave of investment in digital currency startups clearly signals that payments channels are attracting a new degree of interest, and new competitors are changing customer expectations,” said David Gunn, who leads Bain’s EMEA payments team. “Innovation is upon us, and doing nothing is not a viable option. Now is the time for banks to move from experimentation to action.”

Being left behind could be costly for these banks, Bain also found.

According to the firm, FIs stand to lose out on $150 billion in revenue. The biggest areas of opportunity remain in cross-border payments and trade finance.

The latter, which yields about $23 billion in revenue for banks across the globe, according to Bain, poses a chance for banks to switch from manual, expensive and error-ridden letters of credit to a more streamlined, secure and efficient distributed ledger.

While the benefits of distributed ledgers have been much discussed, Bain concluded that actual tools using blockchain for international payments and trade finance remain in their early stages as banks remain challenged by scaling the technology, along with uncertainties surrounding digital currencies and privacy issues.

“Change will not come easily for banks,” said Bain Global Payments Head Glen Williams. “They recognize that distributed ledger technology has the potential to improve the speed, transparency and efficiency with which payments are made, but the current market structure gives them a powerful incentive to stay the course.”