It's not entirely clear yet how — or if — blockchain will transform the financial services market, but that hasn't stopped industry players from scrambling to get a leg up on the technology and ahead of the competition.
New data from Greenwich Associates put a price tag on that effort: According to Bloomberg reports Tuesday (June 12), the financial services market spends an estimated $1.7 billion dollars every year on blockchain as banks and other companies emerge from proof-of-concept stage into market launches and commercial products. The industry's budget for blockchain jumped 67 percent last year, researchers found, with a tenth of financial services companies reporting that they spend more than $10 million on distributed ledger technology (DLT). Reports also noted that the number of employees assigned to blockchain projects has doubled year over year.
Despite the flow of cash, blockchain has proven to be a difficult nut to crack for financial services firms.
Richard Johnson, vice president of Greenwich Associates Market Structure and Technology, told Bloomberg, "More than half the executives we interviewed told us that implementing DLT was harder than they expected."
Loose purse strings also mean blockchain companies themselves are vying for the top spot to provide businesses with DLT services.
This week, reports in the Financial Times highlighted the competitive pressure between SWIFT and Ripple as the two companies rival for the top spot in the cross-border payments market. SWIFT, a payments messaging company, has introduced its Global Payments Innovation (GPI) initiative to boost innovation in global payments. But Ripple, a blockchain company, wants to disrupt global payments and has more than 100 financial institutions (FIs) registered to use its messaging system, xCurrent.
SWIFT Head of Banking Harry Newman said in an interview with Financial Times that blockchain "is not straightforward to scale and it is not yet appropriate to do so."
However, Ripple scored another win this week when American Express (Amex) confirmed it is collaborating with the company, as well as Spain bank Santander, to develop a blockchain platform. Reports in Bitcoin Exchange Guide said Amex has inadvertently confirmed plans to launch the blockchain platform via a job posting on its website (though the posting now links to a 404 page).
The three financial services players announced their partnership last November in an initiative that sees payments made by Amex business customers routed through Ripple's enterprise blockchain network. The job posting revealed that the partners' blockchain platform is slated to launch later this year.
According to reports, the job opening at Amex is under its FX International Payments (FXIP) unit within its Corporate Payments division.
"In 2018, we are introducing a blockchain solution with Ripple and Santander," the job posting read. "This is an exciting time to join the FXIP organization as we increase our focus on growth, new products and technology offerings to meet customer needs and build on the American Express brand as a top, global provider of payments services."
The job opening is for a Sales Coordinator, reports said.
Even as big money and big names fuel the blockchain hype, waves of doubt continue to crash on blockchain's shores. This week, GlobalData published a new report on blockchain, in which its authors warn the technology is "not magic." The report, "Blockchain — Thematic Research," warned that the blockchain bubble "will burst in the next two years," and that the technology "will have lost much of its gloss by 2025."
Reports in MarTech Today, summarizing the GlobalData report, noted that authors did acknowledge blockchain's potential and the technology is "awash with hype, but with a powerful core value proposition." Still, the authors concluded that in "19 out of 20" cases in which blockchain is referenced as a viable solution, the tool can be replaced by a more straightforward database or other tool.