B2B Payments

Corporates Keep Coffers Open To Blockchain

Businesses continue to invest in blockchain technology as more service providers, particularly in the finance arena, pull their distributed ledger innovations out of beta and into the real world. A new report from the International Data Corporation (IDC) pegged corporate spending on blockchain at a new high for 2019, expecting loose purse strings to continue through 2022.

In a statement announcing the IDC’s latest Worldwide Semiannual Blockchain Spending Guide report, IDC Research Director of Worldwide Blockchain Strategies James Wester explored the importance of corporate blockchain spend analysis for the business community.

“Blockchain is maturing rapidly, and we have reached an inflection point where implementations are moving quickly beyond the pilot and proof-of-concept phase,” he said. “That is why data on the actual spend on the technology is so vital: It provides the context in which blockchain is evolving. Understanding how and where enterprises are investing their money gives vendors a better sense of where they need to deliver products and services, as well as offering technology buyers insight into how their peers are adopting blockchain.

Wester added, “It also provides a snapshot of where we can expect to see this new technology disrupt the way enterprise software is delivered.”

According to the IDC’s report, there are a few surprises in terms of where corporate investment in blockchain will land. While top funding and spending targets include popular use cases, like cross-border payments and trade finance, researchers found that industries like manufacturing are exploring how to adopt blockchain tools for asset and goods management purposes, as banking and government sectors are looking at the technology for use cases like identity management.

The report identified which regions’ corporate communities are investing the most in blockchain, with the U.S. leading the way. Analysts pointed to the blockchain industry’s ability to “remove a layer of uncertainty” as it continues to gain traction, according to the IDC’s Research Manager for Customer Insights and Analysis Stacey Soohoo.

Customer Insights and Analysis Program Vice President Jessica Goepfert said in a separate statement that the research showcases new avenues for corporate investment in the technology.

“The use cases that comprise the blockchain opportunity are developing as swiftly as the technologies enabling it,” Goepfert said. “While spending for more developed use cases in the financial sector, like trade finance and cross-border payments, is still healthy and growing strong, relative to six months ago, we’ve seen an acceleration in spending across a variety of other areas, such as energy settlements and warranty claims.”

Furthermore, she continued, “we are continuing to monitor and measure these developments on a regular basis, and are inspired by the various forms of innovation blockchain delivers.”

Below, PYMNTS examines those use cases, and the numbers behind businesses’ increasing — and diversifying — blockchain technology investments.

  • $2.9 billion: the amount corporates around the globe are expected to invest in blockchain this year, up from the $1.5 billion in estimated corporate blockchain spend from 2018. IDC experts expect the industry to see a compound annual growth rate (CAGR) of 76 percent through 2022, reaching $12.4 billion in corporate spend by that time.
  • $1.1 billion: the amount businesses in the financial services space will spend on blockchain in 2019, making it the industry with the largest budgets to invest in distributed ledger technology. That includes banking, securities and investment services, and insurance services markets. Manufacturing is also an increasing investor in blockchain, researchers noted, with the retail and professional services industries upping their stakes in the tool as well.
  • $1.1 billion: the amount U.S. corporates will spend on blockchain this year, making the jurisdiction the largest spender, followed by Western Europe ($674 million) and China ($319 million).
  • 77.6 percent: the CAGR of blockchain investments expected through 2022 for the manufacturing and resources sector, meaning this industry will see the fastest acceleration of blockchain investments between 2018 and 2022 than any other.
  • $453 million: the amount companies are expected to invest this year in cross-border payments and settlements, while trade finance, as well as post-trade and transaction settlement, are expected to see $285 million in 2019 investments. In both these use cases, researchers said banks will lead the blockchain spend path. Manufacturing, meanwhile, is expected to see the highest blockchain investments in lot lineage and provenance use cases, while asset and goods management will also be a popular investment target for blockchain spend in the banking, healthcare and government sectors.
  • 49.4 percent: the portion of corporate blockchain spend attributed to “other” use cases. That means, while cross-border payments and settlement continue to lead in blockchain investments, the use case still only accounts for about 16 percent of total corporate investment in the technology — leaving significant room for investors to diversify their targets and forge paths for new blockchain use cases in the enterprise.

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