Securities and settlement ripe for distributed ledger disruption

Transparency is the key benefit of using distributed ledger technology (DLT) such as blockchain in finance according to 31% of delegates attending the recent SWIFT Business Forum in London. The live audience poll revealed just under a third of those at the event tout the ability to track and trace transaction and data flows across a trade as the most important benefit of DLT. The technology lets more information be added about a trade, but nothing can be deleted, meaning that in theory nothing can be hidden.

Meanwhile, there’s a lot of hype around this technology but where is the most compelling short term application in financial services? According to the poll, 31% of delegates think blockchain and DLT will make the biggest impact in settlements and reconciliation over the next five years. These processes currently require high levels of input from humans and are characterised by time lags: two things that DLT can help eliminate by streamlining the system.

That’s all very well, but what needs to happen for the industry to actually take advantage of these opportunities? According to a quarter of those responding in the live audience survey, compliance is the biggest hurdle the sector needs to get in place for widespread DLT adoption. That’s followed by the need for an identity framework, taking 20% of the voting.

Some 1,200 financial services professionals attended the event, which took place at Tobacco Dock in East London last month. It took place not long after SWIFT published a paper on distributed ledger technologies (DLTs), developed in partnership with professional services company Accenture to explore the opportunities and challenges of DLT in financial services.

GTNews attended a busy workshop called ‘Blockchain – Beyond the Hype’ during the event where panellists agreed that while blockchain has been prone to hype, there is indeed promise that it will deliver on that buzz and make an impact on financial services.

“We’re already seeing short-term tangible benefits and software companies developing interesting technologies,” said Simon Taylor, vice president – entrepreneurial partnerships for Barclays, citing the Australian Stock Exchange’s (ASX) recent contract award to DLT firm Digital Asset for DLT-based market solutions.

Another point speakers seemed to agree on was that the promise of DLT can only be realised once it achieves the scale needed to create real value. Collaboration between the various players and standardisation will play an important part in that.

Matthew Hampson, chief technology officer (CTO) for Nomura pointed out: “Our industry has a poor record when it comes to collaboration.” However, the blockchain consortium headed by fintech firm R3 is notable for the sheer number of financial institutions working together to explore the potential of the technology.

Read GTNews’ full report form the SWIFT Business Forum.

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