Is Blockchain a catalyst for trust or an unprecedented disrupter?

Blockchain, named by IT analyst firm Gartner as one of the strategic technologies of 2017, holds the potential for unprecedented disruption across a wide range of industries, even those that have already seen considerable recent upheaval. For example, by negating the need for a trusted third party to set up a direct relationship between two groups and by ensuring the security of this relationship and generating an unfalsifiable history, it could even contribute to ‘uberising’ Uber. A system based on ‘smart contracts’ would make it possible to place drivers and customers in direct contact.

But what has this got to do with the wealth management sector?  This depends on whether it is used positively or destructively. Blockchain provides an immutable token like a fingerprint and consequently acts as a catalyst for trust. It therefore eliminates the need for third parties to set up and oversee transactions. So while it could be used to bring significant efficiencies to the industry, it could also, potentially, be used to transform the industry as we know it.

But any thoughts of career changes or early retirement could be premature. While some economists have expressed interest in the technology (for example, the governments of Honduras, Ghana and Georgia wish to secure their land titles in a Blockchain while in the private sector several financial institutions have begun to experiment) concrete and real applications are thin on the ground.

There are still very valid concerns surrounding privacy. Although Blockchain is secure in the way that you cannot change the data, it is not possible to encrypt data.

It is also difficult to see this generation of wealth managers wanting the disruption – unless forced by an innovative challenger poised to take on the entire sector by setting up a parallel system. On the other hand, it is also entirely possible that Blockchain could be used to streamline transactions giving wealth managers the freedom for more consultative and advisory work.

Because Blockchain will make it possible to secure the authentication of and traceability of data it may also increase the momentum of Big Data projects within the industry.  According to IDC, around 30 per cent of decision makers decline to use their company’s data due to lack of trust and governance, so with Blockchain, the use of data could be significantly amplified.

Certain observers think it is only a matter of time. While it took 30 years between the first email and the advent of online banking, technological progress has accelerated. It only took 10 years for Big Data to become a priority. Artificial Intelligence and predictive analysis, Hollywood clichés only a short while ago, are now very real and used extensively.

So what happens next is difficult to judge. But Gartner predicts the market associated with the technology will reach $10bn in 2022. The collaborative economy, currently dominated by intermediaries such as Airbnb, Drivy and Uber will probably be the first to enter into a second phase of de-intermediation, then perhaps health where confidentiality issues are tied to personal data. But the prospect of automated or smart contracts means that the financial industry will certainly not be immune.

Ciaran Dynes is VP Products at Talend, a software vendor specialising in Big Data integration