Survey shows that global asset management companies are rapidly embracing blockchain technology, and those with insufficient competitiveness will be eliminated

Blockchain - the transaction database technology that underpins bitcoin - is being used by hundreds of investment firms and wealth managers around the world as more businesses see its potential to transform financial services.

Research from Roubini ThoughtLab found that 225 of the 500 asset management firms surveyed have implemented blockchain technology, which allows transactions to be electronically verified on a network of computers without the need for a central ledger. Two-thirds of the firms surveyed said they expect to use blockchain within five years.

Blockchain is attractive to financial services groups because it means there are no intermediaries in the payment process, which can cut costs. A Santander report published in 2015 found that using blockchain technology could save banks $20 billion a year by 2022.

However, widespread blockchain adoption could also drive out companies that are not competitive enough, according to the Wealth and Asset Management 2021 report from RoubiniThoughtLab, a consultancy co-founded by author and economist Nouriel Roubini.

Prof Roubini said,

“Technology is like a tsunami. It will completely change the status quo of financial services. Companies that cannot make good use of new technologies will not be competitive and will soon disappear.”

Prof Roubini, a U.S. Treasury official known for accurately predicting the 2007-08 U.S. subprime mortgage crisis, said people working in the department would also be affected.

He said:

"Because of the capital-intensive technology used, which saves labor, many non-high-tech jobs in the financial services industry will be replaced by software, robots and machines."

The World Economic Forum estimates that by 2027, 10% of global GDP will be on the blockchain.

Alex Tapscott, co-author of the Roubini Thought Lab report “The Blockchain Revolution” said:

“We are moving from an ‘information network’ to a ‘value network’, where, like many financial services companies, we can significantly automate and improve our role as a trusted intermediary between strangers. This has far-reaching implications for the investment services sector.”

However, implementing new technologies, including social media, analytics and mobile applications, as well as blockchain, can be costly for some smaller companies.

If blockchain can reduce transaction costs, it can provide more entry opportunities for some low-income investors.

Yoni Assia, CEO of a trading website based in Israel, said,

“More and more people are investing in macro and local markets”

“But few people put these ideas into practice. Lower barriers to entry means more people have the opportunity to enter the world of trading and investing.”