Blockchain deployments will enable banks to realize savings on cross-border settlement transactions of more than $27 billion by the end of 2030, Juniper Research predicts.
In a new paper entitled The Future of Blockchain: Key Vertical Opportunities & Deployment Strategies 2018-2030, the research firm said blockchain can reduce costs by more than 11% per on-chain transaction.
The paper claims that banks that integrate blockchain will achieve cost reductions not just in payment processing and reconciliation, but in treasury operations and compliance.
The paper argued that in compliance, automation of identity/money-laundering checks, allied to capability of the blockchain to verify the digital identity of an individual, should enable savings of up to 50% of the existing costs base within a few years.
But the effects won’t be immediate. Juniper warned that the need to parallel-run blockchain-based services with legacy systems would mean that savings would take several years after initial deployment, with annual cost reductions not reaching $1 billion per annum until 2024.
In the Juniper Research white paper entitled “5 industries that will fuel the blockchain boom”, the researcher blames the high costs and lengthy settlement periods on a lack of standards between clearing bodies and correspondent banks, with each organization insisting on sticking to its version of data formats and how the data is acquired, stored and managed.
In 2017, Juniper estimated the volume of B2B cross-border transactions at just under 7.8 billion, with forecasts to grow to more than 18.6 billion by 2030. At current levels, the transactions would collectively cost banks$466 billion in 2030.
Juniper said numerous banks have begun recording transactions on blockchain and predicts that by 2018, one in 500 B2B cross-border transactions will be facilitated by blockchain.
Juniper believes that this proportion will pass 10% by 2024, exceeding 50% by 2030 – driven by the strong interest by banks in increasing cost savings. Juniper noted a correlation between the proportion of transactions recorded on the chain and the ability of banks to realize maximum savings from each element described here. It estimated that for each 1% of transactions on the chain, 1% of potential savings from each element will be realized.
First published in Fintech Innovation