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PwC Sees 2016 As The “Summer Break” For Blockchain Technology

Major global banks and tech companies have started to recognize the potential of blockchain technology. Financial institutions spent an estimate $75 million on the technology in 2015. Various initiatives have been started last year that focus on exploring the blockchain technology, the most prominent ones being R3 blockchain consortium and Open Ledger Project led by IBM.

In an article published on CoinDesk, Jeremy Drane and Cathryn Marsh outline their predictions for 2016 in blockchain tech and the trends that will likely be crucial. Drane is practice leader of US FinTech, blockchain and smart contracts at PriceWaterhouseCoopers (PwC), and Marsh is leader of PwC FSI Institute.

Drane and Marsh see three important trends for this year:

  • Incumbents will focus on protecting their intellectual property as they explore new collaborative opportunities with customers, suppliers, and competitors. FinTech companies are considering how to incorporate blockchain technology into their business. Drane and Marsh believe that established financial institutions should build a core level of technical proficiency and understanding so as to determine which information can be shared in open forums and what they should keep confidential.
  • Large financial institutions will need strategic plans to set parameters for technology risk taking. A major challenge for financial institutions will be to assess the potential long-term viability of their FinTech partners. As companies look to develop proofs-of-concept, pilots and consider making direct investments, they must understand the financial position and strategic focus of their potential partners as well as the ecosystems that support them. Drane and Marsh see a divergence of the successful startups from those that are running low on funding or being acquired.
  • Market participants will start to develop the processes that surround the transactional layer. The report noted that while in 2015, most of the focus of the market was on new transactional-based proof-of-concept solutions, in 2016, focus is likely to shift to the supporting systems and processes that underpin ongoing transactional excellence – governance, auditing and IT security, and many others.

Drane and Marsh see microconsortiums (strategic partnerships between market participants and “handful” of players) in the future that focus on transforming expensive internal processes into efficient shared platforms, which could be sold as a service to smaller competitors.

“The ability to collaborate on both the strategic and business levels with a few key partners, in our view, could become key to competitive advantage in the coming years”, said Drane and Marsh. “Given the speed of adoption of blockchain technology, it may feel as though you're sending your recent kindergarten graduate off to college. We see 2016 as the summer break, when a great deal of preparation must be packed into a short time frame.”

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