Research and advisory company Gartner expects blockchain deployment in financial services to be at least three years away. The firm cited the lack of interoperability standards between financial institutions and said blockchain standards are highly fragmented.
Last week Gartner unveiled its 2019 blockchain hype cycle. It cites banking as the most mature sector for blockchain deployment, followed by government, education and insurance. About 60% of Chief Information Officers (CIOs) expect some sort of blockchain adoption within three years.
Standards are important for financial entities as they have to move assets between clients, partners and other institutions. Currently, companies opt for blockchain platforms like Corda, Hyperledger, Digital Asset or a public blockchain technology like Ethereum.
But there is limited interoperability between these networks, which is crucial for financial institutions to transact with each other. A data exchange standard needs to be established, Gartner said.
“Blockchain standards for financial services companies are currently fragmented and immature,” said Fabio Chesini, senior research director at Gartner. “We are three to five years until standards mature and settle.”
However, Ledger Insights has seen multiple initiatives exploring interoperability, though few would claim to have a comprehensive solution. For example, ISDA, the trade organisation for the derivatives industry has produced a new standard which was trialed in a hackathon by numerous industry players.
In another Barclays hosted hackathon, Clearmatics, the technology company behind the Utility Settlement Coin ran another hackathon for interoperability between its Ethereum-based technology and other platforms. Accenture is also working on a solution.
The topic of standards was discussed at the ongoing Gartner IT Symposium/Xpo in Cape Town, which is hosting several CIOs and senior IT executives.
“It is unlikely there will be a single de facto standard like in the Open Systems Interconnection (OSI) model, at all levels. Given how new and fragmented the state of blockchain standards is, we expect no more than four standards to lead the market in the next three to five years,” said Chesini.
Chesini added that along with standards, CIOs also need to consider governance, integration and interoperability of blockchain systems.
Governance is essential to regulate blockchain activities and also provides legal backing to the process. For integration, blockchain needs to work with existing software solutions to cut down costs.
Gartner said it expects all major enterprise resource planning (ERP) and customer relationship management (CRM) players to offer blockchain capabilities as an add-on feature for their software solutions.
“As financial services companies constantly move financial instruments and assets to other financial services companies and partners, cross-industry interoperability standards are, and will be, critical,” said Chesini.