The power of blockchain in financial services

24 July, 2017
Luc Vervecken

In the current landscape, there are financial institution leaders evaluating distributed ledger technology, while others are investing in other areas. In the current landscape, there are industry leaders evaluating distributed ledger technology, while others are investing in other areas. Financial markets institutions have been among the first to implement have been among the first to implement the decentralized blockchain platform and set the groundwork for their future.

A market study report titled “Blockchain rewires financial markets” from The IBM Institute for Business Value found that in 2017, 14 percent of financial markets institutions expect to have blockchains in production and at commercial scale. The report states that these “trailblazers” may be small in number, but they’re big on ambition. They’re prioritizing blockchain efforts to act on invisible threats – both new competitors and new business models.

Keeping pace with disruption

Today’s industry leaders recognize the gap in their digital capabilities. With many innovative network business models arising, traditional financial service and banking organization leaders are beginning to realize that they must evolve in order to thrive in the digital era. Blockchain is a technology allowing big banks to do just that. It presents a shift from disparate bits of information by a single owner to potentially the lifetime history of an asset.

Once data is captured on blockchains, it can be shared across individuals and institutions as an immutable record, essentially cutting out the middleman. Blockchain’s distributed replication can allow stakeholders to access and supply data without the need for central control and management. All stakeholders can verify each transaction, ensuring each contributor can be held accountable for their individual roles in the overall process.

In February 2017, Northern Trust, a leading provider of wealth management, asset servicing, and asset management and IBM built a security-rich blockchain based on the Hyperledger Fabric®, a Linux Foundation project, and secured on IBM Blockchain’s high security business network.

The blockchain network created provides real-time insight and transparency to all parties, including to fund managers and investors. Importantly, the blockchain network has been designed to support stakeholders complying with current, local regulations. This blockchain solution allows the funds to transfer ownership stakes and be managed, serviced and audited throughout the investment lifecycle on a transparent platform offering “one version of the truth” to participants who gain access using secured means.

Managing risk and optimizing performance

While many are beginning to think of blockchain as an inherently safe technology, blockchain networks are only as safe as the infrastructures on which they reside. As blockchain grows in influence and organizations begin to evaluate cloud-based production environments for their first blockchain projects, they are exploring ways to maximize the security and compliance of the technology for business-critical applications. Security is critical – not just within the blockchain itself but for all of the technology touching the ledger.

IBM’s High Security Business Network offers the world’s most secure cloud services available for production blockchain networks underpinned by IBM LinuxONE. With advanced features that help protect data and ensure the integrity of the overall network, LinuxONE is designed to meet the stringent security requirements of the financial sectors, helping to foster compliance. This help avoids manual, error-prone processes that potentially increase the risk of fines and penalties and the rising cost to keep up with new and changing regulations.

How can IBM Blockchain on LinuxONE drive agility and efficiency and reduce risk in your organization?

Learn more about blockchain technology on IBM LinuxONE. If you’re ready to explore an application of blockchain in your organization, then reach out to an IBM representative or Business Partner.

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