The state of blockchain in banking and finance

It's said that blockchain will transform the nature of financial services, but how large institutions will integrate the technology is still an open question. It was the core topic of discussion among industry leaders from banks, financial services companies, venture capitalists and startups who met in New York at Tearsheet's Bitcoin and Blockchain hot topic event Monday. Here are five things we learned: Institutions need to take a long-term view for blockchain applications. In thinking of future applications for the technology, the industry needs to think beyond what's possible now and look beyond -- much in the same way technology developers thought beyond the World Wide Web to streaming video and e-commerce. "The vision takes not a two to give year view but a 20 or 30-year view, and that's the context of what this is about," said Hadley Stern, senior vp of Fidelity Labs. Banks need to consider the risks and opportunities of being first movers. Participants debated the implications of pulling forward on technology that hasn't been fully tested in a traditional financial services environment. "By and large, fintech firms have moved on [banks'] territory and banks have learned a lesson," said Aite Group Senior Analyst Javier Paz. Some felt innovating too fast may draw the ire of regulators, while others saw it as an advantage in building the relationship with them. Among incumbents, use cases have moved from from the front end (payments) to back-end transactions. While the potential for blockchain-powered payments initially got a lot of attention, it was costly to implement. Incumbents are more closely exploring backend technologies like settlement and how assets are issued. Human-based structures will have a critical role in implementation. There is no clear winner among the enabling frameworks: "We have somebody who says you have to implement in Ethereum or Hyperledger or Corda -- how are we going to measure the performance of these different blockchains or distributed ledger technologies?" asked BNP Paribas Blockchain Strategist Vipin Bharathan. Instead, a collaborative "sandbox" approach, bringing together parties from the business an tech worlds, is more likely to bring about scaleable solutions. Blockchain will also change the way digital identity will be managed, and banks will have to rethink how they collect and utilize data. In marketing blockchain-based solutions, you need to be able to explain the value proposition to the client. The space for blockchain-based technologies will get increasingly crowded. Much has been said about its possibilities to make transactions more efficient and secure, but without a sales engine, technology providers can encounter roadblocks. KYC is not just for the regulators, but for the customers, too. Beyond the hype, technology developers need to be able to explain the benefit to the different types of consumers, including technical buyers and user buyers. A starting point is to understand the user problems that the technology is intended to solve. KYC is not just for the regulators, but for the customers, too.