Blockchain deployments for cross-border settlement transactions could save banks $27 billion by the end of 2030, according to a new study.
Juniper Research found that banks would be able to reduce costs by more than 11% per on-chain transaction.
The research did caution that the need to parallel-run blockchain-based services with legacy systems would mean that savings would not be realised for several years after initial deployment. Juniper Research said therefore the annual cost reductions would not reach $1 billion per annum until 2024.
Settlement has arisen as one of the prime benefactors of blockchain technology with cost savings widely discussed as a benefit. Speed could also be improved using ledger technology, however this has split opinions as to whether shorter settlement times are needed.
Earlier this year a Canadian-led consortium has successfully demonstrated the instantaneous clearing and settlement of securities using distributed ledger technology (DLT).
Payments Canada, the Bank of Canada, TMX Group, Accenture and R3 made up the group which concluded that instantaneous equity settlement through distributed ledger technology is “feasible” in what could be a landmark moment for the securities services industry.
Elsewhere, blockchain start-up Paxos successfully raised $65 million from a series B round of funding in June, as it looks to accelerate the pace to build a new settlement platform for financial institutions.
Opinions vary on how the technology should be used for settlement. A report produced by the Financial Industry Regulatory Authority (FINRA) in the US in 2017 indicated that difficulties may arise with the application of DLT to settlement.
The report suggested that under a DLT-based infrastructure, clearing and settlement of securities transactions may occur outside of traditional infrastructure leading to a potentially unclear distinction between trade execution and settlement.