Retail banks have been a bit slower in accepting blockchain, McKinsey says
It might come as a surprise to many, but “Big Three” management consultancy firm McKinsey and Company has argued that retail banks have been a tad slower in accepting blockchain and reaping its benefits as their investment banking counterparts, according to a report by the Bloomberg.
According to new research by McKinsey & Co., the main reasons for such a difference include a tougher regulatory environment for consumer finance and the controversial reputation of blockchain-based decentralized cryptocurrencies such as Bitcoin (BTC).
According to Matt Higginson, one of the authors of the report:
“The poor reputation of cryptocurrencies such as Bitcoin, which use blockchains to track and validate transactions, has also made the “retail banking sector nervous and cautious.”
Investment banks are leaving no stone unturned in using blockchain in everything—from issuing bonds to processing payments. Similarly, if retail lenders use the technology, it can help them in processing remittance payments, managing regulatory issues like know-your-customer and fraud prevention, as well as helping with assessing the financial risk of new or existing customers.
“Almost all of their attention, especially in developed markets, is on cost reduction. And where cost reduction is front and center they are prepared to look at petty much any opportunity,” Higginson added.
According to the report, McKinsey estimates that nearly $4billion can be saved yearly by using blockchain technology in cross-border payments and a further $1 billion can be saved in operating costs associated with onboarding clients.
In spite of the slower inroads that the technology has made in this sector, the report notes that the clients are now changing their outlook and looking at the technology from a fresh perspective. They are exploring new ways to implement the technology within their business, which is in stark contrast to their focus on battling crypto associated risks.
The report also proposes that to encourage adoption, the exchange between fiat currencies and digital assets should be made smoother so as to prevent the risks associated with the volatile nature of cryptos.