McKinsey: Blockchain can save billions of dollars in costs for capital markets and investment banks

麦肯锡（McKinsey） is a well-known management consulting firm with clients all over the world, covering 80% of large corporate business, including governments, international organizations, famous non-profit organizations, etc. Therefore, McKinsey has always had a great influence. As long as it expresses any opinion, the business world will definitely be affected by it.

Of course, in order to provide better consulting services to clients, McKinsey has been paying attention to Bitcoin and blockchain technology. McKinsey has also published a number of articles and reports on the application of this technology (full text download of the Coin Library), focusing on the fields of payment and insurance.

Recently, McKinsey released its latest report, titled "Capital markets and investment banking 2016: Capital markets and investment banking 2016: Time for tough choices and bold actions for tough choices and bold actions". This report focuses on the capital markets and investment banking industry (CMIB), and believes that most of the various measures taken by the industry to improve performance and reduce costs have failed to achieve the expected results, and some more thorough remedial measures must be taken. The report introduction says:

CMIB is under great pressure due to low profits, high costs and policy uncertainty. The failure of industry restructuring has become an inevitable fact.

The fact is that the traditional model of the CMIB industry no longer works for most banks and a more radical overhaul is needed.

According to McKinsey, the adoption of advanced financial technology is part of the transformation. The report mentioned that some banks are exploring new technologies to reduce transaction costs; for example, using blockchain in securities services.

McKinsey analyzed the current situation and came up with four CMIB operating models, and provided valuable advice on the opportunities, risks and implementation strategies of each model. In addition, McKinsey also listed eight key points for banks to successfully transition to the best operating model.

Two of the points include "building a new cost framework and making full use of digital technology" and "participating in industry construction, including distributed ledgers."

The report also states:

In the next few years, companies in the capital markets, from clearing houses to brokers and banks, will benefit from blockchain, including faster clearing and settlement times, book consolidation, unified audit trails, less systemic risk, and a host of operational improvements. Blockchain is well suited for衍生品场外交易over-the-counter (OTC) and债券回购(better when combined with a central clearing house system).

Although it will take at least five years for blockchain applications to be truly implemented, McKinsey believes that the long-term benefits of each use case are as high as billions of dollars. In over-the-counter derivatives trading, blockchain can create wealth of 40亿到70亿美元by reducing counterparty risk and operating costs. Rationalized operations, instant settlement and greater transparency can 40亿美元降低到20亿美元; better collateral management models can reduce costs 5亿美元到10亿美元; proper customer management, transaction processes and settlements can save banks 10亿到20亿美元.

Of course, there are still some challenges to overcome before the distributed ledger is officially put into use in CMIB. However, McKinsey believes that as long as market participants, regulators and technical experts can work together, it is only a matter of time to overcome these challenges. In addition, McKinsey also pointed out that some areas of CMIB have already begun to benefit from blockchain technology, including digital cash, know your customer (KYC), anti-money laundering (AML) and identity authentication.

The McKinsey report also recommends the use of advanced analytics, machine learning and robotics. While these technologies are not currently closely linked to distributed ledgers, they are expected to benefit smart contracts and programmable currency platforms in the future.