The Global Blockchain in Banking and Financial Services Market size is estimated to reach $1.18 billion by 2027, growing at a CAGR of 30.8% during the forecast period 2022-2027, attributed to increasing use of cryptocurrency, rising demand for decentralization of records, growing adoption of secure & efficient transaction methods in banks and so on. The growing number of users require maintenance of complete records of fund transactions which eventually consumes more processing time for payments. As a result, it is crucial to handle and manage the transaction data with ease, speed and security against cyber-attacks & credit risks. As a distributed ledger technology (DLT), blockchain is capable of ensuring transparency and preserving confidential data of the stakeholders. The zero-knowledge proof technology solution results in authenticating financial information without disclosure. Additionally, increasing demand for fast & real-time fund transfer as well as growing adoption of digital identity check technologies are some of the major factors set to transform the Blockchain in Banking and Financial Services industry outlook in the coming time.
Blockchain in Banking and Financial Services Report Coverage
The “Blockchain in Banking and Financial Services Market Report – Forecast (2022-2027)” by IndustryARC, covers an in-depth analysis of the following segments in the Blockchain in Banking and Financial Services Market.
By Type: Public Blockchain, Private Blockchain, Consortium Blockchain, Hybrid Blockchain.
By Application: Fund Transaction Management, Real-Time Loan Funding, Liquidity Management, KYC/Identity Management, Others.
By Geography: North America (U.S, Canada, Mexico), Europe (U.K, Germany, France, Italy, Spain, Others), APAC (China, Japan India, South Korea, Australia, Others), South America (Brazil, Argentina, Others), RoW (Middle East, Africa)
Key Takeaways
- Private Blockchain segment in Banking and Financial Services Market is analyzed to grow at the fastest rate of 31.5% during the forecast period 2022-2027, owing to increasing transparency demands while maintaining secrecy, rising private fund transfers and so on.
- Blockchain in Banking and Financial Services for Fund Transaction Management applications, is analyzed to grow with the highest CAGR of 32.6% during 2022-2027 attributed to increasing digital cash transfer, demand for increasing transparency & security against cyber-attacks in transaction systems and so on.
- North America dominated the Blockchain in Banking and Financial Services market with a share of 37% in 2021, attributed to increasing digitization in banking sectors, the arrival of independent banking, increasing adoption of block-chain-based fund trading platforms and so on.
- Increasing adoption of digital identity check technologies along with growing demands for faster & real-time payments across the world is analyzed to significantly drive the market growth of Blockchain in Banking and Financial Services market during the forecast period 2022-2027.
Blockchain in Banking and Financial Services Market Segment Analysis - by Type
The private Blockchain segment in Banking and Financial Services Market is analyzed to grow at the fastest rate of 31.5% during the forecast period 2022-2027, owing to increasing transparency demands while maintaining secrecy, rising private fund transfers and so on. Additionally, private blockchain maintains peer-to-peer transaction records, eliminates the possibility of any of illicit activity, provides a greater degree of oversight & regulation and they do not require to use of cryptocurrencies or native tokens to process transactions. According to a report published in January 2020 by Self Key Identity Wallet, one of the most significant issues with public blockchain is speed. Public blockchains such as Bitcoin, are extremely slow and they process only seven transactions per second. In comparison, private blockchains like Visa can handle 24,000 transactions per second. Public blockchains are slow as it takes time for the network to reach consensus. Furthermore, when compared to a private blockchain, the time required to process a single block is lengthy. These factors have been significantly impacting the growth of the private blockchain segment in the Banking and Financial Services industry over time.
Blockchain in Banking and Financial Services Market Segment Analysis - by Application
Blockchain in Banking and Financial Services for Fund Transaction Management are analyzed to grow with the highest CAGR of 32.4% during 2022-2027 attributed to increasing digital cash transfer, rising need for secure & efficient transaction technologies, demand for increasing transparency & security against cyber-attacks in transaction systems and so on. Additionally, blockchain has numerous advantages for fund transaction management. It aids in the streamlining of processes, decreases the settlement time, reduces the cost of fund transfer and reduction operational risks of fraud & human error are some of the major reasons behind the increasing use of blockchain technology for fund transaction management. In April 2021, J.P. Morgan announced the use of blockchain technology to improve funds transfers between banking institutions around the world, including payments from Taiwan banks to beneficiary banks in other markets. The new solution is expected to help in reducing the number of rejected or returned transactions caused by mismatched payment details by improving information exchange related to such payments. The system will help in lowering the cost of fund transfers for both sending and receiving banks. Such factors are analyzed to impact the global Blockchain in Banking and Financial Services market size for Fund Transaction Management in the coming time.
Blockchain in Banking and Financial Services Market Segment Analysis - by Geography
North America dominated the Banking and Financial Services market with a share of 37% in 2021, attributed to increasing digitization in banking sectors, the arrival of independent banking, increasing adoption of block-chain-based fund trading platforms and so on. In addition, the rising trend of cryptocurrencies, growing adoption of fast & real-time fund transfer systems and the use of blockchain technology in hedge funds are greatly influencing the adoption of blockchain in banking & financial services within the region. In June 2022, The Reserve Bank of India (RBI) announced a proof-of-concept blockchain project focused on trade financing with various participating banks including HDFC Bank, ICICI Bank and State Bank of India. The project aims to prevent tampering with documents like letters of credit (LC) by issuing digital versions of them. According to the report, IBM (IBM), Corda Technologies, and Belgium-based Settle Mint are providing technological support for the project, citing people with knowledge of the matter. These factors are set to transform Blockchain in the Banking and Financial Services industry outlook within North American markets.
Blockchain in Banking and Financial Services Market Drivers
Increasing Adoption of Digital Identity Check Technologies is Surging the Demand for Blockchain in Banking and Financial Services:
The growing use of digital identity check technologies to facilitate cross-platform operations are accelerating the demands for blockchain in banking & financial services. Online financial transactions are not performed by banks unless the identity of a user is not verified. As a result, the banking system conducts a variety of processes for verifying identity such as face-to-face verification, authentication, authorization and so on. The use of blockchain technology in these processes benefits consumers and banks by allowing faster verification as it allows the reuse of identity verification for other services in highly secured ways. According to UIDAI data published in 2021, over 1.3 billion Aadhaar electronic IDs had been generated by the end of August 2021. Electronic IDs are created using biometric and demographic data. To facilitate digital identification across the country, the official app mAadhaar is available in 13 languages on Android and iOS platforms. In July 2022, CryptoSavannah Launches a Refugee Blockchain Identity and Cash Transfer Project in collaboration with CoinBase. It aims to provide blockchain-powered solutions to promote economic empowerment and financial inclusion to Ugandan refugees and host communities. The project will address the critical challenges that refugees and asylum seekers face, such as the inability to access appropriate and affordable financial services as a result of slow and ineffective identity systems that obstruct access to mobile services in the country. Such factors will help in propelling the growth of Blockchain in Banking and Financial Services industry in the long run.
Growing Demand for Faster & Real-time Payments across the World is Accelerating the Growth of Blockchain in Banking and Financial Services Market:
The rising need for fast & cheap payment solutions across the world is boosting the growth of blockchain in the banking and financial services market. There are dissimilar fund transfer systems available across the world that allows customers to transfer money through bank accounts or credit cards. However, these solutions include a number of limitations such as geographical region, third-party authentication charges, high cost and security concerns related to sensitive customer data. The blockchain-enabled fund transfer systems address these problems as they enable the use of a distributed ledger technology (DLT) system for peer-to-peer money transfers. Moreover, blockchain eliminates the issue of geographic location and eliminates the possibility of cyber-attacks. The blockchain money transfer happens in real-time so the receiver can instantly access the money once it is transferred so it facilitates the instant fund transfer. According to World Bank projections, the average transaction fee for cross-border remittances was around 6.51% at the end of the fourth quarter of 2020. The figure is even higher for bank-initiated transactions, averaging 11%. A typical international payment takes 2-3 days to clear, whereas domestic remittances take only a few seconds to appear in a bank account. Such factors are concerning for the migrant workers who send money home to their families. In June 2022, Novatti Group announced the integration of stablecoin AUDC into XRP Ledger by Ripple which uses blockchain technology to transfer funds. This collaboration aims to launch faster and lower-cost XRPL transactions. It also plans to build a low-cost domestic and cross-border payment system and stablecoin-linked payment cards. These factors are set to expand the Blockchain in Banking and Financial Services market size in the coming time.
Blockchain in Banking and Financial Services Market Challenges
Scalability Issues associated with the Adoption of Blockchain in Banking and Financial Services are Limiting the Market Growth:
Issues related to the scalability of the blockchain platforms is hampering the growth of blockchain in the banking and financial service market. Blockchain is a distributed system and its cumulative processing power directly depends on the computational power of the devices involved. According to a report published in 2020 by Finextra, in comparison to the transaction speed of Green cards (1,700 transactions per second) blockchain can handle an average of 4.6 transactions per second. This disparity implies a significant challenge for the global adoption of blockchain for banking. When a new transaction is processed, each node adds information about the transaction to the distributed ledger technology (DLT). As a result, the growing transaction history has the potential to bring the entire system down. Additionally, hardware limitations affect the scalability of the blockchain. All transactions in the blockchain network are required to pass a validation process. The transactions have to wait for long periods of time for validation, considering the number of transactions in the queue and the wait time for transaction validation increases during peak times. The response time is directly related to high transaction fees as one of the notable factors resulting in scalability issues. These factors are limiting demand for Blockchain in Banking and Financial Services and restricting the growth of the Blockchain in the Banking and Financial Services industry.
Blockchain in Banking and Financial Services Industry Outlook
Product launches, acquisitions and R&D activities are key strategies adopted by players in the Blockchain in the Banking and Financial Services Market. The top 10 companies in the Blockchain in Banking and Financial Services market are:
- Microsoft Corporation
- Infosys Limited
- Hewlett Packard Enterprise
- Amazon Web Services Inc.
- IBM Corporation
- SAP SE
- Oracle Corporation
- JPMorgan Chase & Co.
- Accenture PLC
- AlphaPoint
Recent Developments
- In April 2022, AlphaPoint collaborated with Netki to apply their independent Chivo Wallet experience for network onboarding and payment facilitation to future nation-scale crypto adoption. The combined platform can easily handle the users and can easily manage scalability, supported by a high degree of automation and blockchain technology. The collaboration is working towards lowering the costs of blockchain technology platforms in the BFSI sector.
- In December 2021, JPMorgan Chase collaborated with Siemens to launch a blockchain-based payment system using Onyx. This application would be designed to automate various steps involved in recording and verification of payments, ensuring automatic transfer of money between Siemens accounts. The platform will increase the speed & security of fund transfer.
- In July 2021, Oracle Financial Services Software Ltd collaborated with Everest to bring blockchain to banks to enhance their product offerings. The collaboration aimed to enable a wide range of financial services by providing ease in fund transfer.
Relevant Report Titles:
Report Code: ESR 0274
Report Code: ITR 0170
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