Blockchain technology could reduce infrastructure costs for eight of the world’s 10 largest investment banks by an average of 30 per cent, according to a new report by Accenture and McLagan.

The report states that this would translate to between $8 billion and $12 billion in annual cost savings for the eight banks.

Based on an analysis of granular cost data, as aggregated by bechmarking firm McLagan, the report claims that finance reporting costs could shrink by 70 per cent. Additionally, compliance costs could drop by 30 to 50 per cent and operating costs could also see a 50 per cent decline.

To complete any transaction, banks need to reconcile and confirm their data with their counterparties and clients which is often a complex, costly, and labour-intensive process that is sometimes prone to error. The use of blockchain technology allows institutions to move to a shared, distributed database that spans organisations and supports a shared digital ledger of transactions recorded and verified across a network of participants.

Richard Lumb, group chief executive of financial services at Accenture, said: “Capital markets institutions have faced a perfect storm of regulatory-compliance costs and revenue pressures in recent years, prompting them to invest in emerging technologies as a lever to improve profitability.

“Through this first-of-its-kind analysis of real-world cost data we draw a clearer line under blockchain’s value to investment banks. Our goal is to help banks move rapidly from proof-of-concept to production system with blockchain technology, generating real cost savings and improving bottom-line results.”

Chris Blain, partner at McLagan, added: “This joint analysis with Accenture suggests that blockchain technology could significantly change the cost structure of investment banks over the next decade. The technology represents a potentially important breakthrough at a time when leading investment banks are looking at myriad ways to rebuild their returns on equity.”

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