Consortia Key To Blockchain’s Success, Says Deloitte

Deloitte has been an early embracer of blockchain technology, and 2016 was a busy year for the consulting firm in the space. Earlier this month, Deloitte revealed an investment in blockchain startup SETL, a U.K. firm that uses distributed ledger technology for payments and settlement. It was Deloitte’s first public investment in a blockchain startup, according to reports, but the company had already been working with SETL to develop contactless card solutions for Metro Bank.

Back in October, Deloitte announced Deloitte Catalyst, an incubator to support startups exploring disruptive technologies — and that, of course, includes blockchain. Clearly, the company has its faith set in distributed ledger technology, a technology that has mainly been focusing its disruption on the financial services space.

But a report released by Deloitte earlier this month aimed to highlight the fact that blockchain won’t stop at FinServ in its disruptive path. Indeed, the majority of executives at companies across verticals surveyed by Deloitte said they have at least some knowledge of blockchain technology. Consumer products and B2B manufacturing are at the forefront of embracing blockchain (aside from financial services), the report found, with 38 percent of executives in this space reporting that they have filed for a blockchain patent.

In years ahead, blockchain is likely to make its mark in sectors like media, telecoms and manufacturing.

“This diversity may be a testament to the versatility of the technology,” Managing Director David Schatsky said in a statement. “But it is likely also a reflection of the fact that, despite the hype, the impact that blockchain will likely have on businesses in various industries is not yet fully understood.”

In the years ahead, industries are sure to gain a clearer understanding of how blockchain will disrupt their markets. But for 2017, financial services continues to be the largest target of the technology.

“2017 has the potential to be a banner year for blockchain in the financial services space,” Eric Piscini, a principal with Deloitte Consulting LLP and global blockchain leader for financial services, told PYMNTS. “In a recent Deloitte survey of blockchain-knowledgeable executives, just 12 percent of financial services executives said their company has deployed blockchain in production. But they are aiming to pick up the pace: 24 percent say these companies plan to go live with blockchain in the coming year.”

According to Piscini, it will be crucial for the success of blockchain that a major trend seen in 2016 continues in the new year: blockchain consortia.

This year saw the rise in these groups of banks, technology conglomerates and FinTech players banding together to explore blockchain use cases and develop real-world solutions. Among the largest of these groups is the R3 consortium, which Deloitte will be eying closely in the year ahead.

“We will be tracking industry alliances, such as the 30 banks participating in the R3 consortium and adoption by major companies, which will likely result in new applications emerging,” Deloitte recently wrote.

Piscini echoed that focus on blockchain consortia to PYMNTS.

“Industry consortia will be critical to unlocking mass-scale value and keeping blockchain relevant in 2017,” he said. “With more than 20 consortia in place already, we are on our way to success.”

He added that the concept of collaboration brings new power to the exploration of blockchain.

“Smaller consortia are critical for one simple reason: If you are on your own in blockchain, the value is extremely limited,” Piscini continued. “They need to include a small subset of key players at first, what we call the ‘minimal viable ecosystem.’ These players need to represent all key functions and be represented by financial institutions, technology companies, regulators and consultancies to make them real.”

But, like any emerging technology, doubters persist in the blockchain sphere. Those doubts may grow in 2017 as R3 enters the year with a bit of trouble: The group greatly missed its funding target this year when it raised $59 million from its members, despite hoping to raise $200 million. Making matters worse, some of its top members — Goldman Sachs, Santander, Morgan Stanley and the National Australian Bank — all decided to let their memberships in R3 lapse.

Faith in blockchain technology remains, however — with some even arguing that these struggles will only clear a path for the true victors in the industry. For instance, Chris Finan, cofounder of blockchain start Manifold Technology, told PYMNTS this month that these troubles have a silver lining and can bring clarity to the ways blockchain will actually make an impact on global markets.

“When the sheen starts to fade away on some of the unrealized promise of the technology — that it was going to be a panacea for capital markets and help institutions completely offload risks — I think people are starting to say, ‘OK, let’s think more practically about this,’” he said.