The second annual Blockchain in Payments Report reveals widespread adoption of blockchain-based payments by financial service providers. Strong adoption signals that both customers and providers have proven the value and feasibility of blockchain. Moreover, trust has been won.
The Flywheel Effect
The spinning flywheel is a good analogy for the pace of blockchain and digital asset adoption. Flywheels used in heavy industry require significant energy to start spinning, but once they gain momentum, tend to continue spinning. The flywheel is spinning for blockchain and digital asset adoption, but the industry must still overcome key challenges to move the wheel for adoption faster. In blockchain and digital asset adoption, the “energy” lies in proving business and customer value and technical feasibility— in the 2018 Blockchain in Payments Report, early adopters proved value and technical feasibility. The “spinning” trigger is proving viability by scaling this technology across the majority of respondents. For the flywheel to spin faster, it requires expediting implementation for financial institutions, gaining regulatory clarity and the boost that digital assets offer when paired with blockchain technology for cross-border payments.
Key takeaways from the report:
- Conducted in August and September of 2019, the Blockchain in Payments Report analyzed data from 1,053 respondents across 21 countries who are directly involved with payment services at their organization.
- Location of respondents - 15% Nth America, 14% Sth America, 16% Europe, 14% Middle East/Nth Africa, 41% Asia-Pacific
- 2018 18% of respondents had deployed or nearing deployment of blockchain. 2019 97% are evaluating or implementing blockchain. This dramatic increase in exploration and adoption can be attributed to broader education in the market about the benefits blockchain offers and heightened competition is driving more innovation industry-wide.
- 31% of respondents see cross-border payments market opportunities in terms of both expanding existing services into new regions and introducing new services
in existing regions. - 99% of respondents see at least technology for payments (up from 88% in the 2018 report).
- 97% are either implementing or evaluating blockchain to capture new market opportunities in payments (up from 82% in 2018).
- A second wave of adopters is visible: 23% of respondents in production have made the move during the past year while 45% moved two years ago.
- It is early days to quantify the economic benefits of blockchain implementation. Respondents point to new revenue generation and cost savings. On the revenue side of the equation, 41% of respondents see blockchain
providing greater market access, allowing them to extend their services to new geographic areas. The percent jumps to 47% for early adopters of blockchain. - Slightly over a third of respondents are concerned about blockchain and the use of digital assets as “difficult to integrate” (35%). A smaller percent view integration as being “too expensive” as well (28%).
- Around a third of respondents state regulatory concerns in their evaluation of blockchain and digital assets: 35% state that regulations are too uncertain, while 32% believe that regulations are prohibitive. These regulatory
concerns, however, vary notably by a payment service providers’ adoption stage, level of digital channel usage and location. - The Need for Speed. Nearly all respondents (95%) use pre-funding with the top two reasons being speed related. Speed is most important to respondents that have implemented blockchain.
- 89%of all respondents are very to extremely
interested in real-time settlement (up from
81% in 2018) - 95% of respondents who have already
implemented blockchain are very to extremely interested in real-time settlement - Yet despite this inclination toward pre-funding, it’s clear that respondents’ perspective on how digital assets can deliver speed is evolving. Two striking findings of the survey are: first, early adopters are the most interested in using digital assets; and second, they rank speed of payment as the top benefit of digital assets.
Conclusion
The flywheel for blockchain in payments is set to spin faster. The extensive energy put into proof
of concepts and pilots, and the steady building of networks over the past two years, has resulted in a clear understanding of blockchain’s value and feasibility. With value comes usage and the wheel makes its first rotation, and trust is won.
Getting the wheel to spin faster requires proving viability by scaling, which is highly likely given the strong adoption exhibited by respondents. A faster spinning flywheel will be contingent on blockchain
providers’ ability to simplify and expedite implementation by sharing best practices. It is also critical that the industry continue to educate regulators about the positive attributes of blockchain and digital asset technology so that they can
develop well-informed regulatory frameworks worldwide.
But perhaps the biggest catalyst for a fast spinning flywheel, is the boost that digital assets offer when paired with blockchain technology for cross-border payments.
We’re on the cusp of another breakthrough
innovation, including the poorest, in a financial
system that increases instead of limiting
the value of their assets. Transforming the
underlined economics and financial services
through digital currency will help those who
live in poverty directly.Bill Gates, Co-chairman of the Bill & Melinda Gates Foundation
