Having observed countless other industries being supplanted by agile and dynamic technology companies, financial institutions – including global custodian banks and market infrastructures – realised long ago they needed to adapt their businesses otherwise they risked suffering a similar fate. Technological innovation, however, needs to be implemented thoughtfully and strategically if it is to work in the long-term. Tim Grant, Head of Business at SIX Digital Exchange (SDX), a fully integrated issuance, trading, settlement and custody infrastructure for digital assets, shared his thoughts on innovation at the Network Forum.
Being Strategic About Innovation
Grant told the conference that it was essential organisations undertaking huge technology change programmes do so in a way that is pragmatic. He conceded banks and infrastructures may have been too ambitious in the past in what they were trying to achieve. He added a number of potentially interesting Blockchain programmes had been killed off because of this, owing to the fact they were too costly and speculative – problems, which do not chime well in a world driven by quarterly financial reporting. Instead, financial institutions need to be more realistic in their objectives when adopting new technologies.
It’s Not All About Blockchain
Simultaneously, Grant said financial institutions need to be technology-agnostic when developing new products. He highlighted that while SDX was leveraging R3’s Corda Enterprise Blockchain solution to facilitate trade settlements, the digital exchange itself used commoditised technology sourced from NASDAQ, which is not Blockchain-enabled.
This, he said, was because there is limited point in building an exchange platform on a Blockchain. While Blockchain has many applications and use cases, organisations need to be sensible in how they deploy it. If existing technologies can solve commercial problems or deliver business-wide efficiencies, then firms should look to make use of those solutions.
Blockchain has been extensively evangelised and widely hyped across securities services. Although the technology – in the long-term – will bring a number of internal and market-wide efficiencies, it will take time to implement. A number of major global exchanges, for example, have already conceded that their Blockchain initiatives will be delayed. While market participants should unreservedly continue innovating and trialling new technologies, they need to manage expectations and be realistic about what is possible and what is not.