"Big Three" management consultancy company McKinsey & company has claimed that the blockchain technology is getting slower traction with retail banks because of the regulatory hurdles and a stable consumer environment. The news was first shared by Bloomberg on June 7.
McKinsey allegedly labeled retail banks anxious and cautious while taking about blockchain, as diverse from their seemingly more adventurous investment banking counterparts.
McKinsey states that the factors which led to this difference consist of a more strict regulatory environment and bad reputation of cryptocurrencies like Bitcoin (BTC). Also, the adoption of existing disruptor payment services, like Zelle is apparently slowing the adoption of new blockchain-powered solutions, the author says.
Various investment banks are experimenting with the blockchain to provide different services ranging from issuing bonds to processing payments. McKinsey says the if retail banks start embracing the technology, they can observe significant gains in various applications such as processing remittance payments, managing Know Your Customer compliance, fraud prevention, and helping with assessing the financial risk of new or existing customers.
Especially, the report separates itself as cost efficiencies on the basis of technology, stating that the importance of simplifying expenses for retail banks:
“Almost all of their attention, especially in developed markets, is on cost reduction. And where cost reduction is front and center they are prepared to look at petty much any opportunity.”
The consulting company anticipates that $4 billion can be saved per year by using blockchain technology for cross-border payments, along with extra $1 billion can be saved per year in onboarding costs for clients. Talking about fraud, blockchain applications can help to decrease loses by $9 billion, the report says.
Even though the banking sector is slowing adopting blockchain technology, McKinsey states that clients are changing their tune and starting to explore how to utilize the blockchain technology within their business instead of focusing on crypto-related risks.
Atakan Hilal, one of the other authors of McKinsey report said in an interview that, “It’s rather difficult in retail banking to change consumer behavior.” This is one of the biggest challenges which is faced by banks. It can be solved if consumer identities are being created on Blockchain. This will help to ease loan decisions for banks as they have been a validated identification in place.
The report says in order to encourage adoption, the exchange between fiat currencies and cryptocurrencies should be made easier, hence to stop the volatility-related losses for consumers. It lastly encourages the formation of a clearer picture in the regulatory sphere.