UK finance bosses bet big on blockchain
Key Points
- UK financial institutions are investing heavily in emerging technology, and three quarters of them believe tokenisation will shape the future of finance.
- Tokenisation refers to the digital representation of assets on blockchain-based infrastructure, allowing them to be more efficiently transacted.
- A Lloyds survey found tokenisation was a kay area of focus for financial services, with 71% expecting tokenisation to reshape the industry.
- 77% of all respondents said investment in emerging technology was a growth priority, and 64% plan to increase their capital expenditure in the coming year.
Nearly three quarters of the UK’s largest financial institutions expect the future of financial services to be shaped by blockchain-based tokenisation.
This is according to a Lloyd’s survey of senior industry leaders which found that tokenisation was a key focus for the future of UK finance, with many believing that blockchain-based infrastructure will help to improve the efficiency of transacting assets such as cash, bonds, and funds.
A blockchain is a distributed ledger of transactions that is transparent and immutable, with transactions confirmed by consensus and secured by cryptographic proofs. A blockchain can be private and permissioned, only visible to and governed by a set of approved parties or institutions, or it can be open and public as in the case of Bitcoin.
Blockchain-based infrastructure allows a range of assets, from money to houses, to be represented digitally as either fungible or non-fungible tokens, and allows them to be easily transacted while retaining the protections and safeguards associated with traditional financial assets.
Lloyds noted that tokenisation can unlock faster settlement, more efficient collateral and liquidity management, and allow for the automatic processing of transactions when specific conditions are met.
This latter feature is enabled by blockchain-based smart contracts, immutable and publicly verifiable pieces of code that run autonomously and transparently when certain conditions are fulfilled, making them an ideal piece of infrastructure for automatic transactions.
60% of those surveyed by Lloyds said they were most interested in the faster payments and settlement offered by tokenisation.
This growing investment in tokenisation comes along with a broader acceleration in technology investment in the financial sector. According to the survey, 77% of all respondents said investment in emerging technology was a growth priority, and 64% plan to increase their capital expenditure in the coming year.
“Financial institutions have spent years modernising how customers interact with financial services. Increasingly, attention is turning to the infrastructure behind those experiences,” said Lloyds Global Head of CIB Coverage Lisa Francis.
“Tokenisation is a key part of that shift, with organisations exploring how it can help them transact in a safe, trusted environment, improve efficiency, make better use of capital and enable new products and services. Those that can turn that potential into real-world solutions stand to gain the greatest advantage.”
