London, October 2020: Decentralised finance (DeFi) is now being taken seriously by traditional finance. In a European-wide survey of financial institutions spanning across insurance, banking and trading, 86% are implementing or assessing services built on a DeFi framework, with 58% of companies concerned they will lose a competitive advantage by ignoring DeFi instruments.
The research, conducted by BCG Platinion (part of Boston Consulting Group) and Crypto.com, analyses the uptake of decentralised services amongst traditional financial institutions. From 400 companies across Europe, 71% with a turnover or balance sheet above £10bn have already assessed or implemented DeFi, compared with 51% of companies turning over less than £100m.
Of companies assessing or implementing the blockchain technology, 42% are pivoting to a more decentralised approach to asset management. 38% of companies are using it to facilitate faster, more secure, payment processing services, rising to 61% for the biggest companies.
Conversely, 70% believe security concerns over fraud is a challenge preventing company wide adoption of DeFi, and 15% of decision makers believe that whilst decentralised finance is a threat, their companies are against its adoption.
The research also considered the impact DeFi will have on business and operating models and 59% of companies say they will have to implement a new governance structure. But 70% of companies say restructuring the business model or decoupling decentralised finance will increase the speed and lower the cost for financial transactions. 67% said it would open up new revenue streams and 61% said they are considering or adopting DeFi as a way to execute financial services with smart contracts.
At the same time, a lack of regulation is a challenge for 61% of companies, increasing for companies with a larger turnover or more assets under management. That decentralised finance is over collateralized is also a concern for investment bankers and asset managers, more so than other areas of finance. And sharing their anxiety with a recent FCA announcement, 60% of companies are worried about a lack of recovery mechanisms.
Of those companies implementing decentralised finance, the majority (39%) are collaborating with an existing consortium, platform, application or service. 24% are developing their own consortium or platform and 22% are going to collaborate with competitors because the current ecosystem is not compatible with their requirements.
Kris Marszalek, Co-founder and CEO of Crypto.com said,
“The research shows that DeFi’s adoption is not limited to just the blockchain industry; traditional financial institutions of all sizes are viewing DeFi not as a competitive threat but rather as a valuable instrument to delivering more decentralized, efficient financial services. This is shown in their warming attitudes towards DeFi and its integral role in future plans for the vast majority of them.“
Kaj Burchardi, Managing Director of BCG Platinion, adds,
“As markets evolve towards decentralisation, there will be a growing demand for approaches like DeFi which can provide a more efficient and more open way of banking, trading and investing.
It is encouraging to find that financial institutions are already seriously, and strategically, collaborating with the crypto community to begin building a new generation of governance and technologically resilient solutions that will make financial services more accessible.
However, there is still quite some progress to be made in order to bring DeFi into the mainstream especially in security and compliance.”
The survey was conducted by Sapio Research interviewing 411 financial organisations and follows up a report highlighting the challenges and opportunities for financial institutions adopting decentralised finance.
Crypto.com was founded in 2016 on a simple belief: it’s a basic human right for everyone to control their money, data and identity. Crypto.com serves over 3 million customers today, providing them with a powerful alternative to traditional financial services through the Crypto.com App, the Crypto.com Card and the Crypto.com Exchange.Crypto.com is built on a solid foundation of security, privacy and compliance and is the first cryptocurrency company in the world to have ISO/IEC 27701:2019, CCSS Level 3, ISO27001:2013 and PCI:DSS 3.2.1, Level 1 compliance. Crypto.com is headquartered in Hong Kong with a 500+ strong team. Find out more by visiting https://crypto.com
About Boston Consulting Group
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we help clients with total transformation—inspiring complex change, enabling organizations to grow, building competitive advantage, and driving bottom-line impact.
To succeed, organizations must blend digital and human capabilities. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives to spark change. BCG delivers solutions through leading-edge management consulting along with technology and design, corporate and digital ventures—and business purpose. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, generating results that allow our clients to thrive.
About BCG Platinion
As a part of Boston Consulting Group (BCG), BCG Platinion provides consulting services in design, development and implementation of advanced technology solutions that fuel creation of new-generation business models. Today, our presence spans the globe with offices in Europe, North and South America, South Africa and Asia Pacific.