World Payments Report 2018: In Its Current State, Distributed Ledger Technology Fails to Meet High Demands of the Financial Market

World Payments Report 2018 In Its Current State, Distributed Ledger Technology Fails to Meet High Demands of the Financial Market

Each year sees the consulting and technology services firm Capgemini and the bank BNP Paribas team up to release their ”World Payments Report”. The World Payments Report 2018 was recently released, and – predictably – it deals quite heavily with digital payments.

The study made use of an online poll which questioned industry employees on numerous issues, as well as interviews with industry executives.

However, it notes that although there is a substantial market appetite for means of digital payment – most notably driven by developing markets – and that non-cash transactions are seeing tremendous growth, there are still substantial operational and regulatory hurdles to overcome.

More specifically, the report goes on to outline some challenges it deems that distributed ledger technology will face before the technology can fully take the limelight.

For example, bank executives were skeptical to new means of digital payments in general, with a comparatively meager 38% stating that they were ”planning an anchor role” in any new payments ecosystems.

Nevertheless, Capgemini’s Financial Services’ CEO Anirban Bose also added that ”some banks may want to revisit their choice to not seek an anchor role in the new emerging payments ecosystem”, as consumer demand for digital means of payment is strong.

However, distributed ledger technology will – according to the report – face difficulties in gaining mainstream adoption due to several factors. The participants of the poll were mainly concerned with a ”lack of interoperability” related to distributed ledger technology, with 85.9% of respondents citing that as an issue.

Moreover, 83.1% of those questioned said that they were worried over the lack of regulatory clarity relating to distributed ledger technology, and 77.8% also said that they had concerns over the technology’s scalability.

In addition to this, more than 60% also noted that the cost of implementation, security, as well as the time it would take to add a block to a transaction as factors that they were worried about.

Furthermore, the report also stated that distributed ledger technology innovation can be restricted to proof-of-concepts or theoretical experiments at the lab level.

The murky regulatory conditions cited in the report stem from the lack of clear legal frameworks in many nations, creating a legal risk that dissuades actors from adopting distributed ledger technology.

Lastly, the report also recounts a three-year distributed ledger technology experiment by De Nederlandsche Bank (DNB), which ultimately culminated in DNB noting that distributed ledger technology, in its current state, ”fails to meet the very high demands of a financial market infrastructure”.

Nonetheless, DNB ceded that distrusted ledger technology could already replace some market infrastructures, notably cross-currency transactions and interbank settlements. Moreover, the full report is well-worth a read for those interested in the current state of digital payments.

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