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I know, I know – it is on the lips of every CDO, CIO, COO, CTO and Chief Innovation Officer and increasingly more varied board members however it’s the start of 2017; many are predicting some significant developments in the application of DLTs (distributed ledger technologies) so we thought it might be worth having our say.

Where is everyone up to with DLT? Who is doing what? And what about talent – how is it being unearthed and deployed?

Which fintech organisations are shaping the market?

From our research, over 101 fintech organisations are currently heavily involved in blockchain technologies and there seems to be an ever-increasing number of them racing to develop, test, and roll-out DLT offerings in a broad range of initiatives.

However, a couple of organisations stand out as market-leaders. R3 is best-known for its blockchain consortium of 70+  major financial institutions aiming to explore applications of DLT. Meanwhile SETL offers a platform capable of processing one billion transactions per day, and Digital Asset Holdings has acquired other DLT businesses and established a leading settlement platform.

While fintech DLT firms have varying end goals, common focuses include cross-border transactions and settlement platforms, KYC-testing and developing cryptocurrencies.

What’s going on at the banks?

With often significant amounts of capital at their disposure, numerous banks are investing both internally and externally in blockchain research and are increasingly taking a hub approach, funding innovation centres in locations where disruption and research is prevalent.

One VP fintech at a global investment bank told us that on investigating one of these internal hubs in his organisation and questioning profitably was told “we don’t make money here, we raise it”.
These banks are taking a long-term approach to DLT and treat it like a code that once cracked, will yield untold riches and cost savings. It looks like they may be prepared to plumb endless capital depths to gain a competitive advantage that might not be realised, less still the investment paid back, for some years to come.

Banks such as Barclays, BNP Paribas, Mizuho FG, Rabobank, Santander and UBS are among the banks leading the way in testing and harnessing DLT.

Other banks have been investing less readily and with diminished enthusiasm in DLT and feel that more exciting returns may spring from other avenues and are happy to have one foot in the door on DLT but focus elsewhere for innovation. Deutsche Bank, for example, is more optimistic  about the scope offered by other technologies. As Ripple CTO Stefan Thomas said to us “we still see a lot of unwarranted enthusiasm around blockchain for use cases where it really doesn’t make sense and that is masking the success of use cases, like payments, where it does”.

How are the consultancies involved in DLT?

Global consultancies, such as Accenture, Deloitte and 15 or so others are keen supporters and proponents of the blockchain.

Labs are appearing in global innovation hubs and being filled with people more quickly than an Uber on a rainy day – and probably more cheaply(!) – such is the internal clamour to be a part of them and consultancies clients’ desire to learn more about the technology.

One consultancy to which we spoke had over 6,000 applications for one position. Their model is more often than not driven by client investment into the lab to fund investigation in to ways in which blockchain could help their businesses (the knock-on effect being consultancies are also learning how the technology might profitably be deployed within their own organisation). The ecosystem truly giving back what is put in.

Such is the interest in DLT within global fs institutions, that we heard of one story recently where a CEO of a large US life insurer flew eight hours to an innovation hub for a three hour debrief on an R&D blockchain project he had commissioned to the lab two weeks prior. He flew straight home after the meeting.

“Collaboration” is the name of the game and if you don’t collaborate, be prepared to spectate from the side-lines as this innovative technology bears fruit for your peers but perhaps more worryingly, for your competitors.

In no other marketplace is it so important to work closely with those against whom you have historically been vying for market share. It is reshaping the competitive landscape.

Why are the regulators embracing disruptive technology?

DLT should limit things such as fraud, embezzlement and theft thus in theory, regulators are pro DLT.

While regulatory bodies have addressed bitcoin, some have not yet regulated blockchain technology more generally.

Before pinning down who and what to regulate, they need to understand the extent to which DLT will be disruptive.

Companies investigating DLT applications cite regulation as a leading concern. Conversely, the regulators are relying on financial and technology institutions to push DLT innovation before they respond to it themselves.

Regulators are making steps however, particularly in countries such as Australia, Belgium, France, Ireland, Luxembourg, Singapore and the UK with our very own FSA providing initiatives such as Sandbox, designed to help entrepreneurs understand how regulation may affect their fintech ideas.

However, if DLT does not significantly impact on firms’ activities beyond reducing costs and administrative needs, then it is unlikely that the regulators will bring themselves in to the action.

In the UK, the FCA’s Sandbox currently comprises nine DLT start-ups, including SETL. While not a regulator, the Bank of England is working with SETL to discuss real-time payment systems using DLT.

The talent conclusion…

The current talent pool exists in the form of the top engineers at leading banks, consultancies, and major fintech platforms.

Millennials who run start-up businesses, grew up with technology or are still studying at renowned academic institutions are in high demand on both an interim/advisory and also permanent basis.

Is there a dichotomy here?

Attracting these individuals who have sprung up in order to challenge the very fabric of the established business landscape are now the ones being encouraged to return or join those against whom they may have historically railed.

Businesses are using hackathons in an effort to distil the talent and understand where they can bring in focused, determined and fit for purpose individuals but so often there are a limited number of people hiring that understand what these individuals can do.

We are seeing young people leading big teams, learning about business goals, as they are the only ones capable of truly understanding a great deal of the technology and capabilities of their engineers and developers.

And once the identification process has been run, how do firms differentiate themselves and ensure they are chosen above their competitors?

Businesses are becoming chameleons, building environments, both physical and intangible, to house and retain this new breed of talent.

“Digital garages”, relaxed dress codes, incredibly flexible working, innovative forms of compensation and remuneration – nothing is off-limits.

From our research, with roughly 300 end clients for DLTs, the demand for talent will be ongoing. Ripple and R3 have established labs in partnership with external bodies and the growth of major fintech hubs including New York, the West Coast, London and Singapore, with Dubai and China also hosting strong consortiums, looks set to continue.

With academic institutions in these financial centres a common breeding ground for ground-breaking thinking, group level global technologists are becoming younger and younger (for example SAP CIO Thomas Saueressig) and finding these individuals, capable of harnessing and understanding DLT, early on and ensuring they fit into an evolving company culture and commercial landscape, is critical.

For access to our 250 page comprehensive organisation by organisation research document around blockchain agendas and projects: do get in touch