The World Economic Forum has released a new report that looks at the impact of implementing distributed ledger technology 9DLT) across nine sectors of financial services.

Prepared in collaboration with Deloitte, the report “The future of financial infrastructure: An ambitious look at how blockchain can reshape financial services” aims to complement existing distributed ledger technology research by providing a clear view into how financial service functions can be re-imagined.

According to the report, DLT has great potential to drive simplicity and efficiency through the establishment of new financial services infrastructure and processes. It emphasizes that instead of considering it as a panacea, it should be viewed as one of many technologies that will form the foundation of next generation financial services infrastructure.

It said that applications of DLT will differ by use case, adding that the most impactful DLT applications will require deep collaboration between incumbents, innovators and regulators. Moreover, it sees ‘Digital Identity’ as a critical enabler to broaden applications to new verticals, and that ‘Digital Fiat’ (legal tender), along with other emerging capabilities, has the ability to amplify benefits.

“Our findings suggest this technology has the potential to “live-up to the hype” and reshape financial services, but requires careful collaboration with other emerging technologies, regulators, incumbents and additional stakeholders to be successful”, the WEF said.

The report furthers lays out comprehensive, business-process-level views of distributed ledger technology implementations within each financial services function including Global Payments, Property and Casualty (P&C) Claims Processing, Syndicated Loans, Trade Finance, Contingent Convertible Bonds, Automated Compliance, Proxy Voting, Asset Rehypothecation, Equity Post-Trade.

It lists six key value drivers for DLT identified through the in-depth examination of nine use cases from across financial services – operational simplification, regulatory efficiency improvement, counterparty risk reduction, clearing and settlement time reduction, liquidity and capital improvement, and fraud minimization. Furthermore, the research identified a set of common characteristics that appeared to be shared by high potential applications of DLT:

• Shared repository: A shared repository of information is used by multiple parties
   
• Multiple writers: More than one entity generates transactions that require modifications to the shared repository
   
• Minimal trust: A level of mistrust exists between entities that generate transactions
   
• Intermediaries: One (or multiple) intermediary or a central gatekeeper is present to enforce trust
   
• Transaction dependencies: Interaction or dependency between transactions is created by different entities