In a recent study, Credit Suisse has assessed the extent to which bitcoin and its underlying technology, blockchain, present a disruptive threat and/or opportunity to global incumbents operating in the payments, capital markets, financial services and media ecosystems.

Authored by Charles Brennan and William Lunn, the report pulls together the collective insights from 31 analysts in 5 sectors in 5 regions around the world. While the authors don’t see much potential in bitcoin, saying that it is a particular sort of blockchain implementation, they emphasize on the disruptive benefits of the blockchain technology.

The study explores the potential of blockchain in relevant industries including Payments (Merchant Acquirers, Card Issuers, and Financial Payments Processors); Capital Markets (Custodians, Exchanges and Registrars); Financial Services (Retail Banks, Investment Banks and Credit Bureaus); and Media (Music: Ad-funded TV, Pay TV, Digital Video and Publishing).

Payments

The authors point out two possible scenarios – first, bitcoin or other cryptocurrencies gaining widespread acceptance as payment method and second, blockchain technology replacing the current payment rails.

“[A] [blockchain] system would not only enable banks to eliminate costly overheads, but would provide a lower-cost money transfer product attractive to large multi-national organizations with high frequent cross-border funding and trade finance demands”, the report said.

Capital Markets

It said that although the current capital markets architecture is mature and secure, it remains “complex and frictional”. The report highlighted the asymmetry between pre- and post-trade infrastructure saying, “Posttrade we still settle T+3; in contrast pre-trade competitive advantage is measured in millionths of a second”. It added that implementation of a permissioned shared ledger which records capital markets transactions could help solve this problem.

Financial Services

The report noted that currently financial institutions have to maintain their own asset registers. It said that these ledgers are not only numerous, but their reconciliation is also costly, complex and often requires manual alterations. Creating blockchain-based single or multiple, databases between major banks, could reduce these frictions.

Media

Implementation of blockchain technology in the media industry would enable content like music, and all of its meta-data (detailing rights holders), to be irreversibly recorded. This comprehensive and exhaustive database could act as a single 'source of truth' to determine the authenticity of content.

“Were this blockchain also paired with a distribution platform the potential implications are even broader. Content has multiple rights owners – music, for example has the writers, labels, licensees and the artists themselves. Smart contracts could be embedded in content, creating autonomous rules that would ensure, for example, that once purchased, revenue is correctly distributed to the designated parties”, it said.

The authors, however, noted that the blockchain technology is currently at a nascent stage, adding that it is challenging to estimate the extent of its impact on the real economy. They see potential impact of technology in three ways: opportunities, where blockchain offers the potential to re-engineer, rationalize and increase the efficiency of legacy systems and technology; Traps, where blockchain may disintermediate incumbents; and growth, where as yet unimagined potential – applications, implications and revenue opportunities – arise from applications built upon blockchain.