This week Garter released a new report predicting that real-world applications of blockchain in the financial services sector are still 2 or 3 years away.
The report, which was unveiled at the IT Symposium/Xpo in Capetown, South Africa, cites fragmentation of distributed ledger technology as a major hindrance to financial institutions trying to implement blockchain solutions. However, Gartner expects that fragmentation to break down into four dominant standards within three years.
Open-source standards and APIs are critical in the financial sector because firms have to constantly move assets between clients, partners and other institutions. A collaborative industry-wide governance framework is necessary to provide a rapid and cost-efficient wholesale settlement between carriers and their partners.
As it stands, there is no single de facto standard for blockchain deployments mainly because industry players have not come together to develop one. As a result, promising blockchain implementations can only go as far as proof of concepts and pilot tests.
Lacking blockchain standards
Lack of standards also means that businesses will only be able to offer blockchain solutions as an add-on service on top of their software or SaaS products. More specifically, businesses will have to have to support multiple blockchains and integrate them upstream into ERP (enterprise resource planning) and CRM (customer relationship management) systems.
In the financial sector, for example, banks CIOs are spoilt for choice when it comes to selecting the right standard for blockchains. They can either choose enterprise-grade frameworks offered by Hyperledger, R3 Corda and Digital Asset, or the many public blockchain standards like Bitcoin, Ethereum, Cardano, and EOS. It’s worth noting that each of these standards is competing to become the de facto basis for digital asset transfer, smart contract, and decentralized applications.
Speaking at the event, Dale Kutnick, senior VP of research at Gartner and co-author of the report, said that one or two standards of blockchain will emerge for effective deployment of blockchain solutions.
Kutnick believes there will be one primary standard – and one or two secondary ones soon. He further added that Hyperledger Fabric has the potential to become a de facto standard for blockchain since it is being piloted by several industries. But it is “highly unlikely” that any of the blockchain platforms companies are using today will be the industry standard in five years, he added.
ERP and CRM integration
Garter report warns that in order to harness distributed ledgers more effectively, organisations will have to integrate blockchain with existing systems like ERP, CRM, finance, and asset management solutions. This also means that organisations will have no choice but to re-integrate their systems should Oracle or SAP announce a new update with blockchain features to their software, Kutnick commented.
Kutnick also expects to see all major software vendors offering blockchain as a feature, adding that most already have that feature in the pipeline. But it will take at least two years to develop a viable blockchain feature for ERP systems, he said.
Gartner released another report last week citing banking as the most advanced industry when it comes to industry blockchain adoption. The report, “Hype Cycle for Blockchain Business, 2019”, says 60% of CIOs expect some adoption of blockchain within three years.