by Carlos Manjon

In the last few years, a certain number of new technologies have actually emerged leading to a radicaldigital transformation of all kind of businesses. To name a few of them:

• Cloud computing-based solutions (IaaS, SaaS, PaaS),
• internet-of-things (IoT),
• 3D printing,
• Docker-based solutions, an open-source technology using containers for software distribution,
• Cryptocurrencies, bitcoin being the most popular,
• Big Data, which (combined with advanced analytics) is allowing the emergence of smart self-learning devices,The new web technologies and the financial industry

The financial sector is no stranger to all these evolutions and is adopting some of them at a steady pace[i]. As a matter of fact, traditional financial entities are being challenged by new emerging players: start-ups called FinTechs that combine innovation and technology to gain market shareMarket share  can be defined as a percentage accounted for by a given producer or brand in its own market. Market share = Current market of producer or brand / Current market of product all brands. Every single area is concerned, be it money transfers, mobile payments, project financing through crowdfunding platforms, or even portfolio investment robo-advisory[ii].
Not surprisingly, several firms have already invested heavily in the latest technologies: some by creating in-house labs, some through partnerships with FinTechs companies, and others by purchasing startups downright.

A closer look into cryptocurrencies

In 2015, one of these innovations has been subject to special attention from the mainstream media: cryptocurrencies. A digital decentralized currency that no government or central bank controls but is produced by a community of individuals and businesses, certainly has a “democratic” smell in it which makes it very attractive. Furthermore, the parties involved in a bitcoin transaction are kept anonymous[iii], making it especially appealing to criminal organisations[iv], to such an extent that a forum has been formed to fight against criminal activities using bitcoin and the blockchain features[v].
But despite all the excitement generated about cryptocurrencies, they are not broadly used. Their supporters may say “not yet”. With an average of 200,000 bitcoin transactions worldwide per day in 2015[vi], they are far behind other means of payment such as credit cards which amount to more than 9 billion transactions per year in France [vii] alone (600 million of which correspond to payments online) for a global amount of €420 Bn. In his must-read article “The resolution of the Bitcoin experiment“, Mike Hearn, a Bitcoin developer, highlights all the technical and organisational reasons why the Bitcoin should fail. Thus, its use should remain limited. Traditional currencies issued by Central Banks have a long life ahead of them.

Blockchain, the technology behind Bitcoin

This said, beyond Bitcoin and other cryptocurrencies and their relatively important use for financial transactions, what may (and certainly will) really have a significant impact on the financial industry is the technology behind them. This technology, called Blockchain, is gaining momentum.