Multiple studies have proven the worth of blockchain use in the finance industry; in addition to improving peer-to-peer money transfers, the technology promises to streamline other sectors, as well.
Mutual funds represent one of those sectors, which could save more than £1.9bn as a result of moving to a blockchain-enabled distributed market infrastructure, according to the research from Calastone.
The forecast savings demonstrate the scale of financial impact that greater automation and interconnectivity could bring to the funds market. Calastone’s predictions further substantiate another study released by Forrester, which has analyzed the financial impact Calastone’s current transaction network has already had on the global funds market.
Cost savings at a global, market level
Speaking of Forrester; it conducted a global market survey of 234 mutual funds to determine the tangible value and financial impact Calastone’s transaction network has had on the global funds market in moving the manual process of funds trading to an automated network infrastructure. The results of the research have shown that, in addressing the friction and operational inefficiencies throughout the transaction cycle across all trading counterparties, Calastone has produced more than £458 million of cost savings over the previous six years. The research covers Calastone’s key global markets including the UK, Ireland, Luxembourg, Hong Kong, Singapore, Taiwan and Australia.
The results highlighted five key advantages for fund firms in connecting to Calastone’s automated transaction network: improved process times; reduction in manual errors; ability to scale and process greater volumes of trades via increased flexibility in trading windows; faster response times; and greater transparency via better audit traceability.
Even greater savings coming with blockchain
Automation is only one part of the equation, with Calastone’s subsequent analysis suggesting its blockchain-enabled distributed market infrastructure (DMI) could deliver estimating further cost efficiencies totaling over £1.9bn worldwide.
To come up with this number, Calastone has calculated the potential cost savings of moving to a distributed and mutualised market infrastructure using data from Deloitte’s 2016 study entitled “Europe’s fund expenses at a crossroads: The benefits of mutualizing the cost of distribution.” The company’s calculation determines the potential basis point (bps) savings across key global markets, including the UK, Ireland, Luxembourg, Hong Kong, Singapore, Taiwan & Australia. The bps calculation has been applied to mutual fund assets under management, at an individual market level of said countries.
According to Calastone, the calculation represent the tangible, financial value that a blockchain enabled distributed market infrastructure can deliver, through stripping-out many of the remaining inefficiencies currently embedded in the system. Such infrastructure builds on top of network automation efforts like the one Calastone has developed, offering a scalable solution to meet the needs of fund industry participants and investors now and for the future.
In June 2017, Calastone successfully completed the first phase of its blockchain-enabled distributed market infrastructure (DMI) proof-of-concept, and in December – the company announced its core network technology will migrate onto blockchain technology in 2019.
“Whilst what we have achieved to date has enabled sizeable savings for the sector, our own analysis highlights how significantly these benefits can be accelerated when using blockchain technology to automate the entire lifecycle of mutual fund transactions, from order placement through to the settlement and payment, through our new distributed market infrastructure – from millions to almost £2bn each year in cost savings,” Julien Hammerson, CEO of Calastone, said in a statement.