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File Image: IOL

Wealth and Investment Blockchain is the next move

By Supplied Time of article published Feb 15, 2019

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The days of drowning in paperwork and facing long delays when implementing a wealth plan are set to become a distant memory as new age technology like blockchain relieves traditional pain points in the industry.

Head of Wealth and Investment: South Africa for Standard Bank, Shaun Kotwal says the wealth management and investment markets are ripe for disruption as inefficiencies like large paper trails and too much “fat in the system” have created gaps which technology can fill.

“Thanks to tech advancements we are moving towards a complete digital experience, from originating to on-boarding and processing. At the moment, going from advice to implementation is still a lengthy process, but speed and efficiency will increase and it will become a less painful experience,” he says.

Superior digital products and services driven by new technology like blockchain, AI, bots and the internet of things, together with seamless back-end processes and operations will be game changers for the wealth management industry of the future.

While blockchain technology is all the rage - whether open or permission based - it is still largely in a Beta version although it is growing and evolving at a very rapid pace.

Kotwal says it is important to look beyond crypto currencies like Bitcoin to the potential of blockchain technology itself for the wealth market. And it is important to note that blockchain is only one among a number of digital innovations, like AI and predictive analytics that can be harnessed in the wealth space to improve efficiencies. Improving time gaps from advice to implementation and delivering strategic, goals-based solutions is still going to be dependent on the ability of the adviser, rather than technology.

“While only one piece of technology cannot be hyped up as a silver bullet to everyone’s problems, I do think distributed ledger technology, which can record details of asset transactions in multiple places at the same time and provide access to real-time, synchronised data, will have many positive effects in the wealth space. It will transform the way financial transactions are executed and result in leaner, more efficient processes, improved levels of counterparty risk and greater capital availability. It will challenge the way investments are currently implemented via a stock exchange, for example,” he says.

Kotwal says blockchain “changes the paradigm” as new forms of investment and portfolio management are coming, while the broader use of digital identities will generate seamless customer onboarding and personalised products and services.

“The proof of transfer of assets from one party to another can be facilitated by the blockchain ledger without the need for an intermediary, for instance. Furthermore, near real-time settlement of trades and the benefit of automated reconciliation can be achieved,” he says. “Portfolio diversification will be enhanced as bilateral cross-border payments can occur in near real-time, circumventing the chain of intermediaries along with layers of costs, delays, and risks. However, it is also important to note this is still at conceptual stage and early adoption is probably only 3-5 years away. We are only likely to have widespread adoption when this is all understood in layman’s terms and trust and understanding increases, but it is revolutionary,” says Kotwal.

However, the ability to solve real world problems is immense.

A benefit for the wealth industry will be engendering trust and security via digital identity capabilities. This is like having an internet/digital equivalent of a physical ID document when that person want to authenticate or identify themselves in the digital world, such as on internet banking, online shopping or applying for new financial products.

“If for example, a customer wants to buy a new home, instead of customers supplying physical proof or copies of their identity or residential address, they can grant access to the bank to view their identity information directly from an attribute provider such as their municipality account. Digital Identity also allows for more secure and convenient login authentication onto digital banking platforms,” says Kotwal.

Change should become more mainstream as regulatory acceptance grows and while the world may still be at the very early stages of evaluating the possible applications of blockchain technology, collaboration and innovation is on the rise. Permission-based blockchain is likely to catch on as it adds an extra control layer and only specified parties, like a bank and approved clients, can transact and validate the network.

A “hidden gem” within the blockchain technology is the ability to deliver smart contracts, where distributed ledgers offer high levels of support. Computer protocols could verify or enforce contracts and this would lead to a wide variety of potential uses in securities, syndicated lending, trade finance, swaps, derivatives or wherever counterparty risk arises.

As a lead sponsor of the Singularity University South Africa Summit – now in its second year – Standard Bank takes innovation seriously. This conference will drive new thinking and modes of doing business so that exponential technology can be harnessed to future proof Africa. As a universal financial services organisation Standard Bank - Africa’s largest bank by assets, with a footprint in over 20 countries, including Wealth and Investment presence in South Africa, Kenya, Ghana, Nigeria, Uganda and Mauritius, and internationally in London and Jersey – will increasingly lean on technology to deliver solutions that make a difference in the lives of customers.

“Simply put, we need to stay ahead of the curve and increasingly incorporate new technologies such as blockchain, bots, IOT and Artificial Intelligence into our growing wealth offering in order to add new value to the lives of our customers,” concludes Kotwal.


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