Finance, retail, and Information and Communication Technologies (ICT) are the most promising economic sectors for applying and developing blockchain (a type of Distributed Ledger Technology, DLT) solutions, shows the latest research implemented by the BlockStart project, a pan-European DLT/ blockchain partnership program.
The extensive report, developed by European management consulting firm CIVITTA, was based on desk research and expert interviews analyzing 15 economic sectors, ranked in terms of their maturity, impact, feasibility, and level of the regulatory barriers for the implementation of the DLT solutions by SMEs.
SMEs in FinTech scored highest in terms of readiness for the blockchain application. Many financial services are data-heavy and fault-prone, thus requiring intermediaries for mediation and ensuring trust. This drives the transaction costs up. Applying DLT allows reducing costs through operational simplification, regulatory efficiency improvement, settlement time reduction, etc.
Despite strict regulation, FinTech already holds the largest share in the blockchain market due to the extremely high potential effect of the DLT-based solutions’ implementation. In 2019, the global blockchain finance market size exceeded EUR 2 billion and is expected to reach EUR 19.5 billion by the end of 2025. For example, a peer-to-peer payments, investing and trading company Circle focusing on blockchain is valued at $3 bn according to Forbes.
“Showing both willingness and ability for disruptive technologies, FinTech is the most prepared sector for SMEs to implement DLT solutions. Having started in the payments sector, blockchain is rapidly overtaking both banking and insurance companies. Main benefits of its adoption in finance include safety, security, and speed in exchanging both data and money. It allows users to take advantage of the transparent infrastructure along with relatively low operational costs,” says Vytautas Černiauskas, expert at CIVITTA.
Unlike in FinTech, blockchain in retail has been considered quite a nascent market, but it is rapidly developing, with at least 7% of organizations expected to have a commercial DLT solution at scale in the next two years.
“Innovating can be costly and until recently primarily large players such as Walmart or Amazon have been developing blockchain solutions. However, blockchain in retail is expected to grow up to EUR 2 billion by 2023, driven by a growing awareness that DLT solutions can improve the tracking of product authenticity, ensure reliable delivery throughout the supply chain and accountability of suppliers. It also offers possibilities to enhance the consumer shopping experience, letting them know the origins of goods,” explains Mr Černiauskas.
According to the report, the third sector to lead the blockchain revolution is ICT. Spending on new technologies in ICT should increase by 14% in the following years and applying DLT could be among the most transformative solutions, changing the notion of trust and bringing greater transparency.
“ICT has the strongest tech and digital background and acts as a powerful tool to facilitate data collection, validation, access, exploration, and communication. For ICT, blockchain provides safety and security of data, making file storage more secure than anything seen before,” notes Mr Černiauskas. For example, Switzerland's state telecom Swisscom and the national postal service Swiss Post are developing their own private blockchain for monitoring of goods shipped, smart energy billing and other services.
Blockchain is still a difficult technology—the effective use of it requires significant technical knowledge. To demystify the Blockchain hype and make it easier for the companies to decide whether it is worth investing in this particular innovation, the BlockStart project has specifically developed a free online “Do you need blockchain?” tool. Although aimed at SMEs, it can be easily used by anyone, offering insights about the company’s innovation readiness, potential for blockchain application, and challenges it could solve.
BlockStart’s pan-European blockchain partnership program is funded by the EC’s H2020 programme for Research and Innovation and implemented by a consortium of three partners: a company builder studio Bright Pixel, a leading management consulting firm in the Central and Eastern Europe CIVITTA, and the world’s largest social network for startups F6S.