TRADING
Blockchain: are the landing lights on yet? Credit Suisse has been piloting distributed ledger trials in its investment banking operation. But Emmanuel Aidoo, head of the bank’s distributed ledger and blockchain effort, isn’t quite ready to make a final decent There’s a perception in some parts of the media that the big beasts of the financial services industry, weighed down by legacy systems, are losing in a race against disrupters trying to take their business. That’s not something that keeps Credit Suisse’s Emmanuel Aidoo awake at night. Quite the opposite, in fact. As his title suggests, the head of the bank’s distributed ledger and blockchain effort has a keen interest in companies developing technologies that have the impetus and thought leadership to drive innovation – and Credit Suisse is right up there among them. Chief among the technologies that could deliver benefits for financial services is blockchain, which he distils as being a special purpose database that makes it possible to ‘reconcile cryptographic mathematical certainty across firewalls’. Its principle benefit to a bank, therefore, is a substantial saving on time and cost, although the spin-offs in
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improved compliance, more efficiency and greater transparency across the network are equally tempting. “It’s easy to get carried away,” cautions Aidoo. “We have to be level-headed about things and really try to peel back the technology to understand the benefits and how we can use it to support our business.” For him, 2015 was the hype stage in the blockchain development cycle and last year was the proof of concept. This year is the prototype stage, but there’s still a long pathway to production. Aidoo draws a colourful comparison: “The industry’s taken off on the flight and decided where to land. Some proofs of concept are even planning the approach or have the landing gear out. But we still need to get down, taxi safely along the runway, offload passengers and baggage, and clear customs. There’s a lot of work to do, but we’re making some great progress.” Deloitte’s Centre for the Edge report on Bitcoin, blockchain and distributed
ledgers came to the same conclusion, but put it slightly differently. It said the technology was ‘caught between promise and reality’. Aidoo still thinks it’s a journey worth making, though. He highlights the simple equation behind return on equity and the cost component. There are obvious potential cost savings in blockchain. So long as it’s introduced in a careful, regulatory compliant way, some processes can be automated to create greater efficiencies in the middle and back office. However, he believes it’s the ‘divided by capital’ part of the equation where blockchain can make the biggest impact. Aidoo explains: “An enormous amount of money is used to support the clearing
Summer 2017