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How blockchain will affect financial services employment

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Chain reaction

Every so often, a new technological development comes along which revolutionizes the financial services industry. Not since the introduction of the internet – more than two decades ago – has any force promised to shake-up the industry with as much force as blockchain. The same technology behind Bitcoin, blockchain is now finding new applications in financial services.

But what impact will it have on the employment market?

For those unfamiliar with the technology, blockchain can be thought of as essentially a digital ledger. Much like Google Sheets, the blockchain itself is a basic spreadsheet hosted from every user’s computer. The distributed ledger simply records transactions, then shares that information in a constantly-updated database that is freely viewable by all users. It can be accessed, traced and verified against itself at any time by anyone with the software, thereby enforcing accountability and making fraudulent transactions much more difficult to perpetrate.

Blockchain’s impact on financial services

A technology as revolutionary as blockchain will undoubtedly have a major impact on the financial services landscape. Many herald blockchain for its potential to demystify the complex financial services industry, while also reducing costs, improving transparency to reduce the regulatory burden on the industry. But despite its potential role as a precursor to extend financial services to the unbanked, many fear that its effect on the industry may have more cons than pros.

Industries including payments, banking, security and more will all feel the impact of the growing adoption of this technology. Profit centers that leverage financial inefficiencies will be stressed. Companies will lose their value proposition and a loss of sustainable jobs will follow. The introduction of blockchain to the finance industry is similar to the effect of robotics in manufacturing: change in the way we do things, leading to fewer jobs, is inevitable.

For example, four major financial institutions teamed up back in August to develop and implement the Utility Settlement Coin, a cash equivalent that will enable interbank blockchain exchanges. This clearly signals the banks’ intent to further develop and leverage blockchain technology in one way or another going forward.

Blockchain will cut headcount for some professions, but create other jobs

Of course, blockchain will undoubtedly impact those who work in the finance sector. Smoothing the contemporary workings of the industry will help firms cut a tremendous sum in operational costs – that means cutting jobs as well.

As a case in point, blockchain transactions require very little oversight in the way of processing reconciling; therefore, jobs in these fields will not be relevant with wider adoption of the technology.

Just as the internet shook up finance in the 1990s, broader adoption of blockchain means certain roles within the industry will vanish, while other new ones come into existence. Perhaps it’s more accurate to think that these occupations will evolve, rather than disappear.

New roles in security fields like encryption and identity protection will develop, as financial services firms will still need to audit their records against blockchain to detect potential fraud or other threat sources.

A wider and more diverse range of careers will experience the same effect as blockchain develops and more applications for the concept are realized and put into practice.

One potential use for blockchain technology could be in home sales and mortgage lending – blockchain could streamline this process, impacting the demand for real estate brokers and lenders.

Monica Eaton-Cardone, GRT, blockchain, distributed ledger, Bitcoin, block chain

Monica Eaton-Cardone of GRT

How blockchain will be used in the future

Blockchain, if used properly, promises to deliver benefits to consumers, governments, banks and other financial institutions. By the same token, those who may stand to be displaced by blockchain need not fear being tossed out on the street next week.

Though the blockchain concept has grown a great deal since it was used in the first Bitcoin exchange in 2009, it will be several years before we should expect any kind of widespread application.

One of the primary concerns will be ensuring security in blockchain technology to build broader confidence in the platform. Even if blockchain is already more secure than traditional payments, skeptics will jump on any opportunity to critique the distributed ledger. It will take time to build confidence in such a new and revolutionary idea, and any incident will be a larger setback than it would be for traditional payments.

Blockchain will need to be standardized and secured before the technology will enjoy widespread adoption. However, I anticipate that by 2020, we will already start to see blockchain making a considerable impact on financial services.

It’s difficult to predict exactly how blockchain will change the game, but it would be wise to start making plans now with the knowledge that the industry will see a dramatic shakeup soon.

Monica Eaton-Cardone is the CIO of GRT, as well as its U.S. subsidiaries Chargebacks911 and eConsumerServices. She is also the COO of Chargebacks911.

Lead photo credit: WoodyUpstate/GettyImages; image of Eaton-Cardone courtesy of GRT

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