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Blockchain technology solutions could axe infrastructure costs for eight of the world's 10 largest investment banks by an average of 30 per cent, according to a new report by Accenture, signalling possible savings for the wealth management arms of these institutions.

The findings of the report, Banking on Blockchain: A Value Analysis for Investment Banks, are based on an analysis of in-depth cost data from the eight banks, Accenture said in a statement. 

Blockchain technology, a virtual distributed ledger of transactions shared peer-to-peer, can record ownership across a public network of computers rendered tamper-proof by advanced cryptography. It is already known as the platform for the controversial digital currency bitcoin. The nascent technology is causing a stir within the financial services sector as its supporters believe it could reduce hidden expenses in the financial system by ousting inefficiencies across areas such as payments, syndicated loans and equity clearing.

Typically, investment banks maintain their own databases of transactions, customer information and other reference data. In order to complete any transaction, banks must reconcile and confirm their data with counterparties and clients, which is often a complex, costly and labor-intensive process that is prone to error, according to Accenture. 

By replacing traditionally fragmented database systems with a distributed ledger system, banks can reduce and in some cases eliminate reconcilliation costs, while simultaneously improving data quality, Accenture said.

Finance reporting costs could shrink by 70 per cent as a result of optimized data quality, transparency and internal controls. Compliance costs could drop by between 30 per cent and 50 per cent due to improved transparency and auditability of transactions. Centralized operations supporting know-your-customer and onboarding procedures could bring savings of 50 per cent by establishing more efficient processes to manage digital identities, which could then by shared securely across multiple banks. 

“Given the tremendous cost of data reconciliation – which is part of every aspect of the capital markets industry – it’s no surprise that we’ve seen a significant amount of investment in blockchain technology. But, as with any emerging technology, understanding what these investments might yield is a challenge. As we move into production implementations, bank executives will need a clear roadmap for how and where to rethink their strategies and redesign their operating models,” said David Treat, managing director of Accenture's blockchain practice.

This news service recently conducted an interview with Accenture's Kendra Thompson, focusing on the potential applications of blockchain technology within the wealth management industry.