It’s potential to more efficiently and accurately track the exchange of financial securities is lighting up the eyes of the world’s biggest banks, tech firms and consultancies, which are rushing to explore its uses.
“Blockchain-enabled technologies are poised to bring huge benefits to the financial services sector over the next decade,” says Owen Jelf, managing director of Accenture’s global capital markets practice.
The consultancy firm predicts the emerging technology could reduce the sector’s costs by more than $20 billion annually by 2021.
And the blockchain’s pioneers are desperately scrambling to hire people who understand the nascent space, according to Campbell Harvey, professor of finance at Duke University’s Fuqua School of Business.
“They want to have a so-called blockchain tsar at their firm — someone who can coordinate a multi-disciplinary effort, so their firm comes out on the winning side rather than the losing side of blockchain disruption,” says the pioneering blockchain academic.
Many on Wall Street believe the tech could bring finance into the 21st century. But all manner of companies are biting into bitcoin and blockchains.
Examples range from start-ups like Digital Asset Holdings and Coinbase, to tech stalwarts such as IBM, to exchanges operators Nasdaq and ASX Group, and even advisory firms Accenture and PwC, which both launched blockchain practices and are fiercely competing for talent.
“We expect the initial core team of 15 experts to grow rapidly,” says Steve Davies, PwC’s fintech leader for EMEA, who adds that the “blockchain juggernaut” is gathering pace: “There is growing interest and a real demand from our clients to help understand the implications of blockchain.”
Keen not to be swept aside by the digital wave, banks have been among the top backers of blockchain. Goldman Sachs, JPMorgan Chase and Credit Suisse are among those supporting the R3CEV blockchain initiative. “Fintech is coming at traditional banking from a new perspective,” says Marc Hamud, senior vice president at GE Capital, who lectures at USC Marshall School of Business.
Andrei Kirilenko, former chief economist with the US Commodity Futures Trading Commission, and director of the Centre for Global Finance and Technology at Imperial College, believes career opportunities are opening up.
But he says the next generation of financial services leaders will be engineers: “They will not be traders or investment bankers.”
Cryptographic algorithms may sound geeky and complex. But they are causing nothing short of a frenzy among a clique of business school students, who see potential for blockchains to disrupt and revolutionize finance.
“I caught the bug coming into business school. Once you see the power of bitcoin, it’s hard to un-see,” says Dan Elitzer, the MIT Sloan MBA who founded the MIT Bitcoin Club, pictured below.
He spent his summer interning at Circle, the bitcoin group led by a former JPMorgan executive. Now Dan works at IDEO, a Silicon Valley innovation consultancy, which is helping to build new blockchain ventures, and which is recruiting at a number of top business schools. “There are increasing opportunities in this space,” he says.
At Wharton School, students are working with BlockCypher, a blockchain web services start-up. “There are many fintech career opportunities available for MBAs,” says Matthew Applegate, VP at Wharton FinTech — from the innovation arms of financial services incumbents to the early-stage ventures hoping to disrupt them.
The MBAs mirror high-profile bankers ditching the Street for start-up stardom. Blythe Masters, the former JPMorgan banker, runs Digital Asset Holdings; Vikram Pandit, former Citigroup CEO, has pumped investment into fintech start-ups like TransferWise and CommonBond.
He's not the only one. Venture capital investment into bitcoin and blockchain ventures surged by 36% in 2015, according to research from CoinDesk.
“A large number of students come here because they are interested in working at fintech start-ups in the Bay Area,” says Adair Morse, assistant professor of finance at the Haas School of Business, a stone’s throw away from Silicon Valley.
Others are founding their own. “Quite a few of them are interested in starting up their own companies,” says Raghu Rau, professor of finance at Cambridge Judge Business School, and a director of the Centre for Alternative Finance.
He gives the example of an MBA graduate exploring blockchain technology to make processing IPOs easier. “He’s trying to persuade a big bank to give him backing for it,” he says.
The blockchain emerged with the controversial cryptocurrency bitcoin, known for its links to hackers, vice and catastrophes like Mt. Gox. But the tech is now viewed as having the potential to, for example, transform money transfers, upgrade banking and digitize legal processes.
“The potential appears to be enormous,” says David Yermack, chair of NYU Stern’s finance department. “….It may turn out to be as important as the advent of double-entry bookkeeping in the Renaissance.”