The current capital market is saturated with multiple systems performing the same functions. Adding to the issue is they’re doing it with siloed pockets of data that require expensive reconciliation processes.

Therefore, it becomes increasingly crucial for the financial sector to be on blockhain to keep up with current trends, but this poses some potential issues.

After all, blockchain can help reduce these inefficiencies and improve the speed of doing business by providing a single, shared version of events and one implementation of common business functions.

But it can be costly and time-consuming for each vendor, bank, or consortium to create and operate its own unique blockchain infrastructure for multiple services.

The Fix Could Be a Unified Blockchain for All

IBM, in collaboration with CLS, a market infrastructure group, a proof of concept that they’ve christened LedgerConnect. This blockchain was designed to enable financial institutions like banks, fintech companies, software vendors among others to deploy, share and consume services all on a single blockchain host.

On top allowing financial institutions to focus on business, LedgerConnect also allows all the applications, networks and services to be available on a single blockchain, instead of in silos. This could increase interoperability, which could further help reduce cost and complexity.

Now They Need to Convince Institutions to Get on It

While IBM and CLS aim to create a universal network, if they play their cards wrong, they could simply be adding one more blockchain to  the already cluttered market.

But at the very least, LedgerConnect seems to be working to avoid the aforementioned pitfall.

Nine financial institutions, including Barclays and Citi, are participating in the PoC and have selected services from a number of vendors including Baton Systems, Calypso, Copp Clark, IBM, MPhasis, OpenRisk, SynSwap and Persistent Systems to participate in the LedgerConnect proof of concept.

The blockchain operates on a private permissioned network based on the IBM Blockchain Platform and Hyperledger Fabric technology. As such, LedgeerConnect will be designed for regulated and security-conscious enterprises and available across asset classes.

According to IBM, they may provide support for additional ledger or blockchain-based technologies in the future if there is market demand and significant market developments.

Commenting on LedgerConnect, Alan Marquard, Chief Strategy and Development Officer, CLS said,

Alan Marquard

“LedgerConnect is part of CLS’s strategy to explore how we can provide safe and robust solutions that create efficiencies and reduce risk for a diverse range of firms operating in the financial markets. We expect LedgerConnect to deliver enhanced efficiencies and economies of scale over single-purpose distributed ledger networks.”

Marie Wieck, general manager, IBM Blockchain said,

Marie Wieck

“Together IBM and CLS have been early pioneers in advancing blockchain solutions for the financial services space.

Building on the success of CLSNet and leveraging the strong relationship CLS has with the world’s leading financial institutions, LedgerConnect is uniquely positioned as a blockchain marketplace for the financial services industry, which will accelerate innovation across the ecosystem with value added services for blockchain networks.”

Pending a successful proof of concept, market demand and all of the necessary approvals from regulators, LedgerConnect should be made widely available across the financial sector.

Featured Image via Wikipedia Commons.