As Wall Street considers how blockchain can revolutionize the world of finance, it reminds me of video games. Back in 1972, Atari’s arcade game Pong launched the video game industry. Pong’s technology was crude — players controlled little bars of light to hit a digital ball back and forth. When it comes to some things on Wall Street, such as taking three days to settle a trade, it’s as if we’re still playing Pong.
Now, imagine if gaming never advanced past 1972 and then one day someone arrived with Pokémon Go, taking us from the world’s most boring digital tennis match to using our phones to hunt for Pokémon in the real world, employing a mix of augmented reality, GPS technology and advanced graphics. It would be fantastic, but no one would know how to play it. People would need to pause, talk to one another, figure out how to use the new devices and learn to get the most out of the new technology together. That’s the promise of blockchain for Wall Street.
The distributed ledger technology can lead the financial industry to unexpected and interesting places, bringing benefits as varied as instant trade settlements and better security. But to get there, we need to learn how to use it together. That’s why many Wall Street firms (including mine) are investing heavily to build early applications that will get the journey started.
Placing A Bet on Blockchain
A particularly strong feature of blockchain is the network effect — the more parties that participate, the greater the value of the network. We believe a place to prove the functionality of blockchain is with proxy voting because of Broadridge’s massive network. We manage 85% of North American proxy voting and over 50% everywhere else, sitting between 50,000 issuers, over 100 million investors, and thousands of financial institutions and intermediaries. This puts Broadridge in a strong position to deliver the benefits of blockchain, and we are working with industry leaders to do so.
That’s why we recently made large technology acquisitions to build the first iteration of a blockchain platform for proxies to run alongside our current system. Just recently we announced an international effort with J.P. Morgan, Northern Trust and Banco Santander, having successfully completed a pilot test using blockchain at a shareholder annual general meeting to produce a “shadow” digital register of the proxy voting taking place in the traditional way. Blockchain brings three principal benefits to proxy voting — it increases efficiency by reducing the complexity of the reconciliation process; it enhances security via encryption; and it increases transparency around vote confirmation. For issuers, it also will create a digital agenda for meetings and can offer analytics after voting about such things as the different drivers of institutional and retail voting behavior.
Last March, a PwC survey found that 56% of people in financial services recognize the importance of blockchain, but 83% of those polled were only “moderately” familiar with the distributed ledger technology. Make no mistake, every executive leading a Wall Street company should assess how blockchain can impact their business. While there are many complexities and challenges that will need to be overcome, this is a once-in-a-generation opportunity.Discover More