Needham Report: Welcome to the Internet of Value

A new report suggests that although multiple applications for distributed financial technology currently exist, there are universal benefits to improving certainty and lowering the cost of payments.

Needham & Company, an independent investment bank and asset management firm, published its report on blockchain technology last week. The report stresses the importance of Internet of Value, the financial system in which money moves as quickly and as unencumbered as data does on the Internet of information. Needham predicts that the Internet of Value will enable “many opportunities that will contribute to a large expansion in digital value exchange as blockchain technology reduces friction and drives down cost significantly.”

The report names the greatest achievement of blockchain technology as the ability to reach distributed consensus in a system that is integrated and near-instant, as compared to the world’s current networks of siloed ledgers that can take days to clear and settle transactions. With distributed financial technology presented as the game-changer, the remainder of the report focuses on use cases and which companies are providing these solutions.

The report cites a Boston Consulting Group study which found that the payments industry generated $425 billion in transaction-related revenue in 2014. Needham suggests that distributed financial technology will have a significant impact on the payments industry, particularly high-volume corporate payments. The authors explain that technologies like Ripple can offer significant advantages to corporates by reducing float and accelerating the cross-border payment process:

“International payments typically take over two days to settle and during that settlement time companies are forced to let cash sit idle instead of earning a return. Furthermore, foreign exchange costs could be reduced by two factors: 1) quicker settlement times reduce exchange risk; and 2) the introduction of competitive foreign exchange marketplaces (such as Ripple’s) could produce more competitive rates for cross-border corporate payments.”

Needham’s optimism is well-founded and timely. At Sibos 2015 in Singapore, blockchain and distributed financial technology were the subject of standing-room only panel discussions.  

“Currently, the foundational layer and infrastructure necessary to support a rich ecosystem of blockchain-based applications and services is being established. As they mature, we expect to see blockchain-enabled companies flourish and bring new economic efficiencies and possibilities into the mainstream.”

Read the full report here.