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UBS bank CEO: Blockchain technology key to remaining competitive

Andrew Munro 19 June 2018 NEWS

More efficient systems are the key to more competitive products, and that's blockchain's jam.

Bitcoin might disappear, but blockchain technology will be crucial for financial institutions to remain competitive in the coming 5 to 10 years, says UBS Group CEO Sergio Ermotti. This is because it stands to greatly improve efficiencies and cut costs across the increasingly data-driven industry.

"It's almost a must," he said. "The freeing up of resources to become more efficient will come through technology and blockchain is a great way [of reducing costs]."



The price is right

Price is a key element, Ermotti explains. As the finance industry finds itself increasingly squeezed by costly regulatory hurdles and emerging competition, its gross margins are under threat.

However, raising prices is not an effective way to respond and will only undermine one's own product. The only real solution is to find efficiency gains elsewhere.

"Our industry will continue to be under pressure, in terms of gross margins. It's no doubt," Ermotti said. "The only way you can stay relevant is not only by being strong in terms of capital, in terms of products, the quality of the people you have, advice you give to clients. You need also to be able to price it correctly."

He doesn't foresee the change happening overnight, and instead envisions it as a 5-10 year plan to slowly transform and automate existing systems. Some of this can be seen with the Batavia blockchain system, developed by a consortium of banks and tech companies including UBS.

Investment banks like UBS might have the luxury of a bit more time than other industries, but they aren't the only ones buffeted by the challenge of finding ways to cut costs, without hurting quality, in an increasingly competitive field.

The weather vane industry

The remittance sector, for example, might be more quickly disrupted since most individual customers are much more agile and able to shop around than the institutional clients of investment banks as well as being much more responsive to a good deal on international money transfers.

Blockchain and digital currency technology is relatively easy to implement in cross-border payments and very clearly useful. Coupled with its responsive customers, responsive providers and a diverse range of approaches taken by incumbent providers, the remittance sector is shaping up to be a useful weather vane for other industries.

MoneyGram, for example, is making a big gamble on the promise of blockchain technology and running hard to stay ahead of the game.

By contrast, Western Union has only cautiously dipped its toes in even though it also acknowledges the importance of finding underlying efficiencies to offer a better price.

These diverse approaches suggest that different companies in different verticals are all looking at the same problems and the same technology, but seeing very different things. Other institutions in the same position, including UBS, might be keenly watching the current struggles of the remittance sector to see how blockchain adoption shakes out.


Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and XRB.

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