A new report by global rating agency Moody's says Blockchain technology has mixed credit implications for global banking systems.
While the technology has the potential to significantly reduce the costs and time involved in cross-border banking transactions and increase banks' efficiency, it could put pressure on their fees and commissions, Moody's Investors Service said in a report.
Swiss banks would be most exposed to reductions in fees and commission, with 50 percent of their revenue coming from that source.
Italian, Canadian, and Israeli banks also are expected to suffer significantly due to reductions in fees and commission, with around 35 per cent of their revenue coming from that source.
Banks in Asia Pacific, as well as some smaller European periphery countries, are reportedly less prone to relying on fees and commissions in generating total revenue.
Banking systems with significant cross-border transactions may see the most disruption from blockchain technology that supports cryptocurrencies such as bitcoin, the report warns.
The United Kingdom, Belgium and Switzerland are mentioned in the report, titled "Banking: global blockchain efficiencies could streamline transactions but reduce banks' fee income."
The report focuses on two areas - cross-border transactions and fee and commission income - through which the technology is likely to impact bank operations.
"Blockchain has the potential to substantially change how a wide range of financial services are executed," says Colin Ellis, the co-author of the report.
Banks could benefit significantly from the development and implementation of blockchain technologies in terms of enhanced efficiency, cost savings and risk reduction. But the adoption of these technologies will also limit processing fees, commissions and gains on foreign exchange transactions, which will pressure revenue, according to Ellis.
Ellis is Moody's Managing Director, Credit Strategy.
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