Europe Blockchain Technology in BFSI Market Assessment, By Type [Private, Public, Consortium, Hybrid], By Application [Digital Currency, Record Keeping, Payments and Settlement], By Country, Opportunities and Forecast, 2017-2031F

Europe blockchain technology in BFSI market is projected to witness a CAGR of 48.51% during the forecast period 2024-2031, growing from USD 1.80 billion in 2023 to USD 42.57 billion in 2031. The market has experienced significant growth in recent years due to increased demand for robust security measures, enhanced compatibility with the financial services sector, and the cost-effective and speedy nature of cross-border payments facilitated by blockchain.

Blockchain technology is a decentralized digital ledger system that records transactions across multiple computers in a way that ensures the security, transparency, and immutability of the data. In blockchain technology, a transaction is first requested and broadcasted to the network. Network nodes then validate it through pre-defined rules and consensus mechanisms, which often involve solving complex problems. Once validated, the transaction is grouped with others into a new block. This block is added to the blockchain only if it meets the consensus protocol used by the network, such as Proof of Work or Proof of Stake, ensuring all nodes agree on its validity. The updated ledger, now including the new block, is distributed across all nodes. Once added, the data in a block is immutable, altering it would require changing all subsequent blocks and achieving consensus from the majority of the network, making tampering exceedingly difficult.

In BFSI, blockchain technology transforms how transactions and data are affecting different factors of market. The primary drivers for the growth of market are comprehensive security procedures, higher compatibility with the financial services sector ecosystem, faster and less expensive cross-border payment systems, rapid digitalization and increasing automation, and rising utilization of online banking services.

European blockchain in BFSI consists of a total of 50 countries, but the market is dominated by a few countries such as the United Kingdom, Germany, Italy, and Switzerland. The market is projected to witness significant growth in terms of revenue and expansion. However, there are a few obstacles that are restraining market such as regulatory uncertainty, data privacy and GDPR, interoperability and standards, scalability and performance, and energy consumption. Despite these challenges, one of the key reasons boosting market expansion is BFSI are rapid digitization and rising automation all over Europe.

For instance, in August 2024, MetaMask, Mastercard, and Baanx announced that they are launching a blockchain-based debit card in which a few thousand cards will be piloted in Europe and in the United Kingdom initially before expanding worldwide. The aim is to make it easier for people in countries lacking banking infrastructure, as is the case in Venezuela and Argentina.

Expanding Role of Blockchain Technology in Cross-Border Payments

In effect, blockchain technology is quickly enabling change in cross-border Europe payments. It increases the speed and level of efficiency of the transaction process. While traditional international transfer time varies from a few hours to days, due to the involvement of intermediaries and complex procedures, blockchain-based payments are executed in minutes, no matter the distance between the participants. Blockchain, by cutting out the need to go through middlemen, such as correspondent banks, can streamline the process of transactions and bring the related costs down. Another advantage is that networks in blockchain are active throughout, making a transaction possible from any location or at any time, including weekends and holidays, unlike traditional banking systems. In addition, blockchain provides transparent unalterable ledgers that help to prevent fraud and promote quick reconciliation and settlements.

For instance, since February 2022, Transact365 Group Ltd has been leveraging blockchain and distributed ledger technology (DLT) to transform cross-border payments. By using blockchain, Transact365 aims to provide real-time processing, enhanced security, and reduced costs by eliminating intermediaries. This approach speeds up transactions and ensures transparency and traceability, which are crucial for international payments.

Consortium Blockchains are Most Widely Used in BFSI

Among the public, private, and hybrid forms adopted, consortium blockchains have been more popular in BFSI in Europe, owing to a host that could be termed region-specific. In particular, good regulatory framework in which banking and financial services are conducted in Europe, strict data protection regulations such as GDPR and MiFID II financial regulations, made consortium blockchains attractive. Consortium blockchains can be engineered to enforce compliance at these draconian levels yet can benefit from the features of blockchain technology. The range of many diversified banking systems in most European Union countries strengthens the consortium blockchains' allure. They facilitate seamless cross-border transactions and collaborations. Additionally, the collaborative culture prevalent among European financial institutions complements the consortium blockchain model, enabling multiple banks and financial entities to work together on shared platforms, thereby fostering innovation and mutual trust.

For instance, in January 2023, we.trade platform officially launched into full production. This blockchain-based trade finance network was developed by a consortium of major European banks, including HSBC, Deutsche Bank, and Santander. It is designed to streamline and secure international trade transactions by utilizing smart contracts to automate and enforce trade agreements, thereby reducing disputes and ensuring that payments are made when specific conditions are met.

Digital Currency Type is Dominating the Market

Digital currency is dominating the share of Europe blockchain technology in BFSI market as it uses decentralized technology and cryptography that guarantees the safety of transactions and control of digital assets. These digital currencies work due to blockchain technology, which allows them to conduct a line of various financial operations and investments. Cryptocurrencies, especially Bitcoin and Tether, are widely used for investment, inter-border payments, and as a store of value. They offer an alternative to traditional fiat currencies in financial transactions without the use of intermediaries. Many European countries have worked their way towards creating central bank digital currencies, whereby these digital currencies promote a safe and effective alternative to cash and commercial banking systems.

For instance, in November 2023, Siemens became the first client of JP Morgan to use the new programmable payment functionality of the bank's blockchain-based account, JPM Coin, for the first time. This functionality makes it possible to have a more comprehensive range of rules than traditional conditional payments. JP Morgan provides a new If-This-Then-That interface via its online treasury portal.

The United Kingdom Dominates Blockchain Technology in BFSI Market Share in Europe

The United Kingdom is ruling the blockchain technology market in BFSI sector as a leading FinTech and innovation hub. London is a city holding several FinTech startups and established financial institutions that are actively exploring and implementing blockchain solutions.

In April 2022, the government announced moves that will see stablecoins recognized as a valid form of payment as a part of wider plans to make Britain a global hub for cryptoasset technology and investment. Measures include legislating for a financial market infrastructure sandbox to help firms innovate, an FCA-led CryptoSprint, working with the Royal Mint on an NFT, and an engagement group to work more closely with industry.

Germany has developed a strong financial sector with a rigorous regulatory environment. This country has huge investments in blockchain technology, aiming at enhancing the security, efficiency, and transparency of financial services. Switzerland is a big blockchain player due to its renowned banking sector and favorable regulatory framework for digital currencies. The country hosts the Crypto Valley in Zug, where many blockchain startups and firms are situated. Apart from these, Italy is making huge steps in implementing blockchain technology in BFSI sector. The country is concentrating on using blockchain to enhance financial transactions and regulatory compliance. These nations have hence turned out to be the most noticeable implementers of blockchain technology in the BFSI sector throughout Europe, precisely due to the existence of robust financial markets, encouraging regulatory environments, and a culture promoting innovation.

Future Market Scenario (2024 - 2031F)

The integration of blockchain with other emerging technologies such as artificial intelligence, the Internet of Things, and cloud computing expected to further drive innovation.

Growth of decentralized finance is another such massive trend. DeFi platforms use blockchain to provide financial services without traditional intermediaries. It lowers costs and makes them much more accessible.

Blockchain technology is going to bring change to cross-border payments by reducing transaction times and costs. Increasingly, financial institutions are looking at blockchain solutions for cross-border transactions that offer faster, cheaper, and more secure transactions.

Blockchain-based identity arrangements will turn out to be more predominant, allowing people to have control over their individual information, and thus fasten the Know Your Customer (KYC) process over different financial administrations.

Key Players Landscape and Outlook

The Europe blockchain market in BFSI is highly competitive and diverse, with both domestic and international players actively involved. Key market developments encompass strategic activities such as product launches, significant partnerships, and mergers and acquisitions, aimed at maintaining a competitive advantage. Companies are making substantial investments in technology and innovation to stay ahead, highlighting the increasing significance of digitalization and cryptocurrencies in transforming market dynamics. Established banks and financial institutions throughout Europe are utilizing blockchain technology to enhance operational efficiency, reduce costs, improve security, and create innovative financial products. As the market continues to grow, the emergence of new competitors is expected.

In August 2024, Haven1 and Amazon Web Services (AWS) announced a partnership for Node Validator which entails hosting one of the initial seven validator nodes on Haven1 to provide robust security for Web3 innovations on the Haven1 proof-of-authority blockchain and will enable broader adoption of Web3 solutions.

In June 2024, Z Hewlett Packard Enterprise submitted a filing to the European Commission for its planned USD 14 billion buyout of Juniper Networks. The European regulator has a deadline of 1st August to decide if it will approve the deal or call for an in-depth review.