What is the market size for applications of blockchain to financial transactions?
Thank you for your question about the market size for applications of blockchain to financial transactions.
The short version is that the market size of blockchain application in the financial industry was about $84.08 million dollars in 2016, and it is expected to reach $135.8 million at the end of the year and $3.10 billion in 2024. In general, the financial industry accounts for 40% of the blockchain market share, and 50% of the non-bitcoin blockchain application market share.
Below you will find a deep dive of my findings.
For this research, I focused on data and analysis from reputable sources. I triangulated the required data in some instances because market research with the specific data required is behind a paywall (see here and here). I explained relevant estimations and assumptions below. Much of the research focuses on its global application because of the decentralized nature of the blockchain technology.
McKinsey conducted a study for the US government on the possible uses of the blockchain technology. Their findings indicate that there are more than 60 nascent blockchain applications, with the financial sector dominating blockchain application at about 40%. The study further revealed that cost reduction is the primary focus across all industry, accounting for 70% of total usage. The McKinsey report identified 24 possible financial usage cases, out of which 7 cases were identified as currently genuine. For the genuine use cases in the financial industry, McKinsey estimates that it could generate between $80 and $110 billion.
Markets and Markets estimates that the blockchain market size was $210.2 million in 2016, growing at a CAGR of 61.5% between 2016 and 2021. This would mean that the blockchain market size will be worth $339.5 million (210.2 million + 61.5%) this year. The report projects that the market will be worth $2.3 billion in 2021. A similar market research by Grand View Research projects that the blockchain market will be worth $7.74 billion in 2024.
If we combine Market and Market's blockchain market size estimates with McKinsey's data that shows that the finance industry accounts for 40% of the blockchain application, we will have the following blockchain market size estimates for the finance industry:
- 2016: $84.08 million (210.2* 40%)
- 2017: $135.8 million (339.5 * 40%)
- 2021: $920 million (2.3 billion * 40%)
- 2024: $3.10 billion (7.74 billion * 40%)
Globally, Statista reports that International money transfer currently dominates all usage in the financial institutions, accounting for 60% of total usage. This is followed by securities and clearing settlement (23%), KYC and anti-money laundering (20%), fiat currency payment and settlement (19%), and creating transparency (19%). You can find a more detailed breakdown here.
For non-bitcoin blockchain usage in the financial industry, McKinsey reports that the insurance industry has the highest usage at 22%, followed by the payment industry at 13%. The other current non-bitcoin blockchain applications in the financial industry include Register of Ownership (6%) and Securities Identities (2%). The dominance of the insurance industry is not surprising given that PwC estimates that the insurance industry could save 5-10 billion dollars with blockchain technology. In total, the financial industry accounts for 50% of non-bitcoin blockchain usage.
Blockchain technology is already being tested by major banks. McKinsey predicts that at the end of this year, 15% of global banks will have adopted blockchain technology extensively, while IBM predicts that in 4 years 66% of banks would have employed blockchain technology.
To wrap it up, the market size of application of blockchain in the financial industry was about $84.08 million dollars in 2016, and it is expected to reach $135.8 million at the end of the year and $3.10 billion in 2024. In general, the financial industry accounts for 40% of the blockchain market share, and 50% of the non-bitcoin blockchain market application.
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