Blockchain in Banking Market Share & Growth | Forecast 2031

Report Description

Blockchain in Banking Market Outlook 2031

The global blockchain in banking market size was valued at USD XX Billion in 2022 and is likely to reach USD XX Billion by 2031, expanding at a CAGR of XX% during 2023 – 2031. The market growth is attributed to the increasing incidence of phishing across the globe and the growing adoption of smartphones.

Growing number of smartphones is estimated to boost the demand for blockchain in banking. Smartphones created the need for digitalized banking, which boosted the massive adoption of digital payment channels among merchants and services, accelerating the demand for blockchain in banking, as blockchain offers enhanced security, speed, transparency, and cost-efficiency in digital payments. Therefore, the rising adoption of smartphones is propelling the market. For instance,

• According to a report, the number of smartphone users reached 4.74 billion in 2022 and is projected to reach 5.13 billion in 2028.

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Demand for blockchain in banking is rapidly increasing, as it allows for transparent and secure transactions between two parties without the need for a trusted intermediary. Blockchain in banking enhances security, increases efficiency, and reduces costs, as it uses cryptography to ensure that only authorized parties validate and access transactions.

It also offers easy reconciling transactions by providing immutable storage for agreements, contractual terms, and other transaction documents, making all necessary reconciliation data immediately available to both parties. This encourages banks to deploy blockchain technology in their banking systems.

Increasing incidence of phishing across the globe is projected to drive the market. Blockchain in banking reduces the incidence of phishing, as it uses a decentralized distributed ledger system (DLT), offering a top-notch secured system. DLT transactions are recorded around network nodes, which makes modifying, stealing, or viewing data a complex task. Thus, rising cases of phishing are boosting the demand for blockchain in banking. For instance,

• According to the Anti-Phishing Working Group, 4.7 million phishing attacks were reported in 2022, with 1.35 million cases reported in Q4 alone. The phishing attacks have grown by 150% per year since 2019.

The COVID-19 pandemic hampered the demand for blockchain in banking. The drastic fall was registered in the global market during the pandemic, due to the suspension of private & public businesses and organizations to prevent transmission of the virus. The closure of business and international trade impeded the number of transactions, money transfers, and issuance of bank guarantees by merchants, which significantly hindered the demand for blockchain in banking, as blockchain is used in banks to facilitate safe and secure transactions. Additionally, a shortage of disposable income among households, due to increased unemployment, reduces the adoption of banking services by households, hampering the market. For instance,

• As per a report published by UN, the global unemployment rate reached 6.5% in 2020 and the number of people unemployed worldwide increased by 33 million, reaching 220 million.

Impact of Artificial Intelligence (AI) on Blockchain in Banking

The integration of artificial intelligence with blockchain technology creates an immense opportunity in the market. AI-powered blockchain technology improves security by offering a decentralized and immutable ledger that detects fraud and alerts users in real-time. AI and blockchain in banking increase the efficiency of banks by automating manual processes and making real-time decisions. Artificial intelligence associated with blockchain technology enhances the customer experience by providing personalized recommendations and real-time insights.

Blockchain in Banking Market Dynamics

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Major drivers

Growing awareness regarding blockchain technology among banks is expected to drive the market. Blockchain helps banks store data in blocks using a tamper-proof format and decreases the time taken for KYC. It automates transactional processes, such as payment & settlement, and removes delays in documentation caused by duplication. It also provides secure transactions, reduces compliance costs, and speeds up data transfer processing, which encourages banks to adopt blockchain technology. For instance,

• As per a report published, the market size for blockchain solutions for the banking system was USD 0.28 billion in 2018 and is estimated to reach USD 22.5 billion by 2026.

Increasing international trade is projected to boost the demand for blockchain in banking. Blockchain in cross-border payments makes the entire process simple by digitizing, securing, and streamlining transactions and accelerating the supply chain process. Therefore, growing international trade is propelling the market. For instance,

• As per the report published by the United Nations Conference on Trade and Development on December 13, 2022, global trade hit a record USD 32 trillion in 2022.

Existing Restraints

High implementation cost of blockchain technology is expected to restrict the market growth. Blockchain technology is expensive to implement, as it is made up of consensus mechanisms, such as blockchain platforms, app features, and other technological stacks, making it expensive as compared to traditional banking systems. Additionally, blockchain technology does not allow for easy modification of data, as it is an immutable database and each block has its unique hash value, which makes it difficult to operate data that is already in the blockchain, encouraging banks to reduce their adoption.

Emerging Opportunity

Increasing adoption of digital currencies creates an immense opportunity in the market. Digital currency is any money or currency primarily stored, managed, or exchanged on digital computer systems over the Internet. Blockchain technology is implemented in digital currencies to collect and store information about buying, selling, or exchanging digital currencies.

• On December 1, 2022, Reserve Bank of India issued Central Bank Digital Currency (CBDC) in the retail banking segment, which is based on blockchain technology.

Scope of the Blockchain in Banking Market Report

The report on the market includes an assessment of the market, trends, segments, and regional markets. Overview and dynamics have also been included in the report.

Market Segment Insights

Type Segment Analysis

Based on type, the blockchain in banking market is categorized into private blockchain, public blockchain, and hybrid blockchain. The public blockchain segment accounted for a major share of the market in 2022, owing to its ability to offer easy access. Public blockchains are open to everyone and are decentralized networks where anyone participates and validates transactions.

Public blockchains record and verify transactions by the participant and offer a high level of transparency. It also empowers users by eliminating regulatory orders and allows users to explore possible applications. Public blockchains rely on their nodes and, hence, are difficult to hack. This increases the adoption of public blockchain in banking.

The private blockchain segment is projected to grow at a robust pace during the assessment period, due to its potential to offer high control and security. Private blockchains provide added security to sensitive information and allow high control of access to the data on the network. Additionally, private blockchains restrict access to specific participants, ensuring transaction confidentiality. This enhances the demand for private blockchains in banking.

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Component Segment Analysis

In terms of components, the global market is bifurcated into solutions and services. The service segment held a large market share in 2022, owing to its ability to offer high security, transparency, and the traceability of data shared across a business network. Blockchain service allows businesses to use cloud-based solutions to create, host, and utilize their own smart contracts, blockchain apps, and functions on the blockchain infrastructure. This increases the demand for blockchain services in banking.

Enterprise Size Segment Analysis

Based on enterprise size, the blockchain in banking market is segregated into large enterprises and small and medium-sized enterprises. The large enterprise segment registered significant growth in 2022, due to growing infrastructure in emerging nations and the emergence of automated technologies. Large enterprises are adopting blockchain technology to automate various aspects, such as payment, document verification, and data management, which increases their productivity and reduces time and cost. Moreover, blockchain uses distributed ledger technology, where registered participants access the information, which reduces hacks and fraud, encouraging large enterprises to adopt blockchain technology.  

The small and medium-sized enterprises segment is projected to grow at a rapid pace during the forecast period, owing to the increasing disposable income of people in emerging countries. Small and medium-sized enterprises are adopting blockchain, as it collects information from various service providers and compiles it into one cryptography to verify the authenticity of the customer. Blockchain increases the efficiency of small and medium-sized enterprises by streamlining document management, reducing paperwork, and minimizing the need for intermediaries. This enhances the demand for blockchain in small and medium-sized enterprises.

Application Segment Analysis

Based on application, the global market is divided into remittances, identity management, compliance management, payments and smart contracts, fraud prevention, and others. The remittances segment accounted for a major share of the market in 2022, due to increasing demand for a secured method of sending and receiving funds across borders. Blockchain offers fast and secure payment processing, enhanced transparency, and low transaction fees in the money transfer process, which enhances their acceptance in remittances. Moreover, growing remittances in low and middle-income nations are expected to propel the market. For instance,

• According to data published by the World Bank on May 11, 2022, remittance flows to low and middle-income countries (LMICs) increased by 4.2% in 2022 and is estimated to reach USD 630 billion by the end of 2022.

The fraud prevention segment is anticipated to grow at a significant pace during the projected period, owing to the increasing incidence of bank fraud around the world. Blockchain reduces the incidence of bank fraud by verifying transactions through a network of computers, rather than a central authority, which makes it secure and resistant to fraud. This increases the adoption of blockchain technology. For instance,

• The Reserve Bank of India reported bank frauds amounting to more than 302.5 billion INR in 2023.

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Regional Outlook

In terms of region, blockchain in banking market is categorized into Asia Pacific, North America, Latin America, Europe, and Middle East & Africa.  North America held a large market share in 2022, due to the presence of key market players, such as JP Morgan Chase & Co., Microsoft, and others. Moreover, the rising prevalence of bank fraud and scams in the region is encouraging banks to adopt blockchain technology, as it reduces the incidence of bank scams by removing intermediaries for money transfers. For instance,

• According to a report published by the Federal Trade Commission on February 23, 2023, consumers reported losing nearly USD 8.8 billion to fraud in 2022, an increase of 30% from 2021.

The market in Asia Pacific is projected to expand at a high CAGR in the coming years, owing to the presence of a huge consumer base and growing international trade. Banks are adopting blockchain technology for international trade, as it increases security and transparency for international payments. For instance,

• According to data published by the Press Information Bureau (PIB) on April 23, 2023, merchandise exports in India registered the highest-ever annual exports of USD 447.46 billion.

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