Web3 skeptics have had a field day recently, but there’s an interesting window of opportunity for progress right now, according to Bain.
Web3 has taken a hit thanks to turbulence in the crypto industry and some recent project flops, which creates potential for incumbents to take advantage of available talent, reasonable valuations, and regulatory energy.
Web3 – a new paradigm of decentralization that incorporates technology like blockchains, smart contracts, and digital currencies – promises to make financial services faster, less expensive, and more resilient and transparent.
But let’s be real, the industry has had a wild year. The turbulence in the cryptocurrency market and some recently failed blockchain projects, like Australia’s blockchain exchange and Europe’s we.trade platform, have validated skeptics.
But perhaps counter-intuitively, the slew of disappointments makes it a good time to consider your own Web3 plans, according to Bain’s Thomas Olsen. Web3 is well-suited to areas like wholesale cash management, custody and asset servicing, and private capital markets, according to Bain’s research and latest survey, and even though its timeline is uncertain, progress shouldn’t be halted by recent hiccups.
“From an incumbent perspective, it’s not all negative – these large financial institutions are seeing a window of opportunity,” Olsen told Insights Distilled.
It’s now more feasible for big banks to hire experts and develop partnerships (or plot acquisitions) with startups at better terms, while regulators have added motivation to move towards solutions. “Hopefully it will accelerate clarity around regulation, increase available talent, adjust valuations, and allow for more of a focus on real-world efficiency gains and improvements, versus speculation,” Olsen added.
While the amount of emphasis any big financial institution should place on Web3 depends on the potential use cases that suit its business, Olsen said there are several “no regrets” moves that banks can make, like setting a common education foundation at the C-suite and board level and thinking through how to structure experiments.