UBS Chief Sergio Ermotti has acknowledged that blockchain is a splendid technology, which assists in slashing costs. Ermotti has further stated that banks must deploy this technology to stay relevant. While speaking to CNBC, Ermotti accepted that the banking industry is in pressure and will continue to remain so until resources are used in a more efficient manner. His views were echoed by Jim Cramer, the host of ‘Mad Money’ show.
“Our industry will continue to be under pressure, in terms of gross margins. It’s no doubt. The only way you can stay relevant is not only by being strong in terms of capital, in terms of products, the quality of the people you have, advice you give to clients. You need also to be able to price it correctly.”
The UBS chief said technology plays a great role in shaping the outcome of businesses.
“It’s almost a must. The freeing up of resources to become more efficient will come through technology and blockchain is a great way to allow us to … reduce costs.”
He further revealed that UBS is now testing IBM’s Batavia platform, which is specifically designed to facilitate global trade finance. Ermotti believes that blockchain technology would have a positive impact on the cost of finance industry over the next decade.
However, similar to other bankers, Ermotti doesn’t have good opinion about Bitcoin. It can be remembered that UBS published a detailed report last year that clearly made a distinction between cryptos and blockchain. The report termed Bitcoin and other cryptocurrencies as a speculative bubble, while blockchain as a disruptive technology.
Across the world, distributed ledger technology might add $300 billion to $400 billion of economic value every year by 2027, according to UBS. The bank’s Chairman Alex Weber has criticized Bitcoin and cryptocurrencies several times in the past. However, in November 2017, Weber suggested central bank adoption of digital currencies in order to make them safe.
The views of Ermotti largely coincide with that of ‘Mad Money’ host Jim Cramer, who said that blockchain and cryptocurrencies have become a formidable threat to the banking industry. Cramer believes that there is link between a fall in mortgage applications and new age technologies such as Bitcoin, blockchain, and Square.
There are plenty of younger portfolio managers who think the banks are like Sears and J.C. Penney: they’re old-line brick-and-mortar stores that are about to lose their relevance thanks to all sorts of new technologies from Bitcoin, blockchain, PayPal [and] Square.
Cramer also stated that banking stocks may not rally until the market see clear earnings momentum.