Spending on blockchain solutions are set to reach almost $6.6 billion this year, according to new forecasts from IDC.
The spend is an increase of more than 50% compared to last year, with blockchain spending to continue to see strong growth throughout the 2020-2024 forecast period with a five-year compound annual growth rate of 48.0%.
“This is an important time in the blockchain market as enterprises across markets and industries continue to increase their investment in the technology,” says James Wester, research director, Worldwide Blockchain Strategies at IDC.
“The pandemic highlighted the need for more resilient, more transparent supply chains, healthcare delivery, financial services, and so much more, and enterprises around the world have been investing in blockchain to provide that resiliency and transparency,” he says.
“What is also very important right now is that we are seeing real interest and investment by corporations, financial institutions, and even governments in areas they previously viewed with some uncertainty such as cryptocurrencies, digital assets, central bank digital currencies, decentralised finance, and stablecoins,” Wester says.
“This investment will have major implications in a very short time on everything from retail to financial services to capital markets.”
The leading use case for blockchain in 2021 and throughout the forecast is Cross-Border Payments & Settlements, which uses distributed ledger technology to track, trace, and manage payments and settlements. The second largest blockchain use case is Lot Lineage/Provenance, which is used to verify the origin and authenticity of a product as it moves throughout the value chain. Other leading use cases include Trade Finance & Post Trade/Transaction Settlements, Asset/Goods Management, and Identity Management.
From an industry perspective, banking leads the way in blockchain spending, accounting for nearly 30% of the worldwide total in 2021. Banking will remain the top industry for blockchain spending throughout the forecast although its share of spending will diminish slightly by 2024. The primary use cases for blockchain within the banking industry are Cross-Border Payments & Settlements and Trade Finance & Post Trade/Transaction Settlements.
The next largest industries for blockchain spending are process manufacturing and discrete manufacturing, which together account for more than 20% of all spending worldwide. The leading use case in both industries is Lot Lineage/Provenance. Following the manufacturing industries are professional services, retail, and insurance, which rely on blockchain to trace the movement of payments and products. The industries that will see the fastest growth in blockchain spending over the forecast period are professional services (56.0% CAGR), state/local government (53.3% CAGR), and healthcare (52.7% CAGR).
“While the effects of the pandemic had organisations diverting budget or pausing projects to focus on more essential endeavours, this was not the case with blockchain,” says Stacey Soohoo, research manager, Customer Insights & Analysis at IDC.
“Along with the on-going pressures of digital transformation, COVID-19 made it clearer than ever that in order to have resilient business operations, changes in behaviour, demand, and supply have forced companies to adopt a digital-led and blockchain-driven business model to survive lockdowns, supply disruptions, and future crises,” Soohoo says.
“Within the current environment, the use of blockchain is coming up especially within banking, manufacturing, professional services, and retail.
“Specifically, focus has been in tracking items from manufacturer to distribution to the end consumer and related payments and settlements that come with goods movements and management,” she says.
“The market is now reaching a point where successful pilots and deployments have proven the need, but other key factors such as a willingness to collaborate are needed to instil blockchain technology across the entire value chain, with every single participant needing and wanting to be a part of the network.”
From a technology perspective, IT services and business services (combined) will account for more than two thirds of all blockchain spending throughout the forecast with IT services receiving slightly more investment over the forecast period. Blockchain platform software will be the largest category of spending outside of the services segment and the fastest growing technology category overall with a five-year CAGR of 52.9%.
Spending on blockchain solutions in the United States will be nearly $2.6 billion this year, making it the largest geographic market, followed by Western Europe ($1.6 billion) and China ($777 million). All nine regions covered in the Spending Guide will see exceptional spending growth over the forecast period led by China with five-year CAGR of 54.6% and Central and Eastern Europe (50.0% CAGR).