Blockchain adoption vital for Indian banks to stay ahead of the curve

Blockchain

With the technology promising to change the way financial service transactions are carried out, Blockchain is emerging as a key investment area for Indian banks. May banks are already trying out Blockchain technology in money transfers, record keeping, and other back-end functions.

Gartner estimates that globally, Blockchain will create USD 3.1 trillion in business value by 2030.

Saurabh Saxena, Country Director, Micro Focus India, says Blockchain is ushering in a new paradigm comprising of Internet of Trust and Internet of Value. "Banks meandering the digitization wave are adopting blockchain as their competitive advantage to stay ahead in the game. Blockchain application usually gives banks the ability to access a single source of information. Additionally, it allows them to track all documentation and validate ownership of assets digitally, that cannot be altered," he adds.

Gartner analyst Rajesh Kandaswamy, however, feels that Blockchain as a technology is in the process of evolution. "Banks are still trying to determine where this technology can clearly provide additional value and many of these areas span industry processes, rather than operate at a company level,” he says.

This, he adds, will lead to banks discussing blockchain adoption at industry level over the next two years, as opposed to much largescale adoption. But, if there are large launches that can affect their market or related ones (examples – large cryptocurrency launch from something like Facebook Libra, announcement by government for launching a fiat-based cryptocurrency or a large blockchain project by a major bank), they will be spurred to act as well, Kandaswamy says.

The recent Nasscom report revealed that more than 40 blockchain initiatives in India are currently being executed by public sector companies - 92% projects in pilot phase and 8% in production phase. “The BFSI sector in India is one of the leading vertical in terms of blockchain adoption, amongst major banks and insurance companies. Some of the largest Indian banks are already using blockchain, and the technology is now finding buyers among all high-street lenders that are seeking to thwart competition from fintech firms,” says Saxena.

"In the coming years, we see blockchain to evolve as a disruptive force in transforming the Indian BFSI sector by making transactions more secure, faster, transparent and cost-effective. Even though adoption of blockchain has some challenges like security, privacy, and scalability, over a period of time, this will surely get addressed. We can strongly say that time is ripe for adoption of blockchain in India," he feels.

Highlighting the gaps that Blockchain technology promises to address today, Kandaswamy lists key areas where blockchain offers a different mechanism:

• Ability to ensure that all parties have exactly the same data
• Ability to tokenize assets
• Execute agreement and contracts across parties.