Blockchain has taken the world by storm. The distributed ledger has proven its mettle in every sphere of activity and the Indian industries have jumped on the bandwagon, even pioneering path-breaking blockchain-based solutions that set the stage for more developments to follow. From the banking sector to production, blockchain has made its way into the Indian Fintech ecosystem and is marking its presence in more profound ways with each passing day.
Blockchain, as the name suggests, uses a chain of cryptographically-linked blocks that are immutably stored. This ensures transparency through the decentralization of information which is shared across the network, replicated on all participating nodes rather than being stored on a central server prone to attacks. This is, in fact, the key to the power of this technology.
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Blockchain and KYC in the Indian Banking Space
Banks have quickly realized the limitless opportunities this new technology holds in improving the efficiency of banking operations to guarantee, at the end of the day, a better customer experience.
Amongst the multiple uses of the blockchain are the KYC (Know Your Customer) procedures so critical to the banking sector. Rapid globalization has transformed regions into globally positioned local units that are connected to the intercontinental network. Transactions frequently cross boundaries and necessitate KYC checks to ensure regulatory compliance.
Needless to say though, the KYC data quickly becomes huge and often unmanageable. It is here that the Indian banks, like their peers elsewhere in the world, have recognized the efficacy of blockchain to store KYC records in an unalterable, secure, and accessible manner. The State Bank of India (SBI), the largest Indian bank with a 450 million customer base, has taken the lead, becoming the first Indian bank to use KYC procedures, in addition, to automatically executing codes called smart contracts, all powered by blockchain.
HDFC Bank too plans to use blockchain in its KYC and trade finance procedures. This, however, is not where the use of DLT (Distributed Ledger Technology) ends. blockchain will enable AML (Anti Money Laundering), asset inventory audits, and the validation of land records as well.
BankChain Blockchain and Indian Banks: A Step Further
SBI, taking a step further, has now become one of the first Asian banks to have rolled out the use of blockchain for facilitating remittance. The technology promises cost-effective remittances, which can quickly add up in the voluminous equation that spans both retail and corporate ecosystems.
BankChain, a “community of banks” and currently has 37 members working on as many as 22 live projects. The consortium aims to usher in an era of the “internet of value” which could facilitate the easy, cost-effective, and secure movement of value across the world. Towards the realization of this aim, BankChain has developed what it calls B2 or the BankChain Blockchain. The platform allows member banks to set up nodes on the cloud or on-premise, becoming participants in this one of a kind “permission blockchain for the world’s banks”.
Claims Management in The Insurance Industry
The Indian insurance industry has been rapidly keeping up with the blockchain, which promises relief from the inefficiencies inherent in the claims management process leading to losses of the order of Rs. 10,000 crore each year.
Cognizant, the IT behemoth recently partnered with Indian insurers including SBI Life Insurance, ICICI Prudential Life Insurance, HDFC Life, and Kotak Life to name a few, developing a secure data-sharing solution based on the Corda blockchain platform.
Similar to the banking sector, the use of the distributed ledger will help facilitate record-keeping, due diligence, regulatory compliance, and of course, the prevention of frauds. The blockchain, as a true Six Sigma torchbearer, will ensure better customer experience through real-time data availability and transparency.
Coupled with technologies based on Big Data, AI, and Machine Learning, the blockchain will help underwriters accomplish their jobs in a much more efficient way, thanks to the power of peer-to-peer networking that forms the core of the technology.
IndiaChain: Blockchain For Public Good
Announced by the NITI Aayog in 2017, IndiaChain is a mammoth project that will forever transform public administration, bringing in greater efficiency, transparency, and trust through the use of the blockchain.
IndiaChain will be a colossal blockchain project that will allow streamlined record-keeping, efficient and transparent disbursement of government subsidies, well-regulated supply chain management, and systematic tax monitoring, to name just a few applications that immediately come to mind.
Armed with the blockchain, the system would feature useful apps encouraging organizations to use the platform to make their own, similar to the UPI interface so ubiquitous today. IndiaChain would also integrate several “sidechains” which could be utilized for industry-specific functions with their own logic set but maintaining their links with the main blockchain.
IndiaChain will also help breathe new life into the education sector that struggles with fraudulent degrees and certifications. Partnering with IIT Bombay and the DU colleges, the project will develop a platform to issue digital certificates for degrees secured with the distributed ledger. The digital certification platform will help eliminate the huge costs associated with the routine degree verification procedures used by companies hiring candidates.
What’s more, IndiaChain will be integrated with the digital infrastructure developed around the Aadhar database, termed IndiaStack.
Another potential use of IndiaChain is in the healthcare and pharmaceuticals industry that necessitates the management of massive data. Beyond doubt, such industries need a secure and efficient system for optimal functioning; one that the blockchain so realistically promises to deliver.
Looking into the Future
The world as we know it is changing. Bleeding-edge technologies such as blockchain, AI, cloud computing, machine learning, and big data have made their presence felt in India, a constitutional republic that stands to benefit tremendously with the might of decentralization, the paradigm shift that resonates so deeply with the spirit of our nation; a revolution we have known closely as the largest democracy in the world.
Blockchain brings the power back where it belongs – Into the hands of the people.
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Will blockchain affect the way banks work in the future?
The emergence and popularity of blockchain technology has raised this question of whether the banking industry would be affected or threatened by it, and even though it may seem plausible, the power that banks hold cannot be replaced by that of blockchains. The banking sector’s traditional approach to financing and other transactions is not going anywhere in the near future. Further, if banks adopt, and adapt to blockchains, there would be a harmony of traditional banking with modern technology.
Which Indian banks have already adopted blockchain technology?
For a number of traditional Indian banks, the processing of Letters of Credit (LCs), GST invoices, and e-way bills pose a central problem. To solve this problem, the State Bank of India, along with 11 other banks including ICICI Bank, Kotak Mahindra, and Axis Bank, have come together to form a new company called the Indian Banks’ Blockchain Infrastructure Company Private Limited (IBBIC). They seek to reduce the processing time for transactions, eliminate paperwork, and make the system more secure.
Can I master blockchain being from a finance background?
Yes, having a background in finance or other related field is advantageous if one wants to have a career in blockchain technology sectors. In fact, the use of blockchains is increasing in the finance sector and financial institutions are incorporating them to make transactions and daily business easier, faster, and secure. Those having expertise in finance background will find it easy to understand how the blockchain system works and they will be able to master the technology.