What blocks the Blockchain growth? Where is the innovation needed?
Experts discuss the current scenario & future scope of blockchain in BFSI at Technoviti 2020. Edited excerpts:
Girish Bajaj,
Blockchain Evangelist
I have seen tremendous improvements in the use of blockchain technology in India, particularly in the BFSI and other sectors. NITI Aayog has done a wonderful job and done several case studies in the fertilizer and healthcare industry. It has done POCs and pilot projects on blockchain. Further, they are moving into live projects in the next few months. In 2016, ICICI Bank did its first blockchain transaction and in 2018 HSBC did its for Reliance Industries.
Indian banks are moving forward in the adoption of blockchain. Startups are vibrant and have given very revolutionary ideas on the use of blockchain. There are plenty of opportunities for blockchain because it is transparent, corruption free, cost effective, and operationally efficient. Blockchain will eliminate corruption completely and with required data to store, you can control what you want to release. Currently the Telangana government has incorporated blockchain for land record registries. There are POC and live projects going on in the other Indian states.
The ROI for the blockchain technology is good in India. About 2-3 years ago, it was expensive to use blockchain. It is important to understand which sector you are in and what blockchain will suit your requirements, then move towards your aim and mission. The cost of blockchain technology will come down in 2- 3 years and banks, enterprises and even end users will demand blockchain. As a service, it is available from Amazon and Google. Blockchain helps to avoid security leaks, in terms of controlling what data can be seen by the stakeholders and which can be controlled.
Vikram Pandya,
Director Fintech at SP
Jain Global:
On the demand side, you have financial services which are looking for innovative solutions. Some of the pilot POCs of blockchain are just PR drive; we need to look at the real work and serious projects and there is a talent requirement for it. India is considered as a follower, not a leader in any technology, and same is the case with blockchain. If you look at all the talent in India, we may be good at Java, Python, or C++, but how these and other technologies can be used to create blockchain solutions is missing in India.
The focus from our side is to implement certain real-world scenarios rather than just looking at something which is just copy paste from the stakeholder. Recently, the Maharashtra government has launched farmer lending platforms using blockchain technology; blockchain as an ecosystem will take time to mature. There are certain made for each other use cases. For example, trade finance, identity management and supply chain finance solutions are multiple value chains which are now on blockchain. NPCI Vajra has a blockchain at its core and it is helping to remove the reconciliation requirement.
Today channel equation i n t he blockchain allows you to have a specific party within a specific transaction to have access to a specific set of documents. Channelization of private permission of blockchain is already there and if you want to understand about public blockchains, you must understand that blockchain is many technologies together.
HiteshSachdev,
Head - Startup Engagement, Innovation & Investments at ICICI Bank:
ICICI Bank started its blockchain journey i n 2016 when we did some bilateral pilot transactions on remittance with Emirates NBD. To harness the true potential of blockchain, we realize that we need to collaborate with multiple stakeholders. This led to an idea of creating a consortium for Indian banks, which will operate and manage cost-effective transactions. The DLT infrastructure will handle large volumes of transactions and facilitate seamless integrations.
We approached almost all the banks in terms of joining the proposed blockchain consortium and initially we had a lot of challenges explaining the benefits. There were concerns like awareness issues, regulation and selection of appropriate partner. To overcome these challenges, we created various committees like product, technical, and regulatory, all represented by nominees of respective member banks. We also on-boarded a knowledge partner and a law firm, to help us to graph the entire governance structure. We created a common rule book to be followed by all the member banks. Trade
finance is the most popular use case where we can use the blockchain technology, because trade finance is paper intensive, prone to frauds and time-consuming.
We have all the stakeholders on a single platform now although all of them operate from different technological platforms. If you bring them on a single platform, it harmonizes lot of technical issues. For example, if you want to issue an LC through a bank and discount the bills, it normally takes around 15 days. However, by using blockchain it will be over in around 2-3 days and it will also be very cost effective. It will also mitigate lot of risks associated with trade finance. This platform will become a self-fulfilling trade finance ecosystem.
ICICI Bank is joined by 15 banks to form the Blockchain Infrastructure Company (BIC) and we are incorporating this as a separate entity. You will find that banks are collaborating rather than competing on the blockchain platform We are planning to use lot of ML while creating insights about the data which will come on this platform. We have we have integrated the systems of all these banks and fair progress has been made in creating a common infrastructure for use by everybody. Some of the banks have already worked in this area and have created this infrastructure and banks themselves are running their own businesses on blockchain in trade finance remittance. There are certain banks which are on the top of the curve and they are using blockchain both in terms of internal use cases and in developing infrastructure for riding the internal businesses and participating in their network.
Prasanna Lohar,
Head - Innovation & Digital Architect at DCB Bank
Why do we need blockchain when internet is already there? The internet became open internet in 1995, and today every ecosystem runs on the internet. Today, we don’t talk about the uses of internet. Likewise, by 2035-40 we will not talk about blockchain. Instead, we will talk about use cases and will try to adopt particular use case. Blockchain has become important because of some flaws on the internet. Internet is good for the client-server model or as a fun sharing model. We need trust in the ecosystem. For example, today we have 8-9 products on sharing economy, like taxis, homes and co-working places. Over the next 3-4 years a majority of entities will become part of the sharing economy, and we will struggle with the trust issue.
Blockchain is not something that will drive your ecosystem but will enable your mobile apps to work smartly. For example, a centralized device for creating centralized database like KYC. Blockchain can be used in Aadhaar for making the biometric secure - wherever trustworthy ecosystem is required we can use blockchain. There are different flavours on how to design a blockchain platform. You can design it in a public way, like cryptocurrencies. The good part of the cryptocurrencies is that they have created awareness about the blockchain technology.
Countries like Dubai, Australia and Estonia are building ecosystems and use cases on blockchain. Several universities today offer courses based on blockchain. As per a 2019 Deloitte report, in Asia, there was only 9% adoption of blockchain, and the technology was at a very nascent stage and there is a long way to go. Today, we can do transactions on mobile, tomorrow this will happen on IOT, that is entire a car or a refrigerator and blockchain will be the underlying technology.
Suresh A Shanmugam,
Head - Innovation & Future Technologies Business Information Technology Solutions (BITS), Mahindra & Mahindra Financial Services
Blockchain is one technology that can make an enterprise’s interaction with rural customers more efficient. The technology today has a share and care model where the data is getting in to action with multiple hands. Blockchain kind of information is more authentic and serve through one model and it is available for them.
The rural India is not looking for money, it is not looking for advice. It is actually looking for moral support. To engage with rural customers, we can create an ‘earn to pay model’ for them. Make them earn and they will pay back to you, and blockchain kind of technology suits this model. The model will be more global and will try to come out as per the rural expectations. For example, somebody is taking a loan for buying a buffalo. He does not want just a loan for a buffalo. He expects a support system. There will be products derived from the buffalo like milk, dung etc Blockchain can be the ideal technology to share information and data with the customers depending on his specific needs. When we have enough information which can be shared, we are trying to bring an ecosystem which enables them to make use of this information and do better things. We are getting confused between security and authentication. I think blockchain must do more with the authentic information.
Sudin Baraokar,
Global IT & Innovation
Advisor
Trust as a service has a massive scope and there are so many other emerging themes coming out, where we can use blockchain. In my view blockchain is decentralized, distributed and secured. We still have the system of records and then you need to build a huge number of systems of engagements around it. We should create web services and trust applications to work perfectly. Last year reports, the total amount involved in fraud in the Indian banking system was `1050 billion. If we have system of integrated records, with trust integrated system of engagement by using blockchain, you can develop next-gen apps and services for the financial services. All the bank processes like collection, lending, etc can be done using blockchain. The future is very bright for the blockchain in India.