Blockchain to Disrupt Banking Industry

The Blockchain Technology to Disrupt The Banking Industry?

Blockchain is the foundational technology just like the Internet. For the banks, the best way is to start with small use cases and keep an eye on larger examples or consortium-based use cases like cross-border payment, trade finance, Central Fraud Registry, decentralized KYC, etc.?

Blockchain technology is an open, distributed ledger that records transactions between two parties efficiently and permanently. A blockchain consists of individual blocks of data that involve a series of related transactions, linked together in a specific order. All of the involved parties can share a digital ledger across a computer network without needing a centralized authority or intermediaries. That’s why processing transactions through blockchain is faster.?

Banking & Payment industry today has been deeply impacted by the rise of blockchain technology and cryptocurrencies. The legacy system is built upon the inheritance of technologies dating to the advent of credit cards and interbank settlement developed in the mid-1900s for use in centralized, established financial institutions with both institutional as well as retail clients in the era when the post-war fiat money system was the only option for private financial representation.

Banking executives believe that blockchain will have to fulfill several conditions before becoming a mainstream technology in banking. To make the most of blockchain, banks need first to develop the infrastructure required to operate a global network using matching solution

We need to take a strategic approach to make blockchain a mainstream technology.?

1) The first step should be awareness at the bank level by all stakeholders, including board and top management.?

2) The 2nd stage is the discovery of use cases for blockchain, which can happen through workshop among domain experts.?

3) The 3rd stage is practicing it with start-ups and tech companies and perform a small use case implementation with all SDLC Stakeholders including security, audit, and test teams.?

4) The 4th and final stage is the collaboration between multiple entities like other banks and come up with larger use cases.?

In my view, Innovative Banks & organizations will be looking at opportunity to create ‘Bank-in-Box’ built on Blockchain technology & other technology stack.

Upon the advent of blockchain technology and cryptocurrencies, it gradually became increasingly clear that the legacy system, while revolutionary in its early days, still is quite inefficient and is designed from the perspective of an institutional client. This leads to relatively limited access to financial services by the majority of the retail market segment. Especially retail clients in developing nations have been hit particularly hard with higher fees, longer processing times for transactions, more invasive and ineffective KYC/AML processes and limited access to technology and thus limited access to all types of financial services.

Let's look at possible Banking Use Cases to enhance banking operations -

1. Internet Bank Fund Transfer?

2. Cross border Payment?

3. Smart Contract Enforcement?

5. Record Keeping & Storage

6. Clearing and Settlement?

7. Loan Syndication?

8. Crypto Banking

9. Know Your KYC and Customer onboarding

10. AML - Anti-Money Laundering

11. Regulatory Reporting?

12. Trade Finance?

13. Data and Network Security?

14. Financial Inclusion - P2P Networks

15. ATM Physical Security

16. Inspection again Mortgages

17. Warehouse Receipt Financing

18. Open Banking Trust between Bank , Fintech and Parties

19. Central Bank Digital Currency

20. Employee Onboarding

21. Income Tax Department - Form 15gh, 26AS Filing

22. Account Aggregator Data Security

23. Digital Identity

24. SME Banking Workflows

25. Loan Receipts on Blockchain

The ever-rising use cases of blockchain are about to bring major transformations in the banking sector. Blockchain in banking can disrupt conventional systems and make the existing systems more obsolete.

Having said this, blockchain technology will not suffice on its own. It has to work cohesively with other technologies like Web, Mobile, AI, RPA, and API. Blockchain will help create a smart bank.?

Today, for all the processes in a bank, branches, and operations - there will be enough use cases to be done on blockchain transformation.??

The Account Aggregator Framework, introduced by RBI, is one of the best use cases of blockchain, as it involves multiple parties with better data integrity and security among all stakeholders. As the framework works on a consent mechanism, which is built on blockchain, it will lead to an enhanced customer experience.??

"Only a widespread adoption of blockchain will lead this technology to disrupt the sector, We need to collaborate and consolidate banking for better banking Experience and Blockchain will act as one of the accelerating factor ."