Blockchain – the much talked about shared ledger technology -- is set to transform the financial services industry by making transactions faster, cheaper, more secure and transparent. Essentially, the lure of Blockchain is its method of verifying and tracking transactions. Rather than being stored in a single database, blocks of time-stamped transactions are stored on all systems across a value chain and relies on consensus among a peer-to-peer network of computers based on complex algorithms Instead of a trusted central authority or third-party.
BW Businessworld and Wipro conducted a series of sessions to discuss Blockchain and its adoption in the Indian banking sector. The event was titled ‘Banking on Blockchain - Charting the roadmap to commercialization’ and was conducted on 10th March 2017.
A panel discussion was conducted on the industry adoption of Blockchain. This panel was moderated by Brian Pereira, Executive Editor, BW CIO. The panel had speakers from IDFC Bank, SBI and Deutsche Bank.
The panel discussion began with Abhay Johorey, Head Digital, Consumer Bank, IDFC explaining the significance of Blockchain technology as a disruptive and fundamental technology. He said disruptive technologies evolve over the years, and in some cases, disappear. Banks, by their very nature, invest in technologies which create a lasting impact in the long run.
Johorey simplified Blockchain with a unique reference: “Blockchain is the Wikipedia of Commerce.”
Blockchain technology is a decentralized database that stores a registry of assets and transactions across a peer-to-peer network. It's basically a public registry that keeps a record of transactions and the owner of those transactions. The transactions are secured through cryptography, and over time, the transaction history gets locked in blocks of data that are then cryptographically linked together and secured. This creates an immutable, unforgeable record of all of transactions across this network. This record is replicated on every computer that uses the network.
“We can see everything on Wikipedia. It's a composite view that's constantly changing and being updated. We can also track those changes over time on Wikipedia, and we can create our own wikis, because at their core, they're just a data infrastructure. On Wikipedia, it's an open platform that stores words and images and the changes to that data over time. On the Blockchain, you can think of it as an open infrastructure that stores many kinds of assets. It stores the history of custodianship, ownership and location for assets,” added Johorey.
The assets could be a certificate, a contract, real world objects, even personal identifiable information. There are other technical details to the Blockchain, but at its core, that's how it works. It's this public registry that stores transactions in a network and is replicated so that it's very secure and hard to tamper with.
Giving an overview of the understanding of Blockchain from a Banking Industry use-case perspective, Sudin Baraokar, Head Innovation, State Bank of India said most of the Authorities will start providing contributions to functioning the distribution database in the financial sectors of many parts of India. The key observation of the Authorities depends on how they put Blockchain piles to work by considering startups to contribute in understanding, maintaining and distributing the technology. He also said that if banks come together and share the technology, then it could be less time consuming in developing advancement in the world of Blockchain workflow. According to Sudin, Blockchain 1.0 would launch in the Indian markets within 18 months.
“I see it (Blockchain) as the best big disruption and banks are looking forward to it,” he said.
Muralidhar Ayyagari, Projects - Core Infrastructure, Chief Technology Office, Deutsche Bank said Blockchain is the most talked about technology in the banking sector today, and shared that the technology is currently in the phase of peak of inflated expectations, as per the Gartner Hype Cycle on emerging technologies. He referred to a survey which stated that 89 per cent of organisations consider that Blockchain would be in common use by the year 2026, and 85 per cent also showed a lot of interest in the technology and are willing to take it forward.
“However, the key lies with banks’ understanding of how the technology functions and how banks adapt to the technology with principles of interoperability, immutability, data integrity, scalability and security in place. Further, Blockchain skills are currently limited and there is an urgent need for these skills to be developed quickly. Banks are currently working in a collaborative mode to find solutions,” said Ayyagari.
He pointed out that banks understand the ‘What’ aspect of Blockchain technology but the key is ‘How’ to execute ‘Right’ on a larger scale.
