Blockchain for Banking – Half yearly roundup

In the beginning of 2018, we predicted the key developments in banking for the next 12 months. Halfway through the year, let us see how one of those predictions – about Blockchain – has played out so far.

We maintained that Blockchain would be one of the most influential technologies in financial services, and that 2018 would see the beginning of commercial adoption. Based on a research study commissioned with LTP, we predicted that the top use cases would feature cross border payments, digital identity management, clearing & settlement, letter of credit processes and loan syndication.

Industry announcements in the first 6 months confirm that we called it correctly. Here is a sample: Credit Suisse Group and ING Group said they completed a securities transaction worth about US$ 30 million using a software application built on R3’s Corda distributed ledger platform. ING was also involved in another Blockchain transaction where, along with HSBC, it completed a first of its kind commodities trade on behalf of food and agriculture giant, Cargill. Santander has introduced a Blockchain-based same day international money transfer service. Mitsubishi UFJ Financial Group is jointly developing a Blockchain network for payments with Akamai that is capable of 1 million transactions per second, with latency of less than 2 seconds.

Next, we predicted that regulators would not only open up to Blockchain, but even support it actively. And there is no better way to do that than by adopting the technology within their organizations. Today, various government agencies are exploring using Blockchain to build KYC registries. In India, the Government of Karnataka conducted a hackathon for developing Blockchain-based prototypes for various applications. A 2017 study by the Cambridge Centre for Alternative Finance said that 20 percent of Central Banks planned to use Blockchain by 2019; the top two uses were supporting digital currencies issued by them and payments.

Our third prediction was that the success of pilot projects would drive the emergence of new Blockchain ecosystems, even as the established ones started to mature. A great example comes from Infosys itself, where after successfully helping ICICI Bank and Emirates NBD build a Blockchain corridor for international remittances, we used the experience to form India Trade Connect, a network to carry domestic trade finance transactions, along with a consortium of 11 leading banks. This initiative is powered by our productized blockchain solution Finacle Trade Connect. The solution today supports a full breadth of Trade and Supply chain finance products including Letters of Credit, Open Account, Collection Bills, Invoice and Purchase order financing.

So, what do these trends portend for the industry?

Since Blockchain succeeds only when adopted in numbers, banks will have to build a community of users from different functions – business, technology, security etc. – within their organizations as well as work harmoniously with their external ecosystems. Actually, this applies to all Blockchain users, regulators included. Also, there should be focus on putting governance structures in place.

There is an opportunity to elevate existing Blockchain networks with artificial intelligence and machine learning and leverage these technologies to digitize physical documentation, automate processes, improve compliance and security, and inform sophisticated decision making.

These will further the mainstreaming of Blockchain in banking in 2019.

The benefits of the solution for our bank customers include enhanced operational efficiencies by improving cycle times – as much as about 75% for a letter of credit; cost reduction by reducing document courier fees and per transaction cost associated with intermediary managing systems; risk mitigation through blockchain based systems to prevent duplicate financing and for real-time tracking of trade instruments; and new business opportunities with trusted access to documents required to underwrite credit. Infosys is now extending the learnings from India trade connect to form multiple geo specific networks and is working with 4 consortiums globally.

You can read more about the solution here.



The human inclination, to tame the physical world, has given us tools to cater experience. Often, as a solution to an existing problem. The inventors of yesterday, today and tomorrow—had, have and will look for inspiration to create blueprints and construct their ideas. Sometimes, the idea may come from a less pragmatic source – the imagination. The ideas of science fiction fall under this imaginary realm. For example, submarines and moon landing were predicted by Jules Vernes. Issac Asimov predicted about gadgets, video calls, robots and automation. These inventions have greatly changed the world that we live in.
In the last century, mankind has made huge strides in technology. Today, AI is starting to become all pervasive. Look around, Robocop is no longer a science fiction movie! Now some of you may/will slide towards the likes of Skynet, H.A.L and Ex Machina. Well, these movies have illustrated humanity’s interaction with technology and how we would potentially react to artificial intelligence. Hollywood has exploited the deep human fascination—an existential fear of the unknown with great story telling. And, you are sold to the idea of computers going rogue.
But it’s not just the movies!
“The development of full artificial intelligence could spell the end of the human race.” Stephen Hawking
“I think you can build things and the world gets better. But with AI especially, I am really optimistic.” Mark Zuckerberg
So, grab popcorn, while we unfold some popular myths across AI.


The fear that humanoids and bots will entirely replace services at banks, retail stores, and hospitals is ill-founded. Timely reminders to pay bills, order groceries, or take medications improve the quality of a service. This will augment, rather than replace, the personalized services offered by relationship managers and healthcare professionals. So far in history, each and every technology revolution has created more jobs than it destroyed. Gartner predicts: “In 2020, AI becomes a positive net job motivator, creating 2.3 million jobs while only eliminating 1.8 million jobs.”


Seriously! This is where people lose faith in John Connors.
AI will only help organizations make sense of big data by executing complex analysis and computation at a speed that is impossible for humans, thereby generating faster insights. A suitable example of the power of AI and Big Data is the stock market where AI is used to conduct quick trading within nanoseconds. Further cloud based technologies can accelerate progress by enabling robots to learn tasks and share this knowledge with other robots, thereby eliminating the need to program each robot individually. The benefits of AI are abundant, especially if people are helped and encouraged to learn the new skills they will need to work alongside intelligent systems.


Nah, it’s not an alien that adapts our cyberspace with an ulterior motive. AI can be defined as computers or robotic systems capable of processing information the same way human beings learn, make decisions and solve issues. These systems have several cognitive capabilities such as: experience-based learning, learning-based reasoning, image recognition, complex problem resolution, and Language comprehension & perspective development. When applied in enterprises, these capabilities can bring about a revolutionary transformation, making them smarter, more intelligent, & more productive.


AI harnesses the cumulative power of machine learning, deep learning, natural language processing (NLP), speech/ image/facial recognition, robotic process automation (RPA), and analytics to mimic human intelligence. Progressive enhancements in the cognitive capabilities of underlying interdependent technologies is making AI smarter and more efficient. The dynamic interplay of recommendation systems, predictive learning algorithms, and intelligent data mining facilitates the investigation of business issues and accurate problem-solving.


In Infosys’ executive survey, 85% respondents reported an increase in productivity with the use of AI, and 84% reported work simplification. Further, enterprises currently using or planning to use AI technology anticipate an average 39% improvement to organizational revenue by 20203. AI technologies empower enterprises to execute tasks and resolve issues while reducing the repetitive work human agents perform. Automation and AI tools streamline enterprise systems and make processes more efficient and accurate.
Every revolutionary technology has its fair share of naysayers. Do you remember before the internet happened?!

Open Banking – The disruption has just begun

Today, In India I can log into my PayTm app (a FinTech, which recently transitioned into a bank) to transfer funds from my ICICI account, second largest bank in India, to my account in DBS Digibank (a digital-only bank from DBS ). And all of this in real time.
This is just a precursor of things to come as open banking unfolds the world over. Of course, India with the Unified Payment Interface (UPI) has taken the lead, andthe UK and Europe with the open banking initiative and PSD2 are following fast with broader implementation guidelines scheduled for 2018. In simple terms, open banking empowers consumers to share their banking data with provider of their choice. It also enables one to access their bank account on the app / interface which suits their needs the best.
Clearly, open banking will bring in an era of customer centric solutions.
Personal Financial Management (PFM), in the last 15 odd years didn’t really get the success which it set out to achieve. While it did appeal to audiences in pockets, around the world people have been largely skeptical sharing sensitive information to enable screen scraping of their account information with other banks. With open banking guidelines of API exposure, it is likely to resurrect and finally help people make informed decisions with their finances. Of course, advancements in analytics and artificial intelligence will support this transition. Apart from the ability to aggregate financial information spread across multiple banks easily, customers can also expect more contextual offers as their service providers can now have a broader set of customer data to understand them better. For instance, with better understanding of a customer’s financial status and spending behaviors, the loan pricing could be better tailored for the customer.
While open banking is clearly favorable for customers, traditional banks are unlikely to feel upbeat about it, at least initially, as it takes away the long curated monopolistic access to customer data. Therefore, everywhere open banking is likely to be driven by regulatory changes instead of bank-led initiatives.
As the world moves towards open banking, the incumbent services providers have primarily two options. Be an aggregator of the customer’s financial information and use the data to drive new competitive differentiation, or run the business in a cost-efficient manner and be the provider of low cost products. While open banking is indeed slated to heat up competition with the entry of new players in the market, incumbent banks can ride on their reputation, trust and experience to emerge as primary service providers for their customers. Apart from challenger banks and FinTechs, the most disruptive competition is likely to come from popular digital businesses such as Google, Amazon and Alibaba. These businesses already have significant share of customer’s digital footprint and are likely to pitch hard to present them as primary interface for financial services in the open banking world.
Nevertheless, as an incumbent, one doesn’t have a choice but to embrace open banking and find an attractive spot to remain competitive. Considering it’s yet to be enforced in most countries and even customer adoption may be slow, one indeed has sufficient time to be prepared for this future. From a strategy and investments perspective, the following is recommended:

  • Creating the foundation for open banking by being ready to share customer data as well as accept customer data from other financial institutions. This will require building API-driven open systems, designed for ease of interaction with other financial institutions

  • Enabling appropriate changes in customer apps to access and transact on third party accounts. Here, if one is still running silo-based channels, the task is going to be extremely expensive and time-consuming. This may be a good time to transition towards modern omni-channel solutions which can offer enhanced speed-to-market with open banking.

  • Experiment and learn to generate actionable insights from data. Open banking will break the existing data monopolies. It will make it easy to get access to customer data. However, very few banks have been able to use customer data effectively. In the emerging world, insights-driven contextual advice will be the pivot holding customers and create differentiation.

  • Cost efficacies are critical to preserve and grow market share. If one would like to sell products in the open banking world, cost efficiency is of prime importance. Open banking will make it easier to compare competitive offers, much like one can do today with airfares on an aggregator’s website. This in turn will drive customers towards low cost commodity banking products such as personal loans. Therefore, banks should digitize and automate everything to keep costs low.

  • Above all, customer experience will determine the primary interface. Customers will decide their primary interface basis the overall experience the provider is able to offer. The ease and convenience of use will be key.

Building a direct bank? Here are three things to consider before taking the plunge

Direct banks have been around for a while. They first surfaced in the late 1990s with the popularity of internet. However, most early entrants didn’t make it to top of the charts among leading banks in their countries of operations. One can say that they were ahead of their time.
In the last ten years, however, things have dramatically changed in favor of digital businesses. In particular, four factors have led to this transformation. First and foremost, it’s the adoption of mobile devices, particularly smart phones, and consequent evolution of customer consumption patterns. Today, a large section of society is comfortable purchasing products and services online. Global providers like Amazon and Uber have led this transformation supported by a variety of local digital businesses across areas such as food delivery and grocery shopping. Second, the digital identity infrastructure has improved significantly in several countries. The shining example of the same is the Aadhaar program in India which has given digital identity to over a billion citizens in the country. Today the cost of digital onboarding has dropped to $0.07 for recent payment banks from $5 incurred by the commercial banks earlier, thanks to KYC through Aadhaar. Third, in many countries policies around digital contract signing have made it easy to execute contracts online. Fourth, regulators have also encouraged new competition to emerge by lowering the entry barriers and creating a conducive environment though open banking initiatives and new licensing programs. Riding on these advancements, most countries have seen a variety of digital financial startups in the areas of mobile payments, wallets, and peer-to-peer lending, among others. All these factors have created a conducive environment for a viable direct banking proposition.
One can see several diverse businesses – incumbent banks, non-financial organizations and startups tapping into this opportunity and announcing their direct banking initiatives. On one hand, there are bank-in-a-bank propositions where incumbents are launching new offerings such as liv by ENBD, Kotak 811 by Kotak Mahindra Bank, DigiBank by DBS and Nequi by Bancolombia. On the other, we have completely greenfield direct-only banks such as Monzo Bank, Starling Bank and Atom Bank.
I believe we will see many more such announcements globally in the coming months. As the trend grows, upcoming direct banks must keep three nuances in mind to create a successful proposition:

  • Direct bank is more than branchless mobile bank

    The trend has it that most direct banks offer mobile i.e. app based banking, and online (browser based) banking. The customers who are open to banking with a digital only bank are generally the tech savvy customers who would like to explore other digital channels as well.

    Banking on social networks like Facebook, Twitter, newer channels using smart assistants like Amazon’s Alexa, Google Home and Apple’s Siri are not too far away. While a few banks like Ally are taking baby steps in letting customers check balances and make small transactions on smart assistants, it is the path to tread on for direct banks today.

    Besides, open banking initiatives and a dynamic FinTech ecosystem imply that direct banks must integrate their products and services into third party platforms and applications.

    Therefore, as one starts building the distribution strategy for a direct bank, one must account for multi-channel digital distribution spanning mobile, online, social platforms, smart chat and voice assistants, and APIs led delivery. While the business case for some of these channels may not be strong as yet, these channels will be critical to retain digital-savvy customers.

    The recommended way of achieving this is to focus on building a strong foundation for omnichannel delivery by adopting a hub-and-spoke model. One can make strategic investments in an omni-channel hub which can power the channels of delivery required today, and also easily help to scale new channels swiftly over the course of time. It suffices to say that one of the reasons for the slow pace of digital innovation by incumbents is due to silo-based channel applications, a trap emerging digital banks must avoid.

  • Keep it both simple and comprehensive

    Direct banks prefer to keep a simple portfolio and go by the mantra- ‘do little but do it well’. Banks like Monzo in the UK have focused themselves on building the world’s best current account. Atom bank has focused on Fixed Savers and Mortgages. That’s indeed a great strategy for digital-only businesses.

    However, it’s important to remember that today banks no longer need to manufacture their own products to distribute. Thanks to the success of platform business models in other industries, banking is well poised to leverage similar strategies. For instance, Starling Bank in the UK has publically stated its marketplace strategy which focuses on filling number of adjacent spaces by distributing third party products such as Transferwise for international payments, and Flux for offering itemized bills and rewards program.

    I believe, the ecosystem approach to offer a comprehensive suite of products and services will come in sharper focus in the coming months and year. From a technology perspective, direct banks that choose modern Open API-driven core platform and omni-channel hub will find themselves enabled to easily exercise this strategy, and propel themselves forward to compete effectively with incumbent’s comprehensive offerings.

  • Differentiation must move beyond better pricing

    Thanks to the lower costs of distribution, direct banks would always have lower servicing costs as compared to full service banks. Clearly, this allows direct banks to offer much better pricing on their products and services to attract consumers. Direct banks in India offer as high as 6% interest on the retail checking account, nearly 50% higher than the best rate offered by incumbents.

    However, in the long run, this won’t be enough. One, with multiple direct banks popping up in every country, price-based differentiation will not be sustainable. Also many full service banks have launched their own direct banking brands with similar pricing options.

    Clearly, to differentiate in the long run, direct banks would need to build their strength elsewhere. We will see some of them pivoting themselves around the ecosystem strategy, few others finding ways to constantly enhance automation and reduce costs to be the cost leader, while others may focus on specific customer segments and product categories to emerge as category leaders.

    Banks would need to leverage personalization and offer tailored experiences keeping in mind the end customers’ needs and behaviors. Building trust in a faceless world is the key to long term mutually beneficial relationships with the customer. And this can be brought about only when the customer is delighted with the experience presented to her. Research has it that one in five customers are willing to pay their bank to understand them 1better). Leveraging customer information to understand customer needs, suggest appropriate goals to them, and recommend the right offers at the right moment will go a long way.

    The direct banking business model, while not new, is yet to fully bloom in today’s digital context. Leaders in the space are yet to emerge. The strategic and technology foundations laid by direct banks today will determine their success in the years to come.

The financial brand