Blockchain – Challenges in adoption

Blockchain is one of the emerging technologies which has evolved over time significantly. Industry predictions suggest that the space is expanding. With new blockchain-based startups mushrooming, more investments are likely in blockchain-based startups. Not just in banking, blockchain has its place in various other industries like health care, real estate, manufacturing etc. Due to their secure nature, blockchain based smart contracts are considered as an innovative and path breaking technology to adopt.

Banking is one of the fields which constantly looks out for innovation and newer technologies. Some of the areas where blockchain can be adopted are loans, syndication, trade finance, payments, clearing and settlement to name a few. These involve multiple parties, exchange of documents, and several validations related to documents.

Typically, banks face issues in adopting new technologies. This in turn leads to a lag and in some cases a change of strategy. Some of the reasons for the challenges banks face or for their failure in adoption of certain technologies could be –

Adopting not just to Blockchain but any new technology requires high investment and resources. After the initial excitement, many technologies have faced sunset in the past due to multiple reasons like cost, availability of resources, security, infrastructure etc. Some steps that can be taken to mitigate the risk of adopting blockchain technology are –

Blockchain initiatives involve multiple parties for each transaction. In order to have likeminded organizations / banks willing to take up the technology, collaborative training programs for the personnel, and agreements can be put in place to route multi-party transactions among the agreed organizations and banks. These are some of the ways which can be looked at to make blockchain adoption beneficial and convenient to adopt. According to NASSCOM blockchain report 2019 on Global and Indian blockchain market, Public and BFSI sectors are driving blockchain adoption in India with BFSI leading the adoption. Given the technology’s multiple benefits of immutability, transparency and real-time processing, it is finding wide application in myriad use cases that require tracing a product / asset to its origin. These applications include grocery supply chains, real estate, and more. Infosys recently helped a coffee supplier increase acceptance of its coffee beans among certifying bodies, and made the entire supply-chain and payments process simpler using blockchain. Clearly, other industries are not far behind in adopting blockchain.

Like any other technology, blockchain too has flip sides like high cost and infrastructure, energy consumption for processing. With reports on frauds related to blockchain, the susceptibility of blockchain for security breaches should also be tested to understand the vulnerabilities before taking a strategic decision and plunge. This can save enterprises huge costs and resources.

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