One of the hallmarks of truly digital banking – which is the theme for the Finacle track at Confluence – is the role of the vast banking ecosystem. As a variety of banking and non-banking players collaborate and co-create to offer customers universal banking services, they would need a robust, secure mechanism to facilitate their interactions.
One of that mechanism is very likely, the Blockchain. There is a huge amount of interest in this technology, which has the potential to transform the way the industry works. Investment in Blockchain projects is expected to surpass USD 1 billion next year, and a number of banks are already experimenting with it quite seriously. Barclays, for instance, has a partnership with P2P payments provider Circle, which uses the Blockchain network. Then there’s Visa, one of the participants in a USD 30 million investment in Chain, a Blockchain development platform. There are several ways in which Blockchain technology can improve capital market transactions, and a consortium of 42 banks is already working with Fintech firm R3 to examine some of them.
The World Economic Forum (WEF) has identified blockchain technology as one of its six mega-trends in a new report broadly aimed at outlining the expected transition to a more digital and connected world. In this survey, 58% of the respondents expect that 10% of global gross domestic product (GDP) would be stored on a blockchain by 2025. The survey also suggested that bitcoin and the blockchain would reach a “tipping point”, or a point at which it becomes broadly adopted, by 2027.
In fact, not just capital markets or payments, but any financial services operation that requires accurate, tamper-proof record keeping can leverage the Blockchain to improve security, as well as processes and systems. Blockchain can be deployed in a number of areas, in a permissioned environment, to establish the authenticity and improve the efficiency of banking services.
The “permissioned environment” is a big reason for Blockchain’s appeal for banks. Where true cryptocurrency networks are unpermissioned, whereas permissioned blockchain, only admits approved entities to post transactions or validate the network. It offers a degree of de-centralisation & control that is imperative in a business that is strictly governed by regulation.
Also, the asset agnostic nature of Blockchain enables banks to build any number of assets on it, all of which are tracked and verified at the level of the network.
Capital Markets, Payments, KYC/AML and Trade Finance are all ripe with opportunity for implementing Blockchain technology. Infosys Finacle is already working with a few banks on Blockchain pilot projects. More details shall be revealed at Confluence 2016. Be there!