Blockchain: The Race to Production Begins
“I’m a big believer in the ability of blockchain technology to effect fundamental change in the infrastructure of the financial service industry.” – Bob Greifeld, CEO, NASDAQ, The Financial Times, 2015
Blockchain has come a long way from enabling bitcoin transactions. Banking and technology leaders are convinced of the authenticity, traceability, accountability and efficiency that blockchain offers as an infrastructure in the new digital banking world. 2016 saw banks engaged in a frenzied race to identify pilots to test out the applications of blockchain and the potential benefits. Many banks were announcing their own efforts to explore blockchain pilots, while others were participating in a consortium to form a private blockchain network.
Experimentation with blockchain reached significant proportions in the areas of know your customers, trade finance, remittances and inter-entity payments, supply chain finance, digital identity management, smart contracts, document security, collateral management, syndication of loans and treasury functions. Some of the examples include the recent Emirates NBD and ICICI Bank partnership to launch a blockchain pilot network for international remittances and trade finance, and IBM – Mahindra have debuted blockchain solutions for enabling supply chain finance.
In the Infosys Finacle – Efma Innovation in retail banking report, 61% of the banks perceived that blockchain/distributed ledger will have an impact on emerging retail banking business models in the next three-four years. Progressive financial service institutions are already on board with blockchain and are partnering with technology providers to improve on current business processes.
Now that the potential of blockchain is validated with proof-of-concepts, banks are going to move from pilots to production. We believe that 2017 will be the year when blockchain projects will get into production to enable banks address real-life problems – albeit in a small way for simpler use-cases.
It is not only banks that are on board with blockchain, but also the regulators, who are excited about this promising technology. Regulators are coming in to the blockchain party and providing thrust towards moving blockchain to production – in fact a significant endorsement to the blockchain technology was provided by the Dubai Government, which mentioned that there will be 100% blockchain for all government documents in Dubai by 2020. RBI and NPCI in India have shown openness to understand and implement blockchain on a larger scale in India, and IDRBT, which was established by RBI, is studying the benefits of blockchain technology for banks. The Monetary Authority of Singapore (MAS), which is Singapore’s central bank, has already announced a proof-of-concept pilot project on blockchain to assist in global inter-bank payments.
Financial giants like Standard Chartered, JPMogan Chase, and Barclays have already endorsed blockchain as a key driver for trade finance operations in 2017. The opportunities for cross-industry and cross-functional collaboration that are promised by blockchain offers a huge competitive advantage and the race to production has begun; it is time for banks to move out of the pilot phase, and define an implementation plan for real-time banking with blockchain.