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Diving Into Blockchain – Get The Fundamentals Right

The BlockChain will take another decade before it is mainstream, as it’s changing the foundations, the rails, the roads of finance

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Recently we have seen arrival of new Kid on the Block – Blockchain. It’s being widely debated and has become the new buzz word for multiple industries, especially banking. My interaction around Blockchain has increased with peer Banks as we are experiencing a Global level Blockchain platform for experimentation and collaboration e.g. Bankchain.

“The BlockChain will take another decade before it is mainstream, as it’s changing the foundations, the rails, the roads of finance.  It’s not just a bit of froth on the foundation, like most of the apps out there.  After all, the mobile telephone was invented in 1973 but took almost thirty years to become mainstream.”  

As per my experience at Bankchain, Banks across the country have successfully initiated collaboration with specialized Technology Firms (Fintech) and/or consulting firms to build proof-of-concepts and explore various potential use-cases. This implies the seriousness of banks towards the Blockchain technology and its eagerness to understand how Blockchain can address and resolve few pain points in the current state process. Board Members, Management committees are discussing around incorporation of BlockChain in their Strategy.

While we are diving into Blockchain, its important get the fundamentals right. It’s important to decide the direction and expected results around investments we will put in for BlockChain Drive. Just like for any technology, its success depends on its Use case, Blockchain is not an exception. For banks it’s important to perform, experiment with multiple use-cases on Blockchain before decide on actual potential use case & right choice of Blockchain technology. While experimentation is necessary to validate a solution, it is important to first select the right use-cases to implement a BlockChain based solution.

1. What are the major issues that Banks face today?   
a. Rising costs of operations b. Increasing susceptibility to fraudulent attacks on centralized servers  
c. Challenges in ensuring transparency.  
d. Requirement of  intensive manual processing and documentation
e. Involvement of costly intermediaries  

2. What Solutions that Banks are looking for?  
a. New ways to perform transactions quicker for an enhanced customer service
b. Cost efficiency in its operations  
c. Assuring transparency to customers and regulators.
d. Safe & Secure Solutions

3. How Blockchain can potentially provide a solution for Banks? 
a. It inherently helps eliminate intermediaries.
b. It maintains immutable log of transactions.
c. It also facilitates real-time execution of transactions.  
d. This could potentially reduce the TAT for banking transaction e. It reduces  costs of manual work

 Blockchain is like the internet before the browser. The first generation of the digital revolution brought us the Internet of information. The second generation — powered by blockchain technology — is bringing us the

What are the major issues that Banks face today?  
What Solutions that Banks are looking for ?  
How Blockchain can potentially provide a solution for Banks?
Internet of value: a new platform to reshape the world of business and transform the old order of human affairs for the better.

Banks Banks should leverage full value of Blockchain. It can be achieved by choosing the right ‘use case’ to enhance customer service and satisfaction. To choose right Usecases let’s follow below Framework of 6 Ts –

Turnaround Time

Task Involvement




Ticket Cost   

1. Turnaround Time – Will the transactions benefit from being real-time or synchronous? How much time it will take to complete a transaction?
2. Task Involvement – Does the process involve manual Tasks?  How Settlement & Reconciliation will be handled?
3. Trust – Is there trust among participants? How multiple participants are involved?  
4. Transparency – Are multiple participants involved? Does transparency into the transaction help the participants? How information being stored in multiple locations by multiple participants?  
5. Test & Certify – Is the documentation paper based? Are there reports required to be generated? Is data consistency an issue?
6. Ticket Cost –Is there any latency due to processing through intermediary? Does the intermediary exist due to lack of a trust? Is there any cost involved to maintain intermediary?

“Answer should be “YES” in all 6 Ts Question to adopt Blockchain as a Use Case! We will see Blockchain technology is moving into the financial mainstream”

I must say, it is important that Banks should understand the key fundamentals of this technology and how it can solve the current business issues as on one hand. This will involve answering a series of fundamental questions related to dynamics of transaction, regulations available skills & technology underlying–

Four Challenge Pillars 

Dynamics of Transaction
People & Skills

1. Dynamics of Transaction: Such as cost of implementation of the Blockchain based solution, structure of Blockchain i.e. public, private or consortium, and key stakeholders can be answered by the bank.
2. Regulations: It will have to be resolved through focused discussions with competent regulatory authorities and incorporation of their thought-process. Banks will also need to have a concrete plan for transaction scalability.
3. People & Skills: It will be answered by hiring right people , training or collaborating with matured Technology Partners
4. Technology: Technology challenges are around Scalability, Privacy, Latency & User interface security. It will be answered by Technology companies helping banks to do   proof of concepts & decide on right Blockchain technology to use for certain use case. It’s very important identify right Blockchain Technology.

Going forward Banks will have to opt for many approaches to specialise into Blockchain. Bank need to identify opportunities, determine feasibility and impact, and test proof of concepts. For success Blockchain implementations, Collaboration with Technology Partners & Other banks will be a success Mantra ahead.  
Blockchain is a vast, global distributed ledger or database running on millions of devices and open to anyone, where not just information but anything of value — money, but also titles, deeds, identities, even votes — can be moved, stored and managed securely and privately. Trust is established through mass collaboration and clever code rather than by powerful intermediaries like governments and banks.  

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Prasanna Lohar

Prasanna Lohar is Head of Technology (Digital Banking) at DCB Bank Ltd. He has almost 15 years of application design, development and deployment experience in a Senior Developer/Team Leader/Architect / Sr. Manager Position.

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