Indian banking sector: blockchain implementation, challenges and way forward

Abstract

This study is aimed at covering the application of blockchain technology (BCT) in the Indian banking sector and its benefits in banking operations. This paper covers the challenges it faces in implementing blockchain technology. The paper highlights how BCT is addressing key issues such as speedily and securely transmission of data, value to and from various transaction partners, cost of processing payments, new products, and services creation. The paper also covers various advantages brought out by BCT such as automate verification process and eliminating the need for multiple parties to confirm manual validity of transactions. With the advent of BCT, India’s banking and financial systems can be expected to transform the banking process to a new level. This study covers the field investigation as to how existing BCT is helping banks to effectively and efficiently monitor and control the banking process. The respondents were leading banking institutions and FinTech firms in the country. The study result shows that some of the Indian banks have already started their journey in using BCT and they got the benefits. However, they are facing certain challenges in the adaptation and implementation of this new technology. The legal and standardization issues need to be looked into with regards to jurisdictions in cross border transactions and interoperability between different BCT systems. Banks are currently using permission based BCT solutions for very defined (small) eco-system because of the data security reasons. It is like but not exactly the ‘WhatsApp’ group system wherein an administrator decides on membership of the group. However, for each bank, the considerations will differ for the ecosystem required to deploy the BCT solution. The study covers only leading banks and FinTech companies in the country and smaller players in the banking sector. In India financial institutions are at various stages of BCT adoption. They have already seen the benefits of BCT in some processes where BCT is put into use. With time to come with full implementation, BCT will change the picture of banking in India. With BCT the banking processes will be more transparent, faster and cost-effective with elimination of intermediaries. The key benefits will be decentralisation, trust, and security in transactions.