20 August 2017
Saurabha Sahu

Finance and Banking

Saurabha Sahu - Mindtree

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Financial Inclusion

The financial services industry has much to contribute to the UN and World Bank goal of full financial inclusion by 2020. This group will focus on industry contributions, ideas, barriers and enablers.

Blockchain: Unravel the Unrevealed

06 January 2017  |  7039 views  |  2

Introduction

Self-awareness is always beneficial in both the scenarios: business and life. The more you know about yourself, the better you are at adapting and preparing for changes.

Blockchain is no different. This article is an attempt to uncheck the unknowns in the world of Blockchain.

Where are we?

In my view, we have neither crossed the gulf, nor have adapted the wide installation phase of this technology. To emphasize further, we can review the progress of work that we have done till now.

What are the boundaries? 

We probably do not know where the limits cease, as we are still experimenting by going off the edges in order to realize the expanse of Blockchain.

I can envisage various sectors, where the Blockchain could be perceived as a solution for a problem that exist today, for example Financial, Insurance, Healthcare, Manufacturing, Media & Entertainment sector.

Financial: Investors, Financial Institutions are looking for a faster and secure method of transaction processing. To be specific, everyone needs their funds to be settled quickly. Settlement of funds is applicable across all industry sectors. Blockchain enabled network of peer-to-peer transaction processing will eliminate middle men/ intermediaries, thereby reducing the charges or fees incurred and on the other hand facilitate faster processing and settlement.

Healthcare: Patients traverse across hospitals and doctors for treatments. Doctors need to know the patient’s history to prescribe treatments/ medicines. The details of these secure records lie with the patient or with a related person who is taking care of patient. Loss of records will result in re-diagnoses which can prove to be highly expensive. Blockchain can solve the synchronization issues in the patient’s medical record. Patients will be able to keep the medical records at a distributed manner, but with additional security features enabled. Physicians will be able to access the medical history details faster, without any tamper of information.

Insurance: People are looking to secure their assets, life, and future. Premiums are paid to insurance companies for the same. Blockchain can help insurance companies obtain valid, verified data which has been approved by legitimate authorities. This will lead to:

  • Easy tracking of each premium paid by the insurer towards the insured asset.
  • Easy and secure method of processing of payments
  • Faster processing of claims

The combined effect of Healthcare and Insurance will have a greater advantage as:

  • Patients will be benefited with more cashless treatments.
  • Insurance Companies will be holding an immutable information recording in a distributed environment.
  • This ultimately leads towards a transparent way of claims approval and processing.

Manufacturing sector: Selecting a “suitable/ perfect” vendor or processing of a purchase order has a possibility of manual activities involved. The meaning of suitable could be in-terms of capability, efficiency, past experiences and genuinity. Finding all these details from a single place is difficult as well as it may involve a huge investment for verification. Additionally, it also involves a lot of paper proof of information to be shared. Blockchain implementation at this junction can reduce the risk of getting on boarded an incapable, inefficient vendor.

Media and Entertainment: Publishing an article, or releasing a film, there always need to be a secure method to maintain genuinity. Today people are being loaded with multiple versions of same information with a slight change. This leads to a confusing state for them, where the original, exclusive information is getting lost.  Vice-versa the Media companies, Hollywood, and Bollywood are getting penalized, where they are not getting paid for the job which they have done honestly. The copy right issues are also being violated by using the piracy of information. Blockchain implementation and usage can resolve the issue of Copy Rights, where the honest, genuine information will be stored, thereby removing the problem of piracy. Media companies will be broadcasting a single version of truth information for Public awareness. Conversely, Media companies, Film Industries will be paid for the correct information, exact amount of investments.

In my view, Yes, Blockchain can help in providing a true facts of information, which can trigger for a proactive action and a good decision making. All the above is possible, when the awareness and reliability for the network among the users, organizations, firms and the participants will be there.

After all, I will stress upon the fact that, we should not limit our thought process, for innovation and should not stop, we should experiment and find out the possibilities.

Will it have an impact on firms?

We are managing our organizations in a traditional way, but we are trying to adapt this new technology, where we don’t know whether Blockchain would be beneficial for our main business lines or not.

Automatic control and automating operations are not the same. But in both cases it needs experience in modeling and running parallel systems. It is necessary before declaring that the firm/ organization will change from conventional to the newest.

Firms can start with parallel processing approach, where both the traditional and Blockchain method will be used. Following which, firms can slowly move their business lines in succession to Blockchain technology, and comply with the ecosystem. This would help firms to leverage the dual benefits of speed and security without hampering the current management process. The only thing that firms needs to figure out the costs of Investment.

Will Digitized identity have a future?

Organizations, firms and individuals maintain multiple identities both physically and digitally. This may be for creating awareness and building trust in the ecosystem. The Blockchain-based identity holds an assurance of trust, which is leading us to consume a number of services from a trusted partner, without the need for asserting or verifying the identity.

It will help in the eradication process of maintaining multiple identities either in physical or digital mode by creating a trusted ecosystem. This will also create an impact on processes like, voting, trading, social media, e-commerce, etc.

Will it really help LAW?

Laws are generally stated ambiguously. If one understands, the golden rule of LAW: “All Laws are made to be Broken”.

One of the biggest expectation from Blockchain based smart contracts is to make the law more transparent.

Smart contracts can be used for situations where the rules are more straightforward, unambiguous but may be complex in nature. Perhaps it’s also easier to collate, bundle, and codify the existing laws to start with, instead of attempting to codify all of them before we start. We must be careful but not rushing smart contracts implementation where we don’t fully understand the implications of their potential failures.

Some of the areas where success is somewhat guaranteed are the Smart contract implementation for Government Organizations, an ecosystem of closely related business: Financial, Health and Pharma, Insurance etc. Implementing Blockchain will make life easier for Government Officials, Company Operators, Decision Makers, Share Holders, Stake Holders, at the same time it will also create a robust ecosystem free from Black Money, Money Laundering, and Disputes.

Will networks be more secure than existing banking networks?

SWIFT has become the backbone of the financial market since 1973. Current SWIFT network has proven the scalability, security, resilience and created the history that has built the trust in the network. SWIFT has provided a network for financial institutions to send and receive information about financial transactions in a secure, standardized and reliable environment. This network been tested, verified from last 4 decades.

Blockchain, a technology that has more mathematical power behind it on a decentralized basis than any open source project in history, could fundamentally reinvent the banking system. This cutting-edge technology is at a primitive stage, which is required to undergo multiple rounds of testing and verification and thus imperative to build trust for implementation.  

When will be ready for consumer adoption?

The digitalization has made consumers shift from transacting in physical money to digital wallets. This implies that consumers are now using digital money and they are finding it easy to use, without any restrictions.

Early digital / cryptocurrency wallets are very similar to the Blockchain pockets although not user-friendly enough, which is not for mass consumption. Consumers are not required to have technical knowledge on the Blockchain, however it must be made more user friendly for mass acceptance.

The conglomeration of Web and the cutting-edge technology of Blockchain will make consumers believe and connect others seamlessly in order to get benefit from available information. Blockchain will result in a paradigm shift from a conventional method to a more transparent and modernized method of transaction processing.

What will be the role of regulators?

Regulators have not been too stringent yet, but they are bound to place their marks on the new technology. Till now it is not clear whether they will innovate, update, support or tamper for Blockchain innovation. Regulators are in the phase of experimenting, testing and verifying the technology. They are measuring the real benefits, advantages, disadvantages, complications, do’s and don’ts of Blockchain.

In my view, Regulators will impose new rules and regulations on the transaction processing through the peer-to-peer connectivity network. However, we are yet to see official regulators taking these types of positions.

What will be the role of intermediaries?

Blockchain as a peer-to-peer network for value flow without any central intermediaries or middle-man, but the reality is that new intermediaries will emerge. Currently maximum activities are transacted in financial services and fintech startups.

Going one step ahead with facts and figures, currently we have more than 11,000 financial institutions and 700 + Blockchain technologies. This indicates that multiple financial institutions will join hands to form a Consortium for a single technology or utilize multiple technologies that will be used by several financial institutions to leverage benefits of Blockchain. This will trigger the intermediaries to play a role in the peer-to-peer network.

Outside of the realm of financial services, other industry sectors are also showing good use cases for the Blockchain viz. Government, energy, infrastructure and healthcare are good contenders, but real implementations are few.

Will standards emerge?

Blockchain technology is at a very primitive stage of acceptance. A few firms have started to understand it, few have started investing in the research work to find more value of Blockchain and some have become pioneers to get it started. However it may be too early to impose any standards on Blockchain industry, as we need to provide some time to the technology to blossom a little further.

Will Consortium succeed or be a stepping stone?

Firms will be able to achieve the benefits of Blockchain, when everyone will embrace the technology with the fullest potential. As an initial steps, firms will be experimenting and visualizing the collective benefits for their business. Post that, firms will be moving out of a Consortium, they will try to make their own private network and will realize the same or more benefits as a comparative study.

Consortiums are hard to maintain, but it will also exist may be not as a big one but it may be in a form of several small ones.

What will the shape of private Blockchain networks?

Specifically, most financial institutions will form their own private Blockchain network. As the technology numbers are less, and firm numbers are quite good, multiple institutions will use a single technology, so virtually they will be forming a group/ consortium. Other organizations may head towards joining their hands with a pre-existing consortium.

Looking ahead

The intent of this article was not to limit the importance of Blockchain, but to remain practical and cognizant of the ground reality. It’s always good to know about the winds one will face, even when experiencing the feelings of hope and excitement.

To bring these thoughts into practicality, it is always better to take on a personal assignment for whatever Blockchain activities that you are involved in. Make your own list of unknowns, and think of a path to remove uncertainties and turn them into known issues. Discuss with people within and outside of your Blockchain Consortium. Think about your projects and ideas and the repercussions of the same.

Discovering the known unknowns is the easiest part. The harder part will be to discover the stranger unknowns, but to get there, we need to start.  

The journey has started and pace needs to be built. Be a part of the Blockchain journey to discover the undiscovered. The learnings that we gain by knocking every obstacle found on our way to unravel Blockchain can be used for further experimentation of this new technology. 

 

TagsBlockchainInnovation

Comments: (2)

Stephen Wilson
Stephen Wilson - Lockstep Group - Sydney | 07 January, 2017, 23:35 For an article that set out to "uncheck unknowns" it depressingly leaves the major gap uncrossed: what precisely can a technology specially designed to work without trust and administration, do for mainstream business institutiions? Blockchain specifically stops Double Spend - that's all it does. It does not "synchronize" databases as some presume. It only resolves the order of entries made in one special purpose ledger by untrusted unregistered users. Healthcare to take one example is utterly unlike Bitcoin. Users are registered. Processes are trusted. Administration is everywher. Databases are diverse and very very complicated. You can just say "blockchain makes things better". You need to understand what blockchain does and what it is for.
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Stephen Wilson
Stephen Wilson - Lockstep Group - Sydney | 08 January, 2017, 04:24

ERRATUM:

You can't just say "blockchain makes things better". You need to understand what blockchain does and what it is for.

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Saurabha a Management Expertise with 10 plus Yrs Exp as Domain Consultant in IT BFSI for Core Banking Consulting for Commercial and Central Banks.

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