Digitalising the Banking Sector with Blockchain Technology
Is digitalising your cash, a boon or a bane? Shweta Pathak examines if the future of digital banking has already begun.
Secure and more difficult for criminals to carry out frauds.
The foremost question that strikes my mind is do I need cash anymore? Or has the future of digital banking already begun? Will digital payments completely eradicate the cash transactions? Is mobile banking the most fundamental part of digital banking? This puts us into the debate that what we see today – is digital banking or just a digitised banking that needs core technology like blockchain much faster, more efficient and less error prone?
What are benefits that digital banking brings in?
Digital banking not only benefits the end user but also puts upward of 30 per cent of revenue of the bank, particularly in high turnover products like personal loans and payments. It also benefits the bank in reducing the process and service costs by 25%. The most significant beneficiary of digital banking would be automation of the servicing and migration of the front-end activity to digital channels. The transactions that use to happen over days are brought down to minutes. Manual remittance and physical signatures are replaced by automatic remittance and virtual presence. Expenses have been bought. But is digitalisation only a boon or are we cutting down the jobs and increasing the unemployment problem? But the most important technical question to answer is, is digital banking secure and risk free? If not what are the technologies behind to achieve them? Is blockchain technology a solution?
Blockchain and banking!!!
Did you know that Blockchain is the core technology behind the most trending crypto currencies like bitcoin? It is much faster, efficient and less error prone. The major advantage lies in its ability of being secure and more difficult for criminals to carry out frauds. The most interesting fact is it allows customers to do transactions, process shares or properties in secure and conflict free way without any middle man in between.
So, what is blockchain?
Blockchain is a digital ledger software code. A ledger is nothing but a collection of financial records. You can only see what comes in and goes out and to whom but everything is decrypted in digital format in a centralised place.
How is blockchain transaction different from digital transactions?
In the world of digitalisation, you need an agreement to ensure that every transaction is genuine. If there are any multi-party transactions, then you need a separate agreement for each transaction. But blockchain commits each transaction in a de-centralised database in which all information will be readily available and verified to see if a person is involved in the transaction and every person involved in a particular blockchain transaction can access the details recorded in the chain. Let’s take an example of property selling. If A sells a property to B, in blockchain world this gets recorded with all the details such as date, ownership, value, etc. Later when B sells it to C, C will have access to all the details that are pre-recorded and verified in the blockchain.
What advantages the blockchain brings on to the table?
It is secure!!! In modern-day transactions, manual intervention is required whether by the phone, documentation and emails. With blockchain there is no business of mediator! And what is more, getting rid of mediator minimises the cost hence blockchain is very useful in sectors which has high intermediate cost. Blockchain keeps the middle man and hackers at bay due to its secure cryptographical database. Blockchain reduces the transaction duration. Moreover, it deploys transparency in the transactions.
Blockchain in India
In November 2017 India Axis Bank launched an instant international payment service in India using Ripple’s enterprise blockchain technology solution for retail and corporate customers. Though an international offer, the bank is offering the facility only to its retail customers in the country to receive payments from the UAE-based Rak Bank and for its corporate customers to receive payments from Standard Chartered, Singapore. “The biggest thing in financial and accounting is ledger – keeping track of debit and credit. Also, in case of forex, the back office of each bank needs to speak to the back office of the other bank. Blockchain has immense potential to eliminate back office in banking, especially for trade finance,” is what Amit Sethi, Chief Information Officer, Axis Bank, had said then. There are other banks too using the technology.
Can we balance the need between digitalisation and people dynamics?
Banks need to leverage and target to maximise the use of technology but also set the right structure and incentives that can benefit the people.
Banks should deploy the lightweight technology and increase the focus on business outcomes rather than only concentrating on digital activity. Automate the processes that are necessary and formulate and implement the people vision.
She is a confident, self-motivated and well-presented Agriculture Engineer with extensive technical knowledge with the vision to empower agriculture through technology and improve the livelihood of farmers by increasing their earnings. Her vision is to create a 360 degree approach to capture and support complete farmers and farming activity on a single platform.