It is no secret that blockchain technology is going to play a significant role in the banking system of the future. So far, the technology has shown a lot of promise in the financial sector; its implementation has demonstrated that things once thought impossible are actually within our grasps. Blockchain technology is growing in the banking sector, and as it keeps evolving, major players in the industry such as JPMorgan and Santander are building applications around this amazing disruptive technology.
Banks are now coming to terms with the fact that they can run operating and finance systems, data sharing programs as well as risk-assessment systems on a blockchain platform enabling them to simplify the entire banking process and reap tremendous benefits. Early adopters of any new technology often have to take risks, but now, with the consistent trend of blockchain innovations, banks now realize that not taking the risk of investing in blockchain technology is an even bigger risk.
Infosys, an Indian multinational corporation is one of the big shots betting on blockchain technology. They recently teamed up with seven private Indian banks namely; Axis Bank Ltd, ICICI Bank Ltd, the Indian IT company, Kotak Mahindra Bank Ltd, RBL Bank Ltd, South Indian Bank Ltd., IndusInd Bank Ltd, and Yes Bank Ltd. This massive partnership was aimed at building a bank trade network called the Indian Trade Connect (ITC).
The ITC has been touted as a blockchain system that will bring advanced capabilities to the current trade finance system. Under the ITC platform, users will act as participants on its blockchain network, allowing for systematic processing and smooth execution of several banking transactions. This means that secure and transparent transactions between buyer and seller irrespective of their regulator or bank is now possible since they would all be participants on the Indian Trade Connect blockchain network. This system will improve transparency and enable better risk management in the supply chain and trade financing.
The project also allows for the complete digitization of business processes within the trade finance industry since processes like validation, certification, and payment fulfillment will all happen under the blockchain. The ITC handles all major banking functions, while providing channels for further improvement and scalability. Blockchain technology is still young and will have to undergo several changes before it matures for widespread adoption; Infosys recognizes this fact and has installed some “guarantees” that will allow the Indian Trade Connect to remain relevant.
To prevent their trade network from becoming outmoded in the future, Infosys says it is developing the ITC to be “agnostic” to other established blockchain platforms. This means that it is compatible with systems like Bitcoin, Ethereum or Hyperledger; with this failsafe in place, the ITC will always be able to keep up with changes in blockchain technology.
Infosys Finacle’s chief business officer, Sanat Rao has expressed optimism about the project. He believes that as the Indian Trade Connect grows, more banks will see its benefits and join their blockchain clique.
“Digitization of trade finance processes using distributed ledger technology offers immense potential to eliminate the friction, cut costs and increase revenue through new business products that are now viable using the modern technologies.”
Currently, the ITC is being used by the participating banks for a pilot project, but it may see rapid adoption because many major Indian banks already are already using Infosys’ Finacle software for their day-to-day banking operations, so switching over to the ITC network will relatively be easy. Moreover, Infosys is reportedly in talks with other national and international banks with the aim of convincing them to join their trade network.