HOD (PGDM-IB)
Though much has been talked about the enormous potential of blockchain changing the way we do our businesses, but even after a decade of the launch of Bitcoin, we have witnessed only a handful pilot application of blockchains in the areas of Banking & finance. It is a distributed ledger in which participants of Blockchain peer-to-peer (P2P) network, and not the central administrator, generate blocks. Over the past few years, blockchain technology has attracted a lot of attention from academia to practitioners across industries. Blockchain policy at national level has been not implemented by virtue of binding force. Conversely, states such as Telangana and Andhra Pradesh have enforced it strongly and land records are maintained with the adoption of blockchain technology.
In addition to the applications of Blockchain in various fields of trade and finance, growing segments of startups are now adopting blockchain technology not only to develop products but also to cater it faster. It is also increasingly being used to provide convenient and affordable cross-border payments solutions. The rapid advancement of blockchain is excreting pressure on ingrained traditional financial institutions for reconsidering the way they have been doing business. Blockchain encircles different sorts of transactions viz. the financial transactions, the health-related services, supply chain management, e-commerce etc., with the facility to validate the transactions chronologically.
Financial services have always been driven by technology, particularly when it comes to the convergence, disruption, and transformation of these three variables. First convergence refers to the integration of new industries and technological advancements into financial services, utilizing data and technological advancements already present in these sectors. The disruption of business models to accommodate digitization comes in second, and getting transformed by technologies like Blockchain, which are about to alter the way financial services are provided, comes in third. Recently, disruptive innovation has taken a different path thanks to the Blockchain, which is deeply ingrained in the worlds of business, banking, and commerce.
Cross-border inefficiencies are one of the frequent problems in the trade. The Government of India (GOI) has been continuously working to increase EODB in India and decrease the amount of paperwork and formalities through digital means. India ranks 63rd in terms of how easy it is to conduct business there. Additionally, it appears that the Blockchain will help to advance the EODB even further and pave the way for a business environment free of paper. Private Blockchain has the potential to reinvent trade in the future by streamlining logistics, shipping, and customs clearance.
Blockchain is all about Three Ts i.e., Traceability, Transparency and Trust, every transaction requires trust, whether it’s buying a book online or buying or selling any property. Blockchain has the power to do two things essentially: increasing the size of many markets by reducing the transactional cost and creating many new markets and opportunities around those markets, hence making the financial industries very ripe for Blockchain for adoption. The financial sector does not really have a reputation of being at the tip of the spear in the innovation curve but it really has embraced the digital journey, creative thinking and disruptive technologies of the business models and in this evolution, it had a huge impact on wealth and asset management.
Blockchain makes financial technologies, or FinTech, more algorithmic because it incorporates numerous analytical and human processes. The Blockchain systems were designed so that no one needs to have faith in them; security and dependability are provided by specific encoded algorithms and mathematical operations. The modern financial system with a permission-based or private blockchain system is expected to create more efficient processes, changes in customs and banking etc. Experts further added that this game-changer technology shall be taking finance and trade, particularly the letter of credit, to be closer to becoming digitized and automated.
Thus, Blockchain’s relevance for financial institutions is not only limited to its technological implications and the creation of well-organized database systems, but also to its capacity to alter the business models of the current financial services and organizations. Blockchain technology is poised to create a drastic paradigm shift in the financial sector across the globe. The next best thing after the internet is predicted to be this systemic disruption, and many businesspeople are betting their reputations on the success of the Blockchain technology. In addition, a number of administrations are already lagging behind Blockchain in a number of public functions, including voting, taxation, and health records. It can potentially transform the way consumers do the financial transaction partially or completely in days to come. Beyond that, it has been projected that the application of Blockchain would be extended for enhancing financial inclusion beyond just building new models of business for financial institutions.
