Fintech has been revolutionized by a number of groundbreaking innovations since the 1970s. Many experts point to the emergence of the Society for Worldwide Interbank Telecommunication (SWIFT) and its use of telex to create the premier messaging service for banks and financial institutions across the globe as the beginning of the fintech revolution.
Paperless transactions soon followed which led to the emergence of robust functioning international stock markets. The late 20th century brought with it important innovations in internet and computer technology with the development of intuitive applications that make trading a lot easier and faster.
Blockchain technology appears to be the catalyst for entering the next frontier as far the finance market is concerned. The technology behind cryptocurrencies like bitcoin and ether has been touted as being of immense potential to the global business process. A recent study carried out in India has come to the same conclusion.
Deloitte in collaboration with Assocham recently carried out a study on how blockchain technology and a number of emerging technologies could be of benefit to the Indian trade finance system.
The study which was titled “Role of Trade Finance for Inclusive Growth” looked at how emerging technologies like blockchain, machine learning, and artificial intelligence could be used to provide solutions to some of the problems in the country’s trade finance system.
Some of the focus areas for blockchain implementation included identity management and know your customers (KYC) protocols.
The study concluded that blockchain offered promising solutions to some of the problems that are affecting the country’s finance industry. It urged banks in India to begin conducting proof of concept research with blockchain technology in order to devise protocols for blockchain implementation within their operating architecture.
With respect to artificial intelligence, the study also stated that there is enormous potential for its application in solving real problems in the industry.
The study identified a number of areas that artificial intelligence could be applied in India’s trade finance system. Some of these areas include transaction quality detection, cross-channel marketing, and optimal utilization of bank resources.
Despite the promising prospects tied to blockchain adaptation by banks, the study also stated that there were key issues that need to be resolved before any practical application can be successful.
Apart from the core hindrances to the technical aspects of a blockchain such like scalability and energy efficiency, the study highlighted some important challenges. Some of them include regulatory concerns and the changing role of banks in the new financial landscape.
In India, there have already been a number of blockchain implementations by banks. In 2017, the State Bank of India announced the Bankchain project which was designed to integrate blockchain technology with banks in the country.
Infosys, another large Indian IT firm also launched a blockchain-based solutions framework for Indian banks in 2017. Across the globe, banks and IT firms are collaborating to see how well the blockchain can be used to revamp the banking industry.
Featured image credits: Maggie Appleton