The year 2017 is going to be the year of blockchain technology. Infosys Finacle, which is a part of EdgeVerve Systems, a wholly-owned subsidiary of Infosys, along with its partner Let’s Talk Payments (LTP), has recently released a global survey report — Blockchain Technology: From Hype to Reality. According to the report, almost 50 per cent of banks have already invested in the blockchain technology or are contemplating to do so this year. The report projects that the average investment in blockchain in 2017 will reach about $1 million.
The technology, which started gaining popularity in 2014 saw a peak in investments through 2016. However, since the blockchain technology has a foundational impact on the working of global financial systems, majority of banks and financial institutions all around the world have been having a hard time identifying the technology’s most feasible use-cases and implementation. In addition to this, there have been several uncertainties regarding data privacy, transaction speed, regulatory repercussions of the technology, which have resulted in an increase in the number of variables involved in the overall blockchain equation.
Infosys Finacle, in collaboration with LTP conducted the survey of more than 100 financial services professionals from over 75 banks and financial institutions, including more than 50 CXOs, with an aim of shedding some light of reality on the aforementioned variables concerning the various blockchain technology initiatives undertaken by financial services incumbents.
For the uninitiated, blockchain is a distributed database that is a continuously growing list of ordered records called blocks. To put it more simply, it is basically an anonymous online ledger that makes use of a data structure to make the process of transaction an easier and simpler process. It provides users the ability to manipulate the ledger in a safe way without seeking the support of a third party. Their USP is that they are resistant to modification of the data once they’re recorded. For the ones trying to place bitcoin and blockchain together, bitcoin is actually a form of blockchain technology.
While investors all around the world are really excited to invest in blockchain technology, the current unstable geo-political and economic situation globally might serve as a small hiccup. Bitcoin has emerged as one of the famous avenues to invest in today’s world and has a seen a phenomenal growth in value over the period of last one year.
According to the Infosys Finacle-LTP report, 35% of the respondents surveyed fell under the ‘Early Followers’ category as those financial institutions though have already identified the business use-cases of blockchain for their organisation strategy, but haven’t invested in it yet and are planning to do so in the near future. The report states that planned investments from these banks falls in the range of $1 million to $10 million.
The report also found out that 33% of respondents expect to see the commercial adoption of blockchain by the year 2018, while a majority (nearly 50 percent) predict that the mainstream adoption will still take time and will only happen by 2020.
Out of the banks surveyed, 69% are currently experimenting with permissioned blockchains, with 21% planning to use hybrid variants.
The report also reveals that about 50% of the banks surveyed have either joined hands with a FinTech startup or a technology company to augment their blockchain capabilities, whereas another 30% have gone the consortium model way.
According to the survey report, the top five use cases that are expected to go to production are: cross border payments, digital identity management, clearing and settlement, letter of credit process and syndication of loans. The use cases scored more than 3.2 on a scale of one to five, wherein one was the least prioritized use case for commercial adoption and five the most prioritised.
While the report duly confirmed that the roll out of blockchain technology is most likely to be prioritised in the business domain wherein it has the potential of significantly improving transparency, automating processes across enterprises as well as reducing settlement and transaction time, it also found out that 51% of executives driving these blockchain initiatives in their particular organisations are either Chief Technology Officers or Chief Innovation Officers.
“This research reaffirms our belief that the blockchain technology has potential to help banks reimagine banking processes. The technology can help banks automate inter-organization processes, significantly improve transparency and reset existing operational benchmarks. Several progressive organizations have already executed pilots to validate these propositions. We believe, in the coming quarters, the industry will experience greater momentum towards rolling out lab-pilots to real-life use cases,” said Sanat Rao, Chief Business Officer and Global Head, Finacle in a a statement.
On the home front, India has itself been witnessing a pretty good year as far as the blockchain technology is concerned. While the year began with several Indian banks like Yes Bank, Axis Bank and ICICI Bank announcing the use of blockchain in their daily functioning, the second week of the year saw RBI’s research arm, Institute for Development & Research in Banking Technology (IDRBT), giving a green light to the blockchain technology stating they had tested the technology for core banking processes in the country and consider now is the right time for the technology’s wide adoption in India.