A number of companies and banks are adopting blockchain technology to reduce documentation and increase operational efficience.
“Traditionally, trade finance involves complex documentation processes, high transaction costs, high settlement times and low authenticity rates with physical documents,” Rajashekara V. Maiya, AVP, global head of products strategy, Infosys Finacle, said in an interview. “As a result, a bank’s customer is straddled with delays, high costs and risks.”
“Blockchain technology allows all stages of transactions to be securely shared between network members, as opposed to each bank working independently, which is more expensive and increases the chance of error,” added Mr. Maiya.
“Cost reduction, risk mitigation, speed, traceability and security are among the multiple benefits the participants are seeing from the pilot.”
Infosys created India Trade Connect in partnership with Axis Bank, ICICI Bank, IndusInd Bank, Kotak Mahindra Bank, RBL Bank, South Indian Bank and Yes Bank, which is being used to run a pilot of a blockchain-based solution developed specifically to address the trade finance process requirements of banks.
“Finacle Trade Connect (the blockchain-based solution) will enable increased automation and transparency, while helping efficiently manage risks in trade and supply chain financing operations,” said Mr. Maiya.
Another area of business where the distributed ledger aspect of blockchain technology is appealing to Indian companies is in contracts.
“Why it is required is to answer the question of how do you ensure that data does not get tampered,” said Kaushik Srinivasan, director, eMudhra, a company that offers blockchain-based smart contract solutions in India.
“When you install a smart contract, it is present on every node of the blockchain,” said Mr. Srinivasan. “This is where the consensus policy comes, and how you define the consensus. So, if there are eight nodes on the blockchain, you can say that five of the eight nodes need to confirm a transaction before it is authorised. So, a change to the information can happen only when this happens.”
These smart contracts can be used for information which forms the basis of KYC documentation, ensuring that details like name, address, and date-of-birth cannot be modified once they have been entered into the system.
Smaller countries
International blockchain companies looking to enter the Indian market, such as Indonesia-based Pundi X, say that the Union government could learn more about how best to regulate cryptocurrencies and blockchain from smaller countries that have adopted the technology.
“Blockchain is a very new technology and what one will see is that the use cases will principally come from smaller countries that are more receptive to adopting new technologies, such as Estonia, Lithuania, and Sweden,” said David Ben Kay, chief counsel at Pundi X. “The view taken by the Indian regulatory agencies will evolve as they have more interactions with those countries that are implementing blockchain.”
One of the use cases of cryptocurrencies in India, Mr. Kay said, was in remittance payments where using cryptocurrencies can significantly reduce the cost and time taken for the entire process.
Land records
Blockchain technology can be used to digitise and authenticate currently complex records like land holdings. “India, like many countries, has problems with land titles and ownership and this is where blockhain is developing,” Mr. Kay said.
“The best use case is Sweden, which is putting all its land records on blockchain and it will quite quickly move towards doing land transfers and ownership verification using blockchain, which is a major issue in India currently.”
