This article was originally published in Banking Frontiers - Source Link
India has the potential to transform itself and lead innovations in emerging areas such as blockchain, artificial intelligence, machine learning and Internet of Things (IoT).
The importance of new technologies in India can be gauged from the fact that the impact of digital technologies on the GDP component today is 8%, which will increase to 60% by 2021. As technology shapes the destiny of nations, the road ahead appears to be punctuated with several opportunities. Pivoted on digital, the industry is transforming itself. The equilibrium between legacy and new should be maintained in every IT enterprise; emerging or scaled up, finding their own right balance.
We are moving towards an industry wherein business models increasingly necessitate lot of customer data getting shared and getting captured through the new age technologies such as IoT, m-commerce and therefore data protection will only strengthen customer rights. 'Privacy by Design' concept is getting increased attention. We've seen many organizations develop robust privacy programs using these best practices and guidelines, to service global clients.
Blockchain, a technology that claimed its fame with the 'Bitcoin Boom,' is now a technology that has grown beyond its identity as the one merely driving the cryptocurrency industry. Today, the technology is proving to be a game-changer in various use cases including payments, smart contracts, healthcare data sharing, supply chain management and cybersecurity alongside others. But how does technology make it happen?
We are in the era of blockchain and cryptocurrency. Now, the question is whether blockchain can reduce cyber risk in the financial industry. The answer is 'yes' to a large extent. The banking and financial services industry faces dynamic cyber threats/attacks intended to exploit vulnerabilities.
Blockchain has steadily advanced into the world of payments to change the transaction environment. It reshaped the financial services by:
Removing incorruptibility and driving efficiency and simplicity by establishing new financial processes and services infrastructure
Allowing the inflow of liquid cash through smart contacts, by which participants will be able to convert fiat currencies to support foreign exchange
Prompting cross-border payments in real time
Banks face the pressing issue of cyber security risks (KPMG 2016). Three cyberattacks in recent years on the banking industry's SWIFT network resulted in a loss of $100 million to the sector.
Enterprise blockchains allow only authorized users to access and view its ledgers. However, banks are wary of letting financial data sit outside their secure firewall. To alleviate fears, Fintech needs to build use cases aggressively and simplify process information to make blockchain appealing to bankers. For instance, hacking has become associated with online transactions and blockchain is also dragged into this picture. In Enterprise blockchains, only parties who are part of the network and possess the correct private keys have the authority to record and verify transactions. Thus, some players take care of the verification of the blockchain financial ledger, which makes it very difficult to manipulate or hack the financial records.
The biggest key to turning blockchain's potential into reality is a collaborative effort among banks to create the network necessary to support global payments. Banks need to look at the bigger picture and work together and with non-banks to help define the backbone that can underpin a universally accepted, ubiquitous global payment system that can transform how banks execute transactions.
According to Harvard Business Review, blockchain will do to banks what the internet did to media. When it comes to banks and financial organizations of this day, blockchain has the potential to solve a lot of problems. Blockchain technology possesses all the attractive characteristics needed by a reliable technology involving money matters. It is safe, secure, de-centralized, transparent as well as relatively cheaper.
Blockchain provides a very high level of safety and security when it comes to exchanging data, information, and money. It also allows users to take advantage of the transparent network infrastructure along with low operational costs with the aid of decentralization. These characteristics make blockchain reliable, promising and an in-demand solution for the banking and finance industry.
Senior Vice President, BFSI at Birlasoft
Sanjay Bajaj serves as the SVP and Global Delivery Leader for Financial Services business at Birlasoft. He has more than 25 years of experience in the IT consulting services industry. A Managed services practitioner and process evangelist with deep Banking and insurance domain knowledge, Sanjay has ran transformational programs in Strategy, Commercials, Operations and People to drive growth and profitability for Birlasoft. He has been associated with Birlasoft since 2006.