There is a lot happening in the space of AI, BlockChain, Machine Learning in all sectors, both globally as well as in India. India, however, is still at the starting and other parts of the world are ahead in many ways. Every sector/function is exploring what and how these technologies will impact their businesses/world and how can they harness the potential. As for the BFSI industries, I am part of, different organizations are at different levels of exploring these technologies.
In case of India, the first and foremost factor that pulls everyone here is the sheer size of the market. Even in times when ease of doing business was tough, this factor alone attracted scores of business to India. There is the overall thrust on digital in general and digital payments in particular by the current regime in Delhi. The prime minister’s thrust on digital governance and efficiency will surely be a catalyst for most disruptive technologies that are secure and reliable.
Traditionally, financial services have been India’s strength. In World Economic Forum’s Global Competitiveness Ranking, that is the area where India always scores better, often ranking ahead of many developed economies. New private Indian banks have been known to be early movers when it comes to leveraging technology in general and Internet in particular.
Indian banks and the technology push
The balanced approach followed by Indian central bank, Reserve Bank of India, is another major factor in any new technology adoption in Indian banking sector. In the last few years—especially during the governorship of Raghuram Rajan and his successor Urjit Patel—RBI has taken a cautious but pragmatic view of embracing new technologies, often forcing technology adoption on banks through regulation, wherever it has seen scope to enhance customer experience and efficiency using a particular technology. RBI’s proactive push of new technology adoption has not just been restricted to creating policy frameworks. It has used a mix of regulation, evangelism and even worked with the industry to make things easier and effective.
The creation of National Payment Corporation of India (NPCI) which has significantly brought down the cost of electronic transactions is a case in point. The regulator also has an academic/research unit, Institute of Development and Research in Banking Technology (IDRBT) which keeps studying the opportunities and challenges in new technology areas. It is not a coincidence that both these units have been actively involved in testing out blockchain as a proof of concept.
India’s position is quite unique here. It is a fact that India is a tech-hub. Apart from being a large technology outsourcing destination, India is also the home to vendors with a large core banking market share globally. Two of the top three core banking solution vendors—Infosys and TCS—are headquartered in India. Of late, India has also seen a lot of activity in the fintech arena. The country has become one of the global fintech hubs. While in many developed markets, fintechs and banks have enjoyed an uneasy relationship, in India, most progressive banks like ICICI Bank, Axis Bank and HDFC Bank have proactively gone to fintechs, creating contests and hackathons to get the best of innovations, sometimes even sharing their APIs with these fintechs.
BankChain was announced on 8 February 2017 by SBI, India's largest bank. It’s a 30+ member consortium led by SBI, the country’s largest lender, and includes banks, NBFCs and the National Payments Corporation of India (NPCI), an organization set up by Indian banks to support retail payments. Simply put, BankChain is a community of banks for exploring, building and implementing blockchain solutions. BankChain is supported by Pune-based startup Primechain Technologies to create these solutions. Currently, it has 37 members and 8 live projects.
Banking on blockchain
In December 2015, RBI’s Financial Stability Report went all out for blockchain. Devoting a full section to blockchain titled ‘Implications of disruptions – Blockchain technology’, it said, “Regulators and authorities need to keep pace with developments as many of the world’s largest banks are said to be supporting a joint effort for setting up of ‘private blockchain’ and building an industry-wide platform for standardizing the use of the technology, which has the potential to transform the functioning of the back offices of banks, increase the speed and cost efficiency in payment systems and trade finance.”
Some instances of this include ICICI Bank announcing a successful completion of pilot transactions via its blockchain network with Emirates NBD on a custom-made blockchain application, co-created with EdgeVerve Systems, a wholly owned subsidiary of Infosys in October 2016. Similarly, Axis Bank, India’s third-largest private sector bank, launched instant international payment services using Ripple’s enterprise blockchain technology solution, in Nov last year.
Similarly, RBS Bank (global) has been diligently exploring a number of projects testing use cases for Distributed Ledger Technology (DLT), including research into blockchain based clearing systems and innovations in international payments/foreign exchange. RBS is also one of the founding members of the R3 blockchain partnership.
That means almost all four of the top private banks in India are going deep into blockchain trials and implementation. In short, India is today a vibrant powerhouse of fintech. That will—and the early signs only confirm the trend—impact blockchain trials, rollout and deployment in a unique manner in India, making it a global learning testbed.
For us at RBS Bank ( global), we have been diligently exploring a number of projects testing use cases for Distributed Ledger Technology (DLT), including research into blockchain based clearing systems and innovations in international payments/foreign exchange. RBS is also one of the founding members of the R3 blockchain partnership.