A new digital technology is disrupting business models across industries globally. In this phase of digital transformation, the application of blockchain technology is garnering significant attention. Blockchain, commonly known as the backbone technology behind bitcoins, is a distributed ledger that records each transaction by all the participants in a network and shares information across the network, as and when required, in a transparent way. It is a protocol for exchanging value over the internet without an intermediary. By eliminating intermediaries, blockchain can help in reducing transaction costs. Block­chain is capable of transforming multiple industries by making the processes fair, secure, transparent and efficient. This is because it enables the execution and verification of transactions discreetly without human intervention. Moreover, the immu­tability and irreversibility of blockchain make it nearly impossible to make changes, which, in turn, increases the confidence of users in data integrity and reduces opportunities of fraud.

Developing economies such as India face issues related to poor and inefficient governance, red-tapism, lack of transparency, and huge dependence on paper-based record-keeping systems. Use of blockchain technology can eliminate most of these issues and make way for a complete digital transformation. Several companies, financial as well as non-financial service industries like telecom, healthcare and life sciences, travel and hospitality, and energy, are keeping a close watch on the potential block­chain use cases in order to shift from their traditional business models.

According to the IT industry’s apex body NASSCOM, blockchain technology has the potential to create value amounting to $5 billion in India in the next five years. To this effect, NASSCOM has signed an MoU with the Blockchain Research Insti­tute (BRI), Canada, in order to spread awareness and develop skill sets for block­chain adoption and deployment in India. Further, both entities have planned to set up a centre of excellence in India, which would provide high-end technology capabi­lities to explore the adoption of blockchain across academia, enterprises, government, innovators and advanced start-ups.

Adoption trends

As per industry experts, while the adoption of blockchain is gaining momentum across several industries, the banking sector is a front runner in tapping the benefits of this technology. Banks today have access to credit rating and financial data of their clients but much of it is in silos and not always shared with other banks. Block­chain technology can be instrumental in developing a shared repository. To this end, Bank­chain, a 30-member consortium of ban­ks led by the State Bank of India (SBI), with the aim of developing blockchain-based solutions has been established. The consortium has developed a blockchain-based solution designed to help Indian banks and non-banking financial companies perform the KYC (know your customer) diligence of their corporate borrowers, evaluate corporate lending risk, and manage vendors. The consortium is also working on Project ClearChain that aims at sharing customer information bet­ween banks for better fraud detection and to avoid process delays so as to provide better services to the end consumer.

ICICI Bank has deployed blockchain-based solutions for international trade transactions. Axis Bank and Kotak Mahin­dra Bank have also conducted pilots in cross-border remittances and trade settlements using blockchain technology. The South Indian Bank has completed over­seas transactions between the UAE and India using blockchain. The bank also has a blockchain-based solution to manage end-to-end trade financing for some of its clients. YES Bank is also testing some of the blockchain-based solutions in areas such as testing KYC and secured documents approval workflow. Recently, it made the first commercial deployment of an enterprise blockchain solution in India. Banks like ICICI Bank, Axis Bank, Kotak Mahindra Bank, YES Bank and IndusInd Bank are also testing a blockchain-based solution, a document-tracking mechanism, which will enable them to manage trade documents digitally and bring down system inefficiencies. This solution could be used to track international trade transactions as well. SBI also plans to deploy blockchain for reconciliation, remittances and trade finance operations starting 2019. This will help in reducing costs associated with these functions by 40-50 per cent.

Meanwhile, the Reserve Bank of India (RBI) in partnership with MonetaGo (a US-based company that provides solutions based on blockchain to banks), domestic banks and other financial institutions successfully tested blockchain technology for trade application. For this purpose, RBI’s research arm, the Institute for Dev­elo­p­ment and Research in Banking Tech­nology, worked closely with regulators, banks, financial institutions and clearing houses during the evaluation process in order to develop applications based on this technology for banks.

Further, Mahindra Finance has also partnered with IBM to develop a block­chain solution, which can reinvent supply chain finance across India by enhancing security, transparency and operational processes. The blockchain-based supply chain finance solution will enable all parties involved in the transaction to act on the same shared ledger, with each party updating only its part of the process, and ensure efficiency, consistency, trust and transparency. In the insurance sector, a few companies including IndiaFirst are conducting proofs of concept (PoCs) with blockchain to identify fraud. To this end, a forum has been set up by the Insurance Regulatory and Development Authority to chalk out a path forward.

Besides the banking sector, the telecom industry is now emerging as a key adopter of blockchain technology. The exponential increase in data usage is not translating into a proportional increase in revenues for Indian telcos. In such a scenario, telcos can use blockchain in areas such as data and content monetisation. Telcos can create a media platform using blockchain technology to directly connect with content creators and eliminate intermediaries to bring down costs.

Top telcos like Bharti Airtel, Vodafone India and Reliance Jio Infocomm Limited (RJIL) have been evaluating ways and means to deploy blockchain in a bid to generate more revenue and decrease their operational costs. While Airtel is in the trial stage of blockchain deployment, Vodafone in partnership with IBM is already at the PoC stage. Apart from these two, RJIL is using its start-up accelerator JioGenNext to bring blockchain-related start-ups on board. RJIL has also set up an engineering team that would develop new use cases and applications of blockchain technology.

Further, the Telecom Regulatory Au­th­o­­rity of India (TRAI) has empahised the role of blockchain in the mobile number portability (MNP) process. In its consultation paper, TRAI has stated that if a recipient operator shares its blockchain details with the donor operator and the MNP service provi­der, it could reduce the delays in the MNP process and make it more secure.

Challenges and the way forward

One of the biggest roadblocks for block­chain adoption in India is limited awareness about the technology, and its uses and benefits. This has resulted in limited investments in the technology. Currently, there are only 20-30 good block­chain start-ups in the country. Although large banks and telcos have started deploying this technology, its industrywide adoption is still a distant dream. Going forward, a robust policy framework and relevant awareness programmes will be crucial for the widespread deployment of blockchain technology in India.